PM: Mortgage lenders' duty to cut rates

Tuesday, 08 January 2008 12:00

Mortgage lenders have a duty to cut interest rates offered to customers when the Bank of England lowers the base rate, the prime minister stated today.

In his monthly press conference, alongside chancellor Alistair Darling, Gordon Brown called on mortgage lenders to cut their rates when the Bank of England acts.

"I think where interest rate cuts happen, buildings societies and banks have a duty to take that into account," the prime minister said.

The chancellor added: "If you look at the picture just now, a fair number of lenders have passed on the decrease [in interest rates] fairly quickly.

"I would hope if interest rates continue to come down, then the benefit of that reduction would be passed on to mortgage payers because that would benefit them and their families."

Mr Darling went on to say it was "part of the deal" mortgage rates fell when the Bank reduced interest rates, just as they rose when the base rate was increased.

The prime minister added the government was working toward a situation where the UK had low inflation and low interest rates, away from the high inflation and interest rates of over ten per cent in the early 1990s.

"I know the anxieties people have in our country about the global financial turbulence and how it affects them and I know people with mortgages know what happened when Britain had similar problems in the past," Mr Brown said.

"What we are trying to engineer here is a situation, whereby bearing down heavily on inflation we can keep interest rates for mortgage holders down.

"And it was because we were able to cut inflation during the course of last year that interest rates were able to fall at the end of the year."

He added: "That's the position we want mortgage holders to be in, that the official interest rate is low as well and we don't return to the same that we had in the past."

Interest rates will be set on Thursday when the Bank's monetary policy committee (MPC) meets, with experts split over whether rates will be cut further after December's reduction in the base rate of 0.25 per cent.

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