Downing Street Says » Interest Rates

Asked if the Prime Minister was concerned that some banks seemed poised not to pass on any interest rate cuts, and would he consider taking any action to force them to, the PMS replied that there were two assumptions in the question, one that there would be a change in interest rates, and secondly that the banks would take the action described. So it was best to wait and see what happened both in terms of official interest rates, and then what the response was from the banks. But in general, the Prime Minister s position and the Government s position, as expressed by the Chancellor, Business Secretary and the Prime Minister in recent days, were that when official rates were cut then consumers should expect to see the benefit.

Put that a large number of mortgage lenders seemed to be closing down their tracker mortgages, the PMS replied that has was not going to get into individual decisions taken by individual companies about exactly how they structures their mortgage products. The general point remained that when official rates came down, consumers would expect to see the benefits of that.

Put that if there was systemic change to mortgages so that there were only fixed rate mortgages, it would mean that what we were asking banks to do would become impossible, the PMS replied that obviously people on fixed rate mortgages were in a different position. The reason we took the action we did in relation to fixed rate mortgages was to give people more of a choice. Clearly consumers needed to be in a position where they could make an informed choice about the type of mortgage that they held. But for people who were not on fixed rate mortgages, and had chosen a different means of financing their house purchase, we would expect those consumers to see the benefit of a cut in official rates.

Asked if the taxpayer should have a clear return for their money in the sense that those banks already nationalised like Northern Rock should be transferring base rate cuts more immediately than others, the PMS replied that Northern Rock were clearly in a different position. In general, the reason we took the action that we did in relation to the banks was to ensure that consumers and mortgage holders were the ultimate beneficiaries. Of course we needed to protect taxpayers interests, and that was why we had structured the recapitalisation programme in the way that we did. But ultimately this was about making sure that the benefits flowed to mortgage holders and small businesses.

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» Thursday, November 6, 2008

Interest Rates

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