Bank tipped to cut interest rates

The Bank of England's Monetary Policy Committee (MPC) is expected to cut interest rates amid signs the global credit crunch is hitting the UK. Analysts expect the MPC to announce that it will trim rates from 5.25% to 5% at midday on Thursday. Such a move would be the third cut in interest rates since early December. But the credit crisis, which makes funding mortgages more expensive for banks, may mean they do not pass on the full reduction to borrowers. Homeowners on variable rate mortgages expecting to benefit from any cut could be disappointed, industry experts say. "I don't think we can be sure that lenders will follow any cut in base rates," David Anderson, chief executive of Co-op Financial Services said. "Lenders are funding mortgages from money markets and money markets are not always following reductions in the base rate. Therefore they may not be able to pass on any cut," he told the BBC. Funding problems Due to the uncertainty in the financial markets and a shortage of funds caused by the global credit crisis, the rate at which banks lend to each other has remained high. Many mortgage lenders have had to withdraw their most competitive deals in recent weeks.