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MPs urges banks to pass on interest rate cuts

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by Kay Mitchell

Last month, in a co-ordinated move with other banks, the Bank of England’s Monetary Policy Committee (MPC) slashed UK interest rates from 5% to 4.5%.

Central banks in the US, Japan and China have all cut interest rates in the last week in a bid to fight off a recession.

Many analysts believe that the Bank of England and European Central Bank will follow suit later this week with the Bank of England possibly opting for a 1% cut.

While a rate cut should be good news for homeowners, some lenders are yet to pass on the rate cut to borrowers.

Financial information provider, Moneyfacts.co.uk, recently reported that half of the UK’s mortgage lenders had failed to cut their standard variable rates (SVR) in line with the recent interest rate cut.

As a result, a group of more than 20 MPs has tabled a motion in parliament calling for all UK banks to pass on the benefits to customers.

The measures come after Lord Mandelson, Britain’s Business Secretary, warned UK banks today that they face a customer backlash if they do not pass on the benefits of interest rate cuts.

On the BBC’s Today programme, Lord Mandelson acknowledged that the Government could not force the high street banks to cut rates but added that it is not unreasonable for customers to see some benefit.

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News posted: November 4, 2008

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