Libor Plunges to 3.94 Percent: Will Mortgage Rates Follow? on 100 Mortgages

The three-month Libor fell to its lowest level since December 2003 today, dropping lower than 4 percent to 3.94 percent.

The Libor rate is the banks benchmark rate to which they lend to each other, until now the Libor rate has been much higher than the Bank of England base rate. The banks have been urged by the government to drop their Standard Variable Rates (SVR) but the banks have blamed the high Libor rate for not doing so.

According to reports the average SVR is at 5 percent, which is higher than the rate the banks are borrowing at, with the Bank of England base interest rate being at 3 percent the lenders should now pass on the rate cuts, but many are still refusing to pass on the full 1.5 percent cut.

Some lenders like government owned Northern Rock are increasing interest rates on their fixed rate deals and going against the governments wishes. However, economists believe that the Bank of England will make another interest rate cut next week.

HSBC raised its lifetime tracker mortgage rate to 1.64 percent over the bank of England base rate currently at 3 percent previously the rate was 0.99 percent over base.

Whilst the banks are continually saying that their funding costs are too high due to the Libor link, surely now with the Libor at less than 4 percent they will reduce their rates and finally help struggling homeowners.

Source: Telegraph

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1 Comment
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Many optimistic comments were written like the ones at http://www.themoneyferret.co.uk. But seems like at the end of the day all cries have fallen on deaf ears!

Comment by Anne — December 4, 2008 @ 8:33 am