Interbank loan rate keeps pressure on lenders

13 October 2008

The Bank of England’s half-point base rate cut failed to remove all the pressure on lenders, despite several lenders dropping mortgage rates, it has emerged.

The British Bankers’ Association’s LIBOR (London Interbank Offered Rate) – the rate at which banks lend to one another – remains high, compromising the overall effectiveness of the base rate cut, and actually rose 0.01% following the base rate announcement.

As a result, lenders have had to carefully consider their own interest rate cuts. Several loan providers cut rates on their home loans following the base rate cut, but a number have not followed suit, including some personal loan providers.

A spokesperson for Think Money said: “Some loans on the market have retained higher interest rates than the Bank of England may have hoped. Lenders are still looking to protect themselves from uncertain economic conditions.

“That said, loans are still available, and in many cases at lower rates – it may just take some time to find the right deal. We advise anyone looking for a loan to seek independent loans advice beforehand.”

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