Banks Spurn Pleas to Cut Rates by Raising Cost of Mortgages
Hughes, Kate, The Independent (London, England)
Abbey, Nationwide, Halifax and Northern Rock all hike their rates MPs plan motion in Parliament urging banks to pass on benefits
Mortgage lenders are ignoring pleas from the Government and consumer groups to honour the terms of recent emergency bailouts and pass on this week's expected Bank of England base rate cut - instead pre-empting the decision by increasing rates for new customers.
Despite a substantial base rate cut on the cards, Abbey has increased the rates on its tracker products by up to 0.5 percentage points. Nationwide has increased its tracker rates by up to 0.4 percentage points, Halifax has withdrawn its two- and three-year trackers and increased its five-year tracker by 0.5 percentage points, and Northern Rock has increased its two-year tracker by 0.15 percentage points. Meanwhile, HSBC has said that there would be some "stickiness" in passing on any cut.
A group of MPs is organising a motion in Parliament urging all UK banks to pass the benefits on to cash-strapped consumers, at the same time as urging the Monetary Policy Committee to significantly cut the base rate.
The Business Secretary, Lord Mandelson, told the BBC's Today programme yesterday: "When official rates are being cut, it is not unreasonable for customers to see some benefit from that. When the Government bailed out some high street banks, including the Royal Bank of Scotland, Lloyds TSB and HBOS, by taking a 37bn stake in them, one of its conditions had been for these institutions to restore credit lines. If it appeared that the banks were standing in the way between what the Government is doing and how the public wants to benefit, then many banking customers are going to be asking some difficult questions of the banks."
But the days when a base rate cut almost guaranteed the same saving for homeowners seem long gone. Last month, only 24 of the UK's 88 lenders passed on the full half-point cut in the base rate, just 27 per cent of the market; 33 only managed a partial rate cut, and the remaining 31 lenders failed to make any cuts at all.
Doug Taylor, personal finance campaign manager for the consumer watchdog Which?, said lenders appear to be unreasonably exploiting their position: "Consumers will look aghast at lenders who, faced with a cut in base rate, actually increase their lending rates. It is hard to believe that the sector could devalue its reputation any more but it seems to have found a way to do that."
The failure of lenders to follow the lead likely to be shown by the Bank's Monetary Policy Committee tomorrow is all the more surprising given the easing in interbank borrowing rates. The key three-month sterling Libor has declined to below 6 per cent over the past month, while the overnight rate dropped slightly yesterday. Observers expect more reductions to come, as central banks around the world aggressively cut rates. …