Credit card rates not reflecting base rate cuts

By UK CreditCards.com

Bank of England cuts base rates

Credit card companies and other lenders are passing on the Bank of England's base rate cuts to consumers -- but only partially, according to an industry expert.

The bank has reduced the base rate to a record low of 0.5% in the past few months in an attempt to boost lending in the economy as a whole. Ross Walker, an economist at Royal Bank of Scotland Global Banking and Markets, said that there has been "a partial pass-through" of these rates to credit cards and other loans. He suggested that the bank cuts its base rate aggressively because the figure "doesn't fully reflect real world financial costs and risk".

"They are deliberately cutting the bank rate more in the knowledge that it won't all get passed through," Mr Walker said. "They wouldn't want it all to get passed through. You couldn't reasonably have a mortgage based at 0.5% interest rate."

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Published: 13 April 2009