BSA comments on bank rate cut

BSA comments on bank rate cut

BSA comments on bank rate cut

Commenting on the announcement today by the Bank of England to cut the Bank Rate by 100 basis points to 2%, Adrian Coles, Director-General of the BSA said:

“Homeowners will welcome the MPC’s decision to cut the Bank Rate by 100 basis points to 2%. However, not all mortgage borrowers will find today’s fall mirrored by their lender – building societies have to balance the interests of borrowers and savers. Although low interest rates are good news for borrowers, they are not so good for savers.

Savers will be disappointed at today’s news. Building societies which “pass on” both this base rate reduction and the last could halve the interest which they pay to their investors in a very short period of time. A large proportion of the funds invested in building societies are held by those over the age of 55; building societies will wish to do what they can to protect pensioners from what will be, potentially, a very sharp reduction in their income.

More generally, building societies have a number of factors which determine mortgage rates, some of them much more important than the Bank Rate. They include trends in money market rates, competition in the savings market, the requirement to fund their share of the Bradford and Bingley and Icelandic bank bailouts, and the returns which they earn on their liquid, non-mortgage, assets. In addition, some mortgages also have “collars” below which the rate may not fall.”

~ Ends ~

Notes to Editor:

1. The Building Societies Association (BSA) represents all 58 building societies in the United Kingdom. Building societies have total assets of over £360 billion and, together with their subsidiaries, hold residential mortgages of £250 billion, more than 20% of the total outstanding in the UK. Societies hold about £235 billion of retail deposits, accounting for more than 20% of all such deposits in the UK. Building societies also account for about 37% of all cash ISA balances. Building societies employ over 51,500 full and part-time staff and operate through more than 2,000 branches.

2. Photographs of Adrian Coles are available from the BSA press office, or from the Association’s website at www.bsa.org.uk or Headlinemoney www.headlinemoney.co.uk

Neil Johnson
PR & Policy Manager
Building Societies Association
Tel : 020-7520 5903
E-Mail : neil.johnson@bsa.org.uk