Oral question asked in the House of Lords, by Lord Bilimoria (Crossbench). It was answered on Wednesday, 7 May 2008.

Mortgages

Question: My Lords, last year, the Government injected £25 billion into Northern Rock, more than has been put into any other company or organisation anywhere in the world by a Government, to avoid financial meltdown. Further, the Government have helped by a further £50 billion the whole of the banking community, yet, as we are seeing, the banks are not passing on mortgage cuts to the borrowers. Unless there is something wrong with my maths, the fall from 5.9 per cent to 5.72 per cent means that the average reduction in mortgage rates is about a quarter of a per cent at a time. The banks are not passing on the cuts. What can the Government do to encourage the banks to pass on those benefits?

Answer: My Lords, the noble Lord is of course right to say that the Government took salutary action in order to protect the financial system from what could have been catastrophic meltdown, with consequences for everyone. On passing on the advantages derived from the increase in capital made available, let me say that these are still early days. The banks have real problems with some of the debts that they have already incurred, but the Government will continue to press on the banks the necessity of keeping mortgage interest rates as low as possible.

Secondary information