Brown piles pressure on banks to pass on rate
Friday, 5 December 2008 2:10 PM
Gordon Brown is piling the pressure on high street banks and building societies to cut their lending rates after the Bank of England's one per cent cut yesterday.
"Banks should really pass on the interest rate cuts," he told GMTV this morning.
"Remember the last time interest rates came down 1.5 per cent, we had to talk to the banks before things moved forward.
"But things did move forward and we will be talking to the banks again."
So far out of the major lenders, only HSBC, Barclays and Lloyds TSB have cut their mortgage rates for those on standard variable rates (SVR)
Liberal democrat economics spokesman Vince Cable warned the government against confusing the sector.
"There are very contradictory signals been given to the banks by the government. On the one hand they are being called on to make rate cuts and on the other being told to operate commercially and strengthen reserves," he said.
"Bankers are being pushed and pulled all over the place with no clear sense of direction or strategy. The top priority must be to maintain lending to keep the economy going."
Halifax has cut just 0.25 per cent off its SVR - affecting 15 per cent its customers.
Nationwide has cuts its SVR by 0.69 per cent.
The lenders are claiming they have to balance the needs of savers and borrowers - while maintaining profitability.
They have also citied difficulties with inter-bank rates not falling - as measured on Libor.
"We are taking action to try and get [Libor] down," the prime minister told GMTV.
Mr Brown also tackled the problem of savers seeing rates drop - but claimed low inflation should insulate them against this.
"What I would be worried about most is if we had inflation going up and taking away the value of people's savings," he said.
"The interest rate going down is necessary to get the economy moving again. If you are a saver the best protection you have is that inflation is kept low."
Last night on BBC 1's Question Time, the health secretary Alan Johnson admitted the government could only apply pressure on banks.
"We can't force banks to pass [the interest rate cut] on," he said.
"We do expect - and certainly that's the whole premise of the Bank of England's decision to bring interest rates down to two per cent - that that will be passed on."
He added those not cutting rates would be noted by the public.
"Certainly, consumers will be looking very carefully as to who's passed it on and who hasn't," he said.
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