Credit card firms urged to cut in interest rates| Banking Direct

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Credit card firms urged to cut interest rates

Business secretary Lord Mandelson is meeting the firms’ bosses later today to encourage them to drop their rates.

"The government is deeply concerned that borrowers aren't getting a fair deal," said Consumer Affairs Minister Gareth Thomas.

Credit card firms have always said their interest rates are competitive.

Bank of England Governor Mervyn King has also slated banks and building societies for failing to pass on the recent savage interest rate cuts to borrowers.

Speaking yesterday to the Commons Treasury select committee for the eighth time in the past year, King said that Britain was in "exceptional and difficult times" and that he was in "no doubt that the single most pressing challenge" to domestic economic policy is to enable the banking system to lend normally. "That is more important than anything else at present," he said.

MPs heard that many banks and building societies are failing to pass on the full rate cuts will force the Bank's monetary policy committee to rethink its approach in December.

"Following the 1.5 percentage point cut some banks withdrew their tracker mortgages. They are now introducing them, but with a higher spread from the base rate than before," said King.

"This means that we must cut bank rates by more than we would otherwise have done, and we will take this into account when we calibrate the correct cut in bank rate."

King said that the government financial support of the banks might not have come to an end. "Maybe the banks will need more capital, in which case that should be considered. We have seen that happen in the United States," he said.

The British Bankers' Association has announced mortgage lending plunged 52% in the year to October.