Mortgage lenders need to pass on Bank of England interest rate cuts to consumers to reduce pressure on the slowing housing market, Chancellor Alistair Darling told Reuters on Saturday.
Darling, in Washington for the International Monetary Fund/World Bank meetings, said the Bank's quarter-point cut in interest rates on Thursday, the third such move since December, would help the housing market but it was important for the benefits of it to be passed on.
"The announcement by the Bank of England this week that it is cutting interest rates will reduce pressure, and I hope banks and building societies will pass that on," Darling said.
"What I am saying to the banks is we have helped them...therefore it is time to ensure that the banks themselves help both individual businesses and mortgage holders by ensuring they pass on these interest rate reductions."
A number of lenders have raised the cost of some of their mortgage products even after the Bank's latest rate cut, and first-time buyers in particular are finding it very hard to raise home loans as banks tighten lending criteria in response to a global credit crunch.
This has raised fears the UK will go the way of the United States, where plunging property prices have put the country on the brink of recession, particularly after a key survey this week showed British house prices falling at their sharpest monthly rate since the slump of 1992.
The IMF said this week that British house prices are nearly 30 percent overvalued after years of double-digit growth and many analysts are now predicting sharp price falls this year.
That could prove disastrous for the Labour government, which is trailing badly in the polls in a country where property prices are a national obsession as two-thirds of homes are privately owned.
But Darling put on a brave face, arguing the fundamentals of both the housing market and wider economy remain solid.
"The housing market is slowing down but this has to be seen in the context of house prices having gone up 170 percent in the last 10 years," he said.
"The fundamentals are strong, unemployment is low, we have historically low interest rates and the economy is fundamentally more strong."
