Mortgage Lenders failing to pass on interest rate cut

Tue, 14 Oct 2008

Even as some mortgage lenders pull their tracker loans off the market, it appears that others will not pass the recent Bank of England interest rate cut to borrowers . Although the 0.5 per cent interest rate cut was intended to make mortgages cheaper for borrowers, in reality the cut may not be passed on.

Northern Rock are apparently not passing the base rate cut to their customers, not yet at least. Tracker mortgages are becoming more expensive across the market, particularly for those borrowers with small deposits.

However, many lenders will be passing the full base rate cut to borrowers, typically saving mortgage customers some money each month. The purpose of Northern Rock holding off passing the cut on is to drive customers to other banks. A Northern Rock spokesperson was reported as commenting:

"This is very much in line with the terms of the business plan set out by the Treasury. Our aim is to generate mortgage redemptions to allow us to repay the Bank Of England ."
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