As we bear witness to the interest rates being slashed by an incredible 2 per cent in recent weeks, the Chancellor, Alistair Darling, is still warning banks that unless they pick up their rate of lending then “further action” must be taken by the Government.

The new interest rate is the lowest the country has seen in over 50 years – 1951 to be exact.  However, banks are still failing to pass on the cut to their customers.  Alistair Darling is clearly eager to see the country pull through the economic crisis, however he understands that he won’t be able to weather the storm without the banks jumping on board and lowering their interest rates in line with the Bank of England.

Four of the main banks in total agreed to pass along the rate cut to their customers, being HSBC, Lloyds TSB, Woolwich and Bristol & West, by reducing SVR.  However, other lenders are still reviewing the situation, a decision that is likely to affect the majority of small business owners.

The Confederation of British Industry’s assistant regional director, Liz Mayes, gave a friendly nod to the rate cut, saying, “The economy needs a significant monetary stimulus and the Bank has clearly decided this will be best achieved by another big cut in interest rates. What is critical for business and consumers alike is that this reduction is passed on.”

Unfortunately for Halifax customers, Halifax has announced that they will not be forwarding the full amount of the rate cut through its SVR.  Halifax, part of the Halifax Bank of Scotland group, and the largest mortgage provider in the country, feels as though they have done enough so far in comparison with other lenders.  Shane O’Riordain, Halifax Bank of Scotland spokesman, said, “Halifax has passed on all of the recent bank base rate reductions to its customers with an SVR mortgage. Many lenders have chosen not to pass on these reductions at all or have only passed them on in part. Halifax has balanced the interest of its customers with the commercial imperative of managing its business in a sustainable and prudent fashion.”

CBI assistant regional director, Liz Mayes, went on to say that, “The economy is stalling, inflation is expected to undershoot the Bank’s own target and the headline RPI rate of inflation is likely to turn negative for at least a few months in 2009. We need to see lending improve and to keep business working.”

Alistair Darling threatened more action would be taken against banks that refused to come to the aid of their customers in the current financial downturn, saying, “We will do more to make sure that the wider availability of lending is kept going. We want businesses and homeowners to be able to get affordable credit.”

Alistair Darling left this warning for lenders in the country to reinforce his sincerity on the current lending issue, claiming, “We are ready to take further steps to build on what we have already done to get responsible lending going again.”

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