Lenders want Bank of England to cut interest rates
December 15, 2007
Lenders across the UK have made a plea to the Bank of England to cut interest rates in December in order to ease their finances.
Interest rates have risen five times since August 2006 in a series of 0.25% rises, and this has taken the base rate from 4.5% to 5.75%. The rate has remained unchanged at 5.75% since July of this year, despite calls from industry officials to cut the base rate.
In a recent report the Council of Mortgage Lenders has stated that “funding pressures have started to crystallise for a number of lenders”. The reports shows how inter-bank lending has become more difficult and expensive for lenders, and states that the Bank of England needs to look at cutting the interest rates as soon as possible rather than waiting until 2008, as many analysts have been predicting it might.
The CML report also stated: “November’s Inflation Report appears to anticipate at least two 0.25% interest rate cuts next year. But, earlier and more decisive action may be needed.”
The Monetary Policy Committee meeting is scheduled for next week, and this is where the decision will be made with regards to what should happen with the interest rates. However, even if interest rates are not cut the governor of the Bank of England has promised to make funding available to lenders in the coming weeks to reduce the financial woes of many lenders.
However, the CML has described the financial markets as ‘dysfunctional’ and has stated that there could be a dramatic reduction in lenders ability to provide mortgage finance next year if they are unable to borrow money.
The CML added: “Firms have various other options, including the ability to influence the volumes of new lending business they write in line with their funding pipeline. But, the overall impact is to limit the availability of mortgage credit and to raise its cost for prospective borrowers.”
15th December 2007Recent posts:
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- UK gets much awaited fall in interest rates
- Insurance ads duped many elderly customers
- Costly home loans being pushed through by some brokers
- Complaints over mortgage charges soar
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