The Council of Mortgage Lenders (CML) has branded the Government's attacks on Britain's banks as "incoherent" as official data showed lenders had not passed on interest rate cuts in full to mortgage borrowers.
"Current policy objectives are conflicting and incoherent," said Michael Coogan, the CML's director general. "The Government needs to decide on its key priority. The tug of war with lenders being pulled in every direction at once has to end."
Mr Coogan voiced what banks have been saying in private for weeks as the Government hinted at full nationalisation of the banking system. Gordon Brown and the Chancellor, Alistair Darling, have repeatedly blamed the banks for not passing on rate cuts and holding back on lending to struggling customers. Mr Darling said that, following the Government's recapitalisation of the banks, it was up to lenders to support the economy.
The average cost of a two-year fixed-rate mortgage fell 0.71 of a percentage point to 5.11 per cent in November, Bank of England figures showed. The reduction was less than half the 1.5-point cut made by the Bank's Monetary Policy Committee at the start of the month. However, banks have complained that the Government's pressure to pass on rate cuts in full and increase lending are at odds with the authorities' demand that they should be strongly capitalised and reduce risk to restore confidence in the markets.
Lenders also grumble that with money markets virtually shut, they need to attract savings to fund their loans and that they cannot offer attractive rates while passing on rate cuts in full.Reuse content