Rate cut 'to pass mortgages by'

Calls have been growing for the Bank of England's monetary policy committee (MPC) to lower interest rates tomorrow, but it has been suggested that this will have a minimal impact on the mortgage market for new borrowers.

While existing borrowers on tracker mortgages are sure to see their costs fall if the base rate is trimmed, the Guardian reports that many banks will not pass on cuts, either to existing standard variable rate borrowers or to the cost of deals for new customers.

It states that this is because of the persistence of high interbank lending rates, which increases the costs of obtaining the capital for the banks to lend in the first place.

Such a situation may prompt would-be homeowners to look at the self build option instead of trying to take on more expensive mortgages.

A cut in interest rates has been widely advocated in recent days.

Those suggesting that inflationary pressures are sufficiently weak for a rate cut to be possible include Confederation of British Industry Richard Lambert and prime minister Gordon Brown have both expressed this view.


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