Interbank lending rate falls back

Published:
21 October 2008
Topic:
News,Money,Mortgages

The British Bankers' Association has given a further sign that the money market crisis may be easing with the news that lending rates between banks have fallen again.

The three-month London Interbank Lending Rate (Libor) fell back to 6.12%, down from 6.16%, the association said. However, the figure still remains well above the 4.5% Bank of England base rate.

A number of mortgage lenders, including Nationwide Building Society and Abbey, say that high interbank rates are to blame for their decision not to pass on the recent rate cuts in full to all borrowers.

Some are even increasing the rates on the tracker mortgages to new customers, with Lloyds TSB and Woolwich last week upping the interest charged to limit new business as they battle to raise funds.

The Government's dramatic bank rescue efforts and the shock cut in interest rates have failed to have an impact on three-month Libor, which has remained stubbornly high.

It even increased, to nearly 6.3%, immediately after the bail-out plans were unveiled, raising concerns that the moves were having little effect.

Investec economist Philip Shaw said the further decline suggested banks were finally becoming more willing to lend to each other again.

Copyright © PA Business 2008

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