Interest rate cut 'no relief'
The degree to which today's interest rate cut will offer relief to mortgage holders has been called into question.
Bank of England officials have cut the base rate of borrowing to five per cent in a bid to ease the strain on the financial sector, particularly the mortgage market.
But analysts noted that the rate at which banks borrow money from each other is not pegged to the base rate, so today's cut is expected to have little positive impact in fending off the lumbering credit crunch.
And according to Adrian Coles, director-general of the Building Societies Association, mortgage holders stand to suffer the most from the ongoing difficulties.
"It is possible that some lenders will not pass on all of the cut in their standard variable rates," he noted. "As mortgage lenders' funding costs are not linked to the base rate … new rates aren't really going to come down as the demand exceeds the supply."
Today's interest rate cut comes as concern grows over the state of the UK owner-occupier market, with Halifax recently reporting the biggest falls in house prices for 16 years.
Published 10th April, 2008
© 2008 Estates IT Limited
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The degree to which today's interest rate cut will offer relief to mortgage holders has been called into question.