Banks Accused Of Profiteering Through Interest Rate Drop

A report by the Bank of England (BOE) has found banks are refusing to pass on base rate cuts to borrowers. Much of the disparity is being put down to higher default risks generally and the fact that the inter-bank lending rates have not fallen in line with base rates.

Whilst some have accused the banks of simply trying to recover some of the significant losses made over the last 18 months, the BOE has suggested that ‘banks are charging more profits so they can build up their capital reserves in order to meet stricter new regulatory requirements’. Some would argue that the banks’ refusal to pass on base rate cuts is something of a self-fulfilling prophecy as it is likely to lead to more people defaulting on their mortgage payments and seeking debt advice, one of the reasons given by the banks for not passing on the interest rate cuts in the first place.

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