07.11.08 by Andrew Montlake

What lenders did next...

Wow. What a day yesterday. The biggest cut in rates since 1981 and the lowest rate since the 1950's took everyone by surprise even though we knew it was needed.

The media frenzy was good fun, and I was up at 4.30 am for a spot on Radio 5 live at 6 am and back to the BBC for a TV spot that afternoon. I did say I hoped for a 1% cut but thought they would play it safe with just a half point cut for each of the next three months..

How wrong was I ? This time I am very happy to be as I strongly believed we should be around this level anyway.

The scale of the cut shows just how bad the underlying economy is. The question being asked is what has changed over the last couple of months. It was obvious the economy was in a perilous position so why a massive cut now and nothing earlier - inflation was never the real issue.

In any case this is a welcome relief to many small businesses and mortgage payers.

Full marks go to Cheltenham and Gloucester, Lloyds, Nationwide and Abbey for passing on the full cut. 3 month Sterling Libor, the excuse the banks are using not to pass on rate cuts, has fallen to 4.49% today from 5.56%

Banks that do not pass this cut on to consumers, or at least the lions share, are going to be slated by public and press alike, especially now as they will be seen as running out of excuses.

New customers will however not see the benefit immediately as almost all lenders hurriedly withdrew their tracker rates which is no surprise.

This could be the end of tracker rates, at least at competitive levels, for a while.

With LIBOR falling so dramatically it will be interesting to see what lenders do next and whilst many of us have been supportive and understanding of the lenders travails and issues, perhaps it is time for them to give something back.

At the very least to those brokers and customers with good track records.

Over to you - everyone is watching.

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