Base rate 'is failing to bring down interest rates'

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Base rate 'is failing to bring down interest rates'

Wed 19th May 2010

The Bank of England's base rate should bring down interest rates when it is lowered, but this not happening to the extent it should do, a sector expert has opined.

Darren Cook, spokesperson for Moneyfacts, claimed the reason why the base rate is lowered by the Bank's Monetary Policy Committee is to try to encourage people to put their savings back into the economy.

But, in his view, this is not occurring and borrowing rates seem unwilling to drop.

"We are seeing, especially in the mortgage market, credit cards and loans, that there is not a direct association between the Bank of England rate and what customers ultimately pay," remarked Mr Cook.

He made his comments following research by Defaqto, which showed that the average cost of personal loans has increased from 8.8 per cent in 2007 to 12.9 per cent in the current economic environment.

The Moneyfacts spokesperson suggested that this is no surprise due to the risk present in the market.

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