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Cries of unfair treatment are being continuously shouted at lenders at the moment. While the Bank of England's Monetary Policy Committee reduces the base rate lenders have stuck with the same interest rates, tightened lending criteria, pulled deals or even increased monthly repayments on home loans.

Consumers are up in arms about why the cost of borrowing is failing to come down when the Bank of England is reducing the base rate. Intermediaries have been left with the unenviable task to trying to calm them down and point out while it may be fantastic the Bank of England recognises problems with the housing market and is reducing the base rate, it is Libor that dictates the cost of a home loan.

When Libor is compared with the Bank of England's base rate you get a good idea of how willing banks are to lend money to each other and therefore the level of confidence within the debt capital markets. As it stands, the base rate is 5 per cent, and the three-month Libor stands at closer to 6 per cent.

The problem is clearly while the Bank of England is acting to address liquidity issues there is still a lack of confidence between the lenders and lending between them has all but dried up. It is a case of them being too cautious because they simply do not trust one another's assets.

Kevin Purvey, head of intermediary sales for Cheltenham & Gloucester, said: "The relationship between the Bank of England's base rate and Libor illustrates the current pressures in the inter-bank market.

"We have seen two quarter-point reductions in the base rate so far this year, taking the base rate down to 5 per cent. But, the three month Libor, which is a key benchmark funding rate, has risen in the same period."

The fact there is 88 basis points difference between these two rates demonstrates the hard times banks are experiencing when it comes to confidence and shows the resulting caution with which they are lending to each other.

Mr Purvey said: "The gap between the base rate and three month Libor has widened and now stands at 88 basis points. However before the onset of credit market turbulence, the gap between the two rates was much less, for example the long-term average figure for the five years leading up to August 2007 is around just 20 basis points above base rate."

To improve this current situation requires the banks to regain confidence and improve liquidity. However confidence is a plant of slow growth and banks cannot really afford the luxury of time.

The Bank of England has tried to help kick start the liquidity again by injecting £50bn into the market but doubts remain as to whether this will improve Libor.

Mr Purvey said: "It is enhanced liquidity together with increased confidence in the market that will improve Libor. The Bank of England's announcement to provide special liquidity to the banking sector is an important step to help bring stability and confidence back to the markets.

"Another key contributor in improving Libor and banks' lending will be once the market judges financial institutions have materially written down the value of impaired assets and, where necessary, repaired their balance sheets and capital ratios."

Alex Hammond, PR manager of Kensington Group, said: "If the difference between the two is falling then the cost of inter-bank borrowing is decreasing because banks are growing in confidence, so one of the first signs of a return of the markets may be a sustained fall in Libor, particularly three-month Libor that shows banks are growing more comfortable lending money to each other for longer periods of time."

Heather Scott, head of PR for HBoS Mortgages, said: "As we have seen recently, changes to the Bank of England's base rate has little impact on Libor. This is evidenced by the current economic climate: the Bank base rate is coming down but the money that banks lend to each other remains expensive and this in turn is evidenced by the increased costs of fixed and tracker mortgages."

Ms Scott agreed the answer to the confidence problem was firstly to increase the liquidity in the markets but even this would take time to have a significant impact.

She said: "In order to improve Libor, there must be improved liquidity which has been aided by the £ 50bn that was announced by the chancellor.

"However, the cost of wholesale money continues to be stubbornly more expensive, despite the injection of liquidity into the banking arena. We wholeheartedly welcome the latter and hope that, in due course, it will help bring about a return to lower cost borrowing."

In the last 10 years the spread between Libor and the Bank of England base rate has averaged at 0.13 basis points. It is currently sitting at about 0.9.

Even money costs money and in short, as it stands, money is now seven times more expensive.