Which? is calling for the base rate cut to be passed on to all borrowers, including those with Standard Variable Rate mortgage deals.
Following last month’s announcement by the Bank of England’s Monetary Policy Committee of the largest interest rate cut since 1981, it is expected that the base rate will continue to fall. However, many banks and building societies have been reluctant to extend the full rate cut across their full range of products.
There has been a particular discrepancy between the cut in the base rate and the rates offered on personal loans and Standard Variable Rate mortgage deals.
Stop hiding behind Libor
Peter Vicary-Smith, Which? Chief Executive, says: ‘Banks have been having their cake and eating it for too long. The Industry claim that their hands have been tied when it comes to passing on rates to SVR mortgage customers because they borrow at the Libor rate rather than the base rate. However, since the 05 November, Libor rates have fallen by significantly more than the base rate. So, what are they waiting for?
‘Banks have been benefiting from this Libor cut and to date, none of them has passed on the full cut. If the Interest rate is cut again on December 4, it will be even more important for banks to cut their rates and give consumers the break they deserve.’
Which? calls for banking reform
Which? is calling for root and branch reform of UK banking, urgent measures to help struggling consumers and long-term reforms to build a strong, fair banking system with consumer interests at its heart.
What Which? wants
If banks or lenders are basing their SVR mortgage rates on the Libor rate, we should have seen falls of 1.77%.
Since the 6th November 2008 base rate cut, Libor (London Interbank Offered Rate) has fallen by 0.25% more than the Bank of England base rate drop of 1.5% (by 1.77% at 1 Dec). The Libor rate on the 5th November 2008 was 5.68% and the rate on the 1st December 2008 was 3.91%. The difference between these two is 1.77%. The Libor rate is calculated daily.
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