Over recent months, these spreads have reversed all the increase that occurred last year and returned to their 2017 levels. The result is that there has been a substantial reduction – at both the short end and the long end – in the cost of banks raising funds in wholesale markets. Average rates on retail deposits have also come down.
This means that the lower cash rate should be fully passed through into standard variable mortgage rates. Full pass-through would also mean that the economy receives the full benefit of today’s policy decision. That brings me to the final question: what about the savers, have we forgotten about them?