Banks make millions from rate cut delay

15 September 2005
Natwest and other banks delay passing on rate cuts to borrowers after the Bank of England announces its interest rate, according to Moneyfacts.

Banks are supposed to cut saving and borrowing rates in line with BoE's rate cut in order for economic policy to take full effect, but financial data provider, Moneyfacts, has found that banks are delaying making cuts to make more money.

Moneyfacts spokesperson Jane Dawson said: "At the moment there is a small proportion of companies doing this, but there is a danger that others will follow suit in an effort to create a level playing field.

"We understand that providers may not be able to implement reductions to existing mortgages straightaway. They need time to advise customers of changes to direct debits and actually put the changes in place."

Natwest was found to be the worst offender, taking 16 days to pass on the rate cut to borrowers.

Meanwhile Manchester BS and Direct Line reduced their savings rates when the Bank of England announced the rate cut, but did not pass on the mortgage rate cut for three more weeks.

Last month, when the bank announced the rates, 22 per cent of mortgage lenders had passed on the full savings available, while almost half of lenders had not passed on any.

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