21.11.08 by Andrew Montlake

Government V Banks – Seconds Out, Round 2

This week HSBC / First Direct finally got round to announcing changes to their variable rate by cutting 0.81%. Many may say thanks for nothing!

It is disappointing that a major lender such as HSBC has only decided to pass on just over half of the latest Base Rate cut, and taken an age to come to this decision as well. Whilst this may work for First Direct customers as they now have the lowest variable rate at 4.69%, HSBC are stuck on 5.44%.

With HSBC courting publicity at present for their current product range this half-hearted move shows that customers need to take more into consideration than just the headline rate. If they have not passed this cut on in full it is unlikely they will pass on the next cuts that are surely on their way, making their current offerings more questionable.

The debate around the fact that banks are slow to pass on rate cuts to borrowers and small businesses, but quick to cut for savers, shows no signs of letting up, with Monday looking like an important day to see what measures the Government come up with in their pre-budget report.

One idea doing the rounds is that the Government should set up their own bank and practice what they preach. Take on the lenders by attracting savers at good rates of interest and offer loans and mortgages at more competitive rates and with more interesting loan-to-values.

It would certainly spice up the market a bit.

Meanwhile the rumour mill is in full swing with near constant whispers around the future of Citibank. If this was to go down or be nationalized it would be another big blow to the hopes that we are coming out of the worst.

We will all be watching the governments’ announcement with interest. What could we see? A programme of tax cuts for the lower paid would be certainly welcome, whilst extended access for banks to the Special Liquidity Scheme would also help.

There could finally be some re-structuring of stamp duty, I would like to see it abolished for first-time buyers, though another interesting idea could be moving stamp duty from purchases to sales!

With rising repossessions making the headlines again expect some stronger guidance for lenders to make it a real last resort. There should also be a programme of assistance for small businesses.

Over to you Gordon.

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