>> Britain's biggest lenders on the verge of a risky price war, spooked by plunging revenues, slashing their interest rates on loans for customers nervous of borrowing in the uncertainty of the post-Brexit world. Lloyds, Barclays, HSBC and the Royal Bank of Scotland, all cutting rates for cars, credit cards, mortgages, and new businesses.
Reuters Senior Banking Correspondent, Angela Lee Davis.>> Because of the Brexit vote in June, customers are becoming more scared to take out more debt, and therefore they have to do as much as they can to revive lending. Secondly, the Bank of England has already cut interest rates because it fears that the economy is faltering.
And this cut in interest rates has pressured what we call net interest margins at the banks, meaning they earn less for the money they lend out, so they need to do more to lend more money to in turn earn more profit.>> The banks say the competition means good deals for customers, but many are unsecured loans, like credit cards, meaning customers don't have to provide collateral as a safety net if they can't pay it back.
That's a gamble for the bank and the customer. Britain's economy started to shrink the month after the Brexit vote, and Britons already have a lot of debt. Up to 63 billion pounds as of December. About 2 million people are in default and another 1.6 million make only the minimum payments on their loans.
>> If, in turn, the economy does falter, customers may not be able to pay back there debts because, for instance, they may lose their job. The main threat to the banks is if the customers they're lending to can't pay them back in full and can't pay them back on time.
>> But the strategy seems to be paying off. RBS has seen a 20 Million pound surge in new lending over the first and second quarter this year, a complete reversal from 2015 where they were losing the same amount. And Lloyd's consumer finance business is has 7% to 34 billion.
The market heating up, and a possible way out for banks feeling the Brexit chill.