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The consumer group Which? today called on the UK's bailed-out banks to pass on interest rate cuts to consumers.
Following the multi-billion pound rescue package for failing UK banks, Which? has written to chancellor Alistair Darling demanding that those banks that received cash injections from British taxpayers pass on base rate changes to their mortgage customers immediately.
Yesterday the financial data firm Moneyfacts revealed that three-quarters of lenders had not passed on this month's 0.5% base rate cut to mortgage customers. These include several major banks and building societies, one of which is the state-backed Northern Rock, which reduced its interest rates by just 0.15%.
The chief executive of Which?, Peter Vicary-Smith, said: "The banks have had their bail-out - now it's time for them to deal sympathetically and fairly with the plight of ordinary consumers, many of whom are anxious about their savings or struggling with their mortgage.
"It is the government's duty, as a major shareholder, to ensure this happens."
Which? is calling on consumers to email the chancellor to urge the government to make banks pass on rate cuts, ensure that staff bonuses are awarded responsibly, treat customers fairly and adhere to regulators' rules.
But Sue Anderson from the Council of Mortgage Lenders said a fall in the Bank of England base rate did not mean it was any cheaper for lenders to borrow from one another, and that Which? was "perpetuating a wrong association between the base rate and the cost of funds to lenders".
"The base rate is no longer a good proxy for the cost of funds. It used to be when Libor [the rate at which banks lend to one another] was closer to the Bank of England base rate. But this is no longer the case and may not be for some time," she said.
A spokesman for the British Bankers' Association (BBA) said: "Banks seek to offer customers high-quality banking services at competitive rates. In addition, they are committed to offering sympathetic help to customers in financial difficulty.
"Early signs are that BBA Libor rates - the benchmark of real interest rates - are beginning to come down. As the rates which banks charge each other reduce there may be scope to cut rates to borrowers, but it should be noted that this will generally mean savings rates come down too."
This morning the three-month Libor rate had dropped from 6.08% to 6.03%, the lowest it has been for more than a month.
Banks are responsible
The Which? demand is part of the organisation's wider We own the banks campaign to reform the retail banking sector and gain greater protection for consumers.
More than two thirds of the 1,000 people surveyed by Which? said they thought banks were to blame for the current financial crisis, while 81% said they felt the entire system was due for an overhaul.
Almost three-quarters of consumers surveyed said they had been victims of irresponsible lending practices.
Vicary-Smith said the government should not pass up the "unique opportunity" created by the banking crisis to make "long-term, consumer-focussed changes to the banking industry".
"We want to see an independent review leading to an overhaul of an industry that is characterised by weak competition, irresponsible behaviour and a terrible record for treating customers properly," Vicary-Smith said.
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