it’s widely anticipated that the Bank of England will lower the interest rate again tomorrow (maybe as low as 4%), so what have the banks been doing? Well, apart from not passing on previous rate cuts Abbey has raised their lending rate by 0.5%, Nationwide is increasing theirs, HSBC have said that they won’t pass the cut on to customers.
Which all means that they will be able to get money from the government at a lower rate of interest than they are paying it out at. Good for them, nice way to rebuild profits. Bad for exisiting mortgage-holders and people looking to get mortgages.
The Bank of England is starting to run out of options. If they lower the interest rate again and the banks continue to hoard profit and not pass rate cuts on nothing will change except the banks get more money, which helps no-one except the banks (haven’t they already been given a large amount of cash?).
My mortgage provider (Bank of Ireland) has cut its interest rates in line with the Bank of England’s reductions. Scant comfort, but if they can do it, why not others?