Darling states may take time for interest rate cut to be passed on to borrowers

Following the latest base rate cut by the bank of England earlier this month, the Chancellor of the Exchequer, Alistair Darling, has stated that it could take time for the rate cut to be passed on to borrowers, which means that many homeowners will not see the benefits of the rate cut for some time.

Whilst the government has been calling on lenders to do their bit to help the economy by cutting the interest rates on their mortgages and loans, Darling has acknowledged that the process could take some time, particularly in the current financial climate.

He has said, however, that he expects banks to pass on the cuts in light of the £50 billion plan that the government has launched to help liquidity in the money markets.

Speaking of the interest rate cuts Darling said: ‘It will take time because banks are having to build up their capital positions.

There is no quick fix.’ Mervyn King, the governor of the Bank of England, said that some banks had not passed on rate rises to borrowers in the past, adding: ‘What has been happening in the last six months is that now we are cutting interest rates some of the reductions in Bank rate have also not been fully passed through to mortgage rates.’