Mortgage lenders 'not passing on cuts'

The issue of mortgage lenders not passing on cuts in the base rate of the Bank of England has been described as a "continuing problem" by a UK economist.

Paul Dales of Capital Economics has also revealed that the prospect of lower interest rates have had an impact on the pound which "help in some way".

Mr Dales said: "The money markets rates have actually risen since the Bank cut their base rate in February, whereas normally you would expect to see them fall sharply."

He added that there does seem to be "a kind of stickiness" in that "lever" of bringing monetary policy to the markets and the economy.

The economist concluded that the monetary policy is not impotent, but it is maybe "a bit less" effective than before.

Investors are now predicting that interest rates will fall to 4.5 per cent by the end of the year.

Earlier in the month the Bank of England cut interest rates to 5.25 per cent.

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