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Banks and building societies have been urged to cut their mortgage rates to help the debt management of customers, after the Libor rate fell below one per cent for the first time.

The rate at which banks and building societies lend to each other, known as the Libor rate, dropped to the lowest level for over twenty years, meaning lenders have never been able to borrow money so cheaply.

Despite this, homeowners haven’t benefited with many mortgage rates actually increasing in recent months, adding to the debt problems of homeowners.

Debt advice organisations have urged lenders to reduce their rates in line with the drop in Libor, to ease the debt management worries of homeowners whose finances have come under increasing pressure with higher living costs.

Ivan Cooper, Chairman of the UK’s leading debt management organisation Chiltern, said: “Many lenders are being ‚Äö√Ñ√∫unfair‚Äö√Ñ√π to homeowners by refusing to cut rates, which could threaten a recovery not just in the housing market but the wider economy too.

“If rates were dropped, homeowners would have more available income to boost the economy or put towards easing their other debt problems – as we have found these are suffering too with the lack of available money.”

Some of the biggest culprits are the ones owned, or part-owned by the government including — Lloyds Banking Group, Halifax and Northern Rock. None of these lenders currently offers a tracker rate mortgage below 3.25 per cent, even though they were handed billions by taxpayers to save them from collapsing.

After it was disclosed that they were pushing-up prices of fixed-rate mortgages to their highest level — relative to the Bank of England rate — for at least 20 years, banks were accused of “ripping off” customers.

This is because lenders have been able to increase their profit margins as borrowing costs have fallen and mortgage rates have risen, which has angered some mortgage experts.

Head of the Financial Inclusion Centre think tank, Mick McAteer, said: “Banks have been using the cuts in the Bank of England rate to increase their revenues by billions.

“There is a basic lack of competition and they have a stranglehold. People are paying more than they should for credit cards and overdrafts as well.”

This means that overdrafts and credit card debts may well continue to rise, and mean that the debt problems continue for some time – rather than sparking a recovery as the drop in Libor is supposed to do.

Debt help organisations recommend seeking impartial debt advice as soon as you feel that finances are running away from you and have highlighted these warning signs to look out for:

‚Ä¢ Poor debt management Рusing credit cards to buy fuel, food or to pay bills
‚Ä¢ Adding to debt problems Рgoing further into the red each month
‚Ä¢ Overstretching Рspending more than a quarter of your income to service unsecured balances (overdrafts, personal loans, store cards and credit card debts).

If any of these applies to you or you feel that you’re struggling with your finances, you may benefit from a debt help solution – like a Debt Management Plan (DMP) or an Individual Voluntary Arrangement (IVA).

These enable you to regain control of your finances whilst still repaying personal loans, overdrafts and credit card debts.

For free and impartial debt advice, or for further information on Debt Management Plans (DMPs) and Individual Voluntary Arrangements (IVAs), please call the number at the top of this page.

Lenders urged to cut mortgage rate to ease homeowner’s debt management issues is a post from: TheDebtPeople.co.uk