Government considers action for cheaper loans

8 December 2008

Prime Minister Gordon Brown has said he will be talking to banks in order to persuade them to cut interest rates on loans, Reuters reports.

Brown also told GMTV that he was taking steps to reduce the LIBOR rate (London Inter-Bank Offered Rate), which has limited lenders’ ability to cut interest rates across a wider range of loan products. So far, only mortgages have seen noticeable cuts – and these have not always matched up with base rate cuts.

LIBOR, the rate at which banks lend to each other, has been falling in recent months, but has still remained some way above the base rate – meaning that the funds required for loans are relatively expensive.

A loans expert for Think Money said: “Once financial institutions begin to lend to each other more freely, LIBOR should fall, and we may see cheaper loans as a result.”

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