Alistair Darling summoned the chief executives of Britain’s biggest banks to Downing Street today to demand that they immediately pass on the Bank of England’s interest rate cut to their customers.
Treasury sources confirmed to The Times that the Chancellor told the heads of all Britain’s big high street lenders - including HSBC, Barclays, Lloyds TSB, HBOS Nationwide and Abbey - to implement rate cuts immediately.
Yesterday, the Bank of England slashed interest rates by 1.5 per cent to 3 per cent, the lowest level in 54 years, and today, the shock reduction helped to ease the strain in nervous money markets.
Libor, which is the rate at which banks lend to each other and is key for pricing mortgages, fell by more than one per cent from 5.561 per cent to 4.496 per cent.
However, the figure remains almost 1.5 per cent higher than the official interest rate.
The spread between the Bank of England’s borrowing cost and the rate that banks charge to borrow money over a three-month period - a key measure in the wholesale money market - is the widest since October 22. The day before, Mervyn King, the Governor of the Bank of England, publicly acknowledged for the first time that a recession in the UK is now likely.
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Tags: Alistair Darling, Bank of England, Banks, Barclays, Economy, Government, HBoS, HSBC, Lloyds TSB, mortgage crisis, Mortgages, Politics, Rate Cut, RBS, Taxpayers, U.K.