Interest rates cut to 3%

[jefferson]

as a motgage adviser for Abbey i can tell you all this is a bad thing!! - Abbey along with other banks have pulled their tracker rates for new customers so the rate drop has not been passed on - existing customers already on a tracker are fine and will drop but the only lending option as of tomorrow is Fixed rate!

 

we should have just got another 'half of one percent' rather than the knee jerk 1.5% as the first 0.5% we had last month has not shown any effect as its not had long enough

[caliAl]

if they pass down the savings

 

My mortgage is a tracker against the Bank of England interest rate. I saw an almost imediate saving on the last interest drop

[SteveR]

Mortgage lenders refuse to pass on base rate cut (6th Nov 2008)

http://www.timesonline.co.uk/tol/money/property_and_mortgages/article5098702.ece

 

Britain's biggest mortgage lenders have ignored calls from the Government to pass on today's cut in interest rates to struggling homeowners.

 

Only Lloyds TSB, the bank which is accepting around £5.5 billion in taxpayers cash to shore up its balance sheet, and Abbey, the UK's second biggest lender, have promised to pass on the historic 1.5 percentage point reduction to borrowers on variable rate deals.

 

It does go on to say other banks might decide to pass on the reduction, but that some deals are collared, blah blah blah what a few of us have said here.

 

But more than 4 million homeowners on existing tracker mortgages will benefit immediately because their deals are directly linked to the base rate.

 

Instead of passing on the cut to homeowners, lenders have been scrambling to prevent hard-pressed borrowers from taking advantage of today's announcement by pulling existing tracker deals that are pegged to the base rate.

 

Halifax has been withdrawn all its tracker deals this evening. Abbey withdrew its entire tracker range just two days after raising rates, while Woolwich, owned by Barclays, was been forced to make changes to its entire range of trackers for the second time in a single day, blaming the "unprecedented base rate announcement". This morning it raised the rates on its trackers, but this afternoon was forced to pull the range completely.

 

Nationwide, Northern Rock, the state-owned lender, Alliance & Leicester and a host of building societies have also withdrawn tracker deals today. According to Moneyfacts.co.uk, the financial website, 24 lenders have now withdrawn all their tracker mortgages from the market.

All running scared that they'll not make any money (or continue to lose it!) and I'm not surprised!

[marbleapple]

I'd be pretty surprised to learn that the skills required to work in Bank of England were radically different than the skills required to be a senior exec at Barclays / Lloyds / Halifax etc. etc.

 

The idea that the people in charge of "banks" are stupid enough to get us into this mess - but the people in BoE are a whole different bunch and know what they're doing - is a little hard for me to believe.

.

 

Its got nothing to do with skills but motivations. Banks are businesses and make money by lending... bank leaders want to keep bank profits high (not give lenders discounts)... banks have been over lending and are now in the toilet. The BoE on the other hand isnt a business and dont look to make money... they look at the banking industry at a whole which is very different to looking at profit and loss sheets.

 

To be fair they are a different sort of banker, I can't think of a clear analogy at the moment though. However the BoE have very little to do with Cleatus & Leroy defaulting on their pre-fabs in a Vegas suburb.

 

Thank you

[DaveK]

Its got nothing to do with skills but motivations. Banks are businesses and make money by lending... bank leaders want to keep bank profits high (not give lenders discounts)... banks have been over lending and are now in the toilet. The BoE on the other hand isnt a business and dont look to make money... they look at the banking industry at a whole which is very different to looking at profit and loss sheets.

 

You are clearly missing my point.

 

Your original point - at least the one I commented - was that the BoE are in the financial business and therefore know far more about this kind of stuff than us, and the effect of interest rate cuts - and therefore we should have some faith in them.

 

I agree - "normal" banks are in the business of lending money and trying to make a profit. They got it wrong, the economy is now in trouble and the BoE is now trying to help that by cutting interest rates. I would assume the people in "normal" banks have experience in what they do, and should know more about it than me. They still f****d up and got it wrong. I'm not claiming that the BoE is the exact same business as Natwest. What I'm saying is - the people in the normal banks should know better but got it wrong. So why should I believe that the people in the BoE know any better, and are not also making mistakes with such drastic changes?

[Havard]

No mortgage here, only savings.

 

Terrible isn't it......

 

H.

[Gazboy]

The commercial banks were greedy and were not as picky or choosey as they should have been, they were happy to take on high risk debts which had high rewards if those debts were repayed, and if those debts weren't repayed they got a house to sell at auction and trousered the difference- well that was the plan but so many defaulted the banks were left with lots of risky debts and a shedload of iffy houses which by the shear number saturated the auction markets and lowering their values, if there were buyer/bidders in the first place and often there wasn't.

 

As they say, if you owe the bank £10k, you have a problem, if you owe the bank £10m, the bank has a problem.

[marbleapple]

You are clearly missing my point.

 

Your original point - at least the one I commented - was that the BoE are in the financial business and therefore know far more about this kind of stuff than us, and the effect of interest rate cuts - and therefore we should have some faith in them.

 

I agree - "normal" banks are in the business of lending money and trying to make a profit. They got it wrong, the economy is now in trouble and the BoE is now trying to help that by cutting interest rates. I would assume the people in "normal" banks have experience in what they do, and should know more about it than me. They still f****d up and got it wrong. I'm not claiming that the BoE is the exact same business as Natwest. What I'm saying is - the people in the normal banks should know better but got it wrong. So why should I believe that the people in the BoE know any better, and are not also making mistakes with such drastic changes?

 

 

I don't think you are following my point either... Gaz is:

 

The commercial banks were greedy and were not as picky or choosey as they should have been, they were happy to take on high risk debts which had high rewards if those debts were repayed, and if those debts weren't repayed they got a house to sell at auction and trousered the difference- well that was the plan but so many defaulted the banks were left with lots of risky debts and a shedload of iffy houses which by the shear number saturated the auction markets and lowering their values, if there were buyer/bidders in the first place and often there wasn't.

 

 

The BoE as it isn't out to make money and thus the people it employs and the work it does to determine its direction is different to banks.

[DaveK]

I don't think you are following my point either... Gaz is:

 

 

 

The BoE as it isn't out to make money and thus the people it employs and the work it does to determine its direction is different to banks.

 

As I already stated - I agree that they are different businesses and have different motivations.

 

I disagree that I should have more faith in the BoE, and should be confident that given their years of experience they cannot also be making mistakes - even if the reason for their decision is not greed.

[marbleapple]

As I already stated - I agree that they are different businesses and have different motivations.

 

I disagree that I should have more faith in the BoE, and should be confident that given their years of experience they cannot also be making mistakes - even if the reason for their decision is not greed.

 

Then I think it is fair to say that we can agree to disagree - Sorry had to say that

 

No I actually see your point and agree in many respects... I simply don't feel I have the ability to change the situation so I don't worry about it.

[Chingy]

Some good news if your mortgage is with Nationwide, even if they don't drop there fixed rate or traker products, if your mortgage is coming to an end of its product life you will be transferred directly on there 'BMR rate' currently 1.69% (MAXIMUM 2%) over the BOE base rate.

 

U will be on the BMR rate until u opt for another product or change lenders. So this currently makes there BMR rate which is ment to be high and encourage you to purchase a another product cheaper then any of there fixed rate products.

 

This should drive there fixed rates down, should

[Snooze]

This should drive there fixed rates down

 

Unfortunately, general mortgage rate cuts will still be a long way off. They are driven by the LIBOR rates rather than the BoE rate. Normally the two are pretty close together, but because there is still a lack of trust between lending institutes, the LIBOR rate is now over 2.5% above the BoE rate.

 

The drop in the BoE rate SHOULD drive the LIBOR rate down, but not yet..... only then will general mortgage rates drop.

[DaveK]

Unfortunately, general mortgage rate cuts will still be a long way off. They are driven by the LIBOR rates rather than the BoE rate. Normally the two are pretty close together, but because there is still a lack of trust between lending institutes, the LIBOR rate is now over 2.5% above the BoE rate.

 

The drop in the BoE rate SHOULD drive the LIBOR rate down, but not yet..... only then will general mortgage rates drop.

 

Actually, this is something I don't understand.

 

It's been said several times that the key thing is the rate at which banks lend money to each other, and until they cut that - and have a little more trust in each other - the mortgage interest rate won't drop for the average consumer.

 

So what effect does the BoE interest rate cut have? I've heard people say small businesses benefit - but surely their loans are also from banks. So do their loan rates drop immediately? Or is it just the case that - eventually - the BoE rate cut has some effect?

 

At least from a simplistic view, it seems like the BoE rate doesn't actually do much, because it's the LIBOR rate that matters, and that's not under the BoE control?

[Chingy]

institutes, the LIBOR rate is now over 2.5% above the BoE rate.

 

The drop in the BoE rate SHOULD drive the LIBOR rate down, but not yet..... only then will general mortgage rates drop.

 

totally agree, Nationwide (others I have not looked into) will untill they bring there rates down surely struggle to promote there products whist there BMR rate is lower then there product rate, :blink:crazy world finance

[Homer]

So how does this impact those of use on variable rates not linked to the base rate?

 

I'm with Northern Rock and was on 7.49% before the last 0.5% drop, but it only went to 7.34% afterwards (still saved me £20 a month!).

 

I cannot find any news to see if this rate is going to drop or rise so far...

[SteveR]

I cannot find any news to see if this rate is going to drop or rise so far...

 

Mortgage lenders refuse to pass on base rate cut (6th Nov 2008)

http://www.timesonline.co.uk/tol/money/property_and_mortgages/article5098702.ece

 

Only Lloyds TSB, the bank which is accepting around £5.5 billion in taxpayers cash to shore up its balance sheet, and Abbey, the UK's second biggest lender, have promised to pass on the historic 1.5 percentage point reduction to borrowers on variable rate deals.

 

Offically, the others haven't decided yet, but aren't expected to pass on the full drop, after the council of mortgage lenders pre-empted the BoE rate drop earlier this week and told it's members they can't be expected to put the Government’s interest's ahead of their own recovery and survival.

[Carl_S]

i guess that will mean that my 'gage is 3.69 not bad as it started at 5.69. Maybe i can drink cocktails now.

[marbleapple]

i guess that will mean that my 'gage is 3.69 not bad as it started at 5.69. Maybe i can drink cocktails now.

 

Its great isn't it. I originally was paying £960 a month interest only. It had dropped to £820 last month and I calculate another £200 decrease.

 

So how does this impact those of use on variable rates not linked to the base rate?

 

I cannot find any news to see if this rate is going to drop or rise so far...

 

I think it depends on the bank. One would hope if the Government are wanting the savings to be passed on to us and you are with Northern Rock then the government *should* stick to their promise and at least reduce it a bit.

[AlanM]

Got an e-mail from Bradford & Bingley (Abbey) last night stating the interest rate on my savings account was reduced by 2%. Didn't waste a lot of time there

[Gazboy]

Apart from the usual greed i wonder if when pressed the banks admit they haven't passed on the cuts to the expense side but quickly passed them on at the savings side is because they are flat broke? Could get interesting.

 

btw Libor has gone down today.

[DaveK]

Apart from the usual greed i wonder if when pressed the banks admit they haven't passed on the cuts to the expense side but quickly passed them on at the savings side is because they are flat broke? Could get interesting.

 

Even in the unlikely event they wanted to, they couldn't. Imagine how the public would react if announced that they were cutting savings interest rates but not loan rates because they were broke.

 

They'd be an awful lot more broke very shortly after that.

[penguin]

anyone know if A&L are reducing the rate? my mortage dropped just over £100 last time, should be an extra £150 - £200 now happy days!

[Snooze]

anyone know if A&L are reducing the rate? my mortage dropped just over £100 last time, should be an extra £150 - £200 now happy days!

 

Depends on your mortgage, of course. A&L tracker mortgages from 2+ years ago are all base rate-driven, so they will drop (hurray me!). But the A&L SVR mortgages are unlikely to change any time soon.

 

If you had a drop last time, then I think you must be on a tracker like me, because A&L didn't drop their SVR (hurray you!).

 

Suggest you put the extra cash aside (silver or Yen are probably good choices at the moment!) ready for when the resulting inflation kicks in!

[Soop Dogg]

Depends on your mortgage, of course. A&L tracker mortgages from 2+ years ago are all base rate-driven, so they will drop (hurray me!). But the A&L SVR mortgages are unlikely to change any time soon.

 

If you had a drop last time, then I think you must be on a tracker like me, because A&L didn't drop their SVR (hurray you!).

 

Suggest you put the extra cash aside (silver or Yen are probably good choices at the moment!) ready for when the resulting inflation kicks in!

 

What inflation? The whole thing about the BoE being able to drop interest rates so far so fast is because the risk of inflation at the moment is diminishing rapidly. Commodities are falling as is the price of food etc. Oil (despite OPEC trying to push up the price by reducing output) is still languishing around $60 a barrel. (Down 5% today alone) That said, I guess that if the ar$e falls out of our currency, then we could have a problem.

 

Anyway - as you said, putting cash aside IS a good idea. You never know what's around the corner. (Both on a personal level and national economic climate level) It's just a pity our govt didn't realise this sooner.....

[Snooze]

What inflation? The whole thing about the BoE being able to drop interest rates so far so fast is because the risk of inflation at the moment is diminishing rapidly. Commodities are falling as is the price of food etc..

 

What inflation? The whole thing about the BoE being able to drop interest rates so far so fast is because the risk of inflation at the moment is diminishing rapidly. Commodities are falling as is the price of food etc..

 

Well - it's true - if we're at risk of actual depressive deflation then dropping the rate is not only reasonable safe, but actually might stop entire industrys (shipping, I'm looking at YOU!) going under.

 

Problem is that when the currency drops (and it will, and probably should!), if it goes too far too fast, inflation could suddenly leap, rapidly spiralling out of control.

 

According to your "Location" (Macedonia) - you should be aware of the risks of this. Hasn't Macedonia had double-figures inflation for most of this year?