The post you are reporting:
The Base Rate is one of several factors that determines lending rates, usually it is a major one but that is not the case now. To characterise the present lending rates as banks ripping anyone off is not accurate. There are better deals than you identify there Roger, and others that are worse. One problem we have at the moment is reduced competition. This is felt regarding savings rates as well.
The banks make a margin on the difference between what they pay for money (the interest paid to savers for instance) and the rate they lend at, lower lending rates means lower saver rates and visa versa. Clearly there are other factors such as risk and the costs of defaults come out of the margins. In a recession risks of default are increased as well that has to be accounted for. Likewise on mortgages, property prices are a lot lower, many are in negative equity or close to it, as a result forced sales are not recovering all that is owed, these losses need to come out of margins as well. You cannot just look at the low base rate, compare lending rates to that and claim borrower are being ripped off. Remember as well that there are other fixed costs to lending that comes from margins, unaffected by base rates, salaries, offfices, power light etc etc... Lower lending volumes requires a higher margins to cover these costs also.
