Government tells mortgage lenders to pass interest rate cuts on to homeowners

Last updated at 07:39 09 January 2008

Gordon Brown and Alistair Darling have warned mortgage lenders they should pass on interest rate cuts to homeowners.

The Prime Minister said the firms had a "duty" to pass on the cuts after it emerged almost one in five had not done so.

Their inaction leaves hundreds of thousands of borrowers still paying over the odds following last month's base rate reduction.

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Despite the unprecedented warning from Mr Brown and the Chancellor Mr Darling, lenders said they were not under an obligation to pass on the cuts.

This week Mr Darling wrote to energy regulators asking them to study sharp rises in gas and electricity bills amid concerns of alleged profiteering by some companies.

Yesterday he and Mr Brown waded into the dispute at the first Prime Minister's monthly news conference of the year.

Mr Brown said: "I think where interest rate cuts happen the building societies and banks have a duty to take that into account."

The comments drew a furious reaction from mortgage lenders who pointed out they were under no regulatory requirement to pass on interest rate cuts.

A spokesman for the Council of Mortgage Lenders said: "It's a misconception to see a link between the base rate and the mortgage rates."

Other lenders were quick to point out a lot of the rises in energy bills were due to green taxes and higher business rates.

At least 14 lenders - almost one in five - have failed to cut their standard mortgage rates in line with the 0.25 per cent cut in the Bank of England base rate cut announced at the beginning of December.