BSA comments on bank rate cut

Commenting on the announcement by the Bank of England to cut the Bank Rate by 50 basis points to 1.5%, Adrian Coles, Director-General of the BSA said:

“Being owned by their customers means that building societies want to offer the lowest mortgage rates and highest savings rates possible. However, the Bank Rate reaching such an unprecedented low raises a number of challenges for them.

“Mortgage rates are determined by a number of factors, not just the Bank Rate. These include trends in money market rates and the requirement to fund part of the Icelandic and Bradford and Bingley bailouts, while many mortgages also feature collars that will prevent mortgage rates mirroring today’s base rate cut.

“However, it is savers who will bear the brunt of today’s decision. Already savers have seen their interest payments cut as a result of earlier base rate reductions and while societies will want to help their saver members where they can, it will be difficult for them to ignore completely today’s announcement.”