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"Majority of borrowers receive full rate cut"

By admin | January 2nd, 2008 | General

According to recent reports the majority of borrowers are to benefit from the recent Bank of England interest rate cut, with most lenders deciding to pass on the full 0.25% cut to customers. Although several major banks passed on the interest rate cut after the Bank of England’s decision, there were concerns that some lenders that were reviewing interest rates would not pass on all or in some cases any of the rate cut to borrowers. However, this does not appear to be the case based on recent figures.

Earlier this month the Bank of England gave homeowners and many industry professionals the welcome news that interest rates were being shaved by a quarter point, taking them from 5.75% – where they have been since July – to 5.5%. Halifax, Nationwide, and First Direct all quickly announced that they would be cutting their rates accordingly after the decision was announced, but there were fears that some other lenders would not follow suit.

Although other lenders did not respond as quickly to the rate cut from the Bank of England, most are going to pass on the full rate cut, although some smaller lenders have decided to pass on only part of the interest rate cut rather than the full 0.25%.

One mortgage broker official stated: “I am surprised at the extent to which the full cut has been passed on. Particularly when you bear in mind that the widening spread between bank rate and the cost of funds in the wholesale money market has increased the cost of borrowing for almost all lenders.”

However, he added that it would be difficult for lenders that passed on the full rate cut this time around to do the same if another rate cut is announced in the New Year.

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