Banks Set To Make Tough Choices

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Today the Monetary Policy Committee will reveal what they shall be doing with the Bank of England base rate – and if they reveal a further rate drop as many expect many mortgage lenders will have some tough choices to make.

If rates fall below 2% it will be the lowest base rate for 314 years – and it will mean a balancing act between savings rates and mortgage rates – drop mortgages, savings will also drop, or keep mortgage rates and maybe raise savings rates.

Which? chief executive, Peter Vicary-Smith, says: "Banks can't have their cake and eat it – they must either maintain rates for savers or pass on the full benefits of the rate cut to their mortgage customers.

"Individual consumers didn't cause the financial crisis and shouldn't be the ones to suffer as the banks try to recapitalise their businesses."

Many mortgage borrowers will also be savers so this decision will count double for them – will they save on their mortgage or lose out on their savings?

Whatever happens, and whatever way the pendulum swings for you, there isn’t a better time to talk to your financial adviser than right now. An adviser will be able to help you balance what you have against what you owe and try and maximise your options so as to make you as strong as possible in 2009.

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