One of Britain's top bankers warned homeowners yesterday not to expect to feel the full benefit of this week's predicted interest rate cut as not all banks will pass on the reduction to customers.
David Hodgkinson, the chief operating officer of HSBC – in the Gulf region with the Prime Minister as part of a UK business delegation – said there would still be some "stickiness" in mortgage rates even if the Bank of England made another 0.5 percentage point cut on Thursday as expected.
Since the emergency 0.5 per cent rate cut at the start of last month only 50 per cent of mortgage lenders have reduced their standard variable rates (SVRs) by the full amount, while new fixed and variable-rate deals have also failed to fall as fast as the central bank rate.
Mr Hodgkinson's comments sparked criticism from politicians. "Banks are only too happy to increase the cost of lending when interest rates go up," said the Liberal Democrats' Treasury spokesman Vince Cable. "When the whole banking industry owes so much to taxpayers for their very survival, any bank will find itself on very thin ice if it is found to be unfairly profiteering from its customers."
But HSBC rejected Mr Cable's comments, claiming that its rates were some of the most competitive. "If base rates come down then rates for borrowers will fall but interest rates must reflect the cost to a bank of its own borrowing and the risk presented by a borrower. That is the foundation of responsible lending," said an HSBC spokesman.
A lender's SVR is the higher rate that customers must pay once their fixed-term deal has expired. Historically, homeowners would only pay this for a month or two while they secured a new deal with another lender. But in recent months more families have struggled to remortgage, and have been forced to revert to paying their SVR.
Darren Cook, a mortgage analyst from the comparison website moneyfacts.co.uk, said that mortgage rates remained high because Libor – the rate at which banks lend to each other – was still higher than the bank rate.Reuse content