Press Association
Saturday 4th July 2009
Pressure is mounting on banks to pass on the full benefits of the interest rate cut to struggling homeowners and businesses.
The Government is urging all banks and building societies to help their customers after only a handful of lenders said they would pass on Thursday's 1% reduction in full.
However, Cabinet minister Alan Johnson admitted the Government cannot force banks to pass on the rate cut.
The Health Secretary said: "No, we can't force banks to pass it on. We do expect - and certainly that's the whole premise of the Bank of England's decision to bring interest rates down to 2% - that that will be passed on.
"Certainly, consumers will be looking very carefully as to who's passed it on and who hasn't."
The dramatic percentage point cut left the cost of borrowing at 2% - a level not seen since 1951 and equal to the all-time record low in the UK. The European Central Bank also cut the eurozone rate from 3.25% to 2.5%.
HSBC, Lloyds TSB, Barclays' lending arm the Woolwich, and Bristol & West all said they would be reducing their standard variable rate (SVR) by at least the full 1%, while other lenders continued to keep their rates under review.
Nationwide later followed the lead of its rival Halifax and said it would pass on the rate cut to its tracker customers in full.
The building society's tracker deal contains a so-called collar, stating that once interest rates fall below 2.75% it no longer has to pass on the reduction to borrowers.
But the group said following the 1% fall in the Bank of England base rate it would be waiving the clause and passing on both Thursday's and future interest rate cuts in full.
