Lenders 'must pass gains to mortgage payers'

Posted: 21 Oct 2008 14:19:14 GMT

Mortgage lenders have been urged to pass on the cut in Libor rates to their consumers.

The Libor, or London Interbank Offered Rate, is the fee which banks pay to borrow sterling funds from one another, and can have an impact on the lending rates of various financial products.

According to independent financial information website Moneyfacts, cuts in the Libor need to be forwarded to consumers in order to make mortgages and loans more affordable and stimulate the market.

Darren Cook, a spokesperson for the firm, explained that providers have increased their margins in recent weeks, with many still not having passed on the base rate cut of 0.5 per cent.

"The risk is still there because we know there is an affordability problem and we are going into a recession so disposable income is going to be shrunk and households are going to be pushed to make the repayments," he said.

"However, the cost of finance to the banks looks like it is becoming cheaper now ... they need to pass that onto the consumer now so the consumer gets the benefit."

On October 20th 2008, the three-month Libor stood at 6.12 per cent, according to the British Bankers Association - down from 6.16 per cent on October 17th.

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