Bank bosses summoned to Downing Street to ensure rate cut passed on

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Following yesterday’s interest rate cut from 4.5% to 3%, there were concerns that lenders would not pass on the rate cut to customers.

However, earlier today the chief executives of Britain’s top banks were summoned to Downing Street to meet with Chancellor Alistair Darling, where he demanded that they pass on the rate cut to customers with immediate effect.

It is believed that the attendees were Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide, Royal Bank of Scotland and Standard Chartered.

The Government said it has helped banks and it is now their turn to take the lead. So far, Abbey, Bradford & Bingley and Lloyds TSB have announced that they will pass the rate cut on in full to mortgage borrowers on its standard variable rate (SVR).

Last month, the Government announced a £37 billion rescue package for Britain’s banks. £20 billion is to be injected into RBS, while a further £17 billion will be pumped into Lloyds TSB and HBOS. However, so far only Lloyds TSB has confirmed its intention to pass on the rate cut to its borrowers.

Other banks yet to cut their rates have said the matter is under review and any changes will be announced in due course.

Homeowners on existing tracker mortgages will benefit immediately because their deals are directly linked to the base rate.

However, following the interest rate cut, around 30 lenders withdrew their tracker mortgage products from the market and it is likely that the few remaining will be withdrawn over the weekend.

The Bank of England’s decision to slash interest rates by 1.5% yesterday takes interest rates to 3% – the lowest level in over 50 years.

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