LIBOR rates up sharply ?

Generali

mewbie wrote: »

!!!!!! Generali, I've just done the scroll button on my Blackberry trying to read all that.

If you can afford a Blackberry you can afford to buy LIBOR for Dummies or some similar title!

clobber_2

Thanks Generali, that was useful.

Anyway, so it doesn't matter if banks are lending mortgages from deposits and reserves - have I got that right? Are any of them still doin that? Or is it all a great paper money merry-go-round, everyone lending to each other and flogging their liabilities to each other? Cos if it's the latter, surely LIBOR goes up=mortgage rates go up.

Zammo

LOL. So much for mortgage rates becoming more favourable. They're about to reach new heights. Within the month a 7% 2 year fixed at 85% LTV with a £1500 arrangement will be looking like a bargain.

Bf109

clobber - basically yes, LIBOR up = mortgage rates up.

Its really a matter of if LIBOR stays high enough for long enough for the lenders to re-price their mortgage products... or not.

Bf109

Zammo wrote: »

LOL. So much for mortgage rates becoming more favourable. They're about to reach new heights. Within the month a 7% 2 year fixed will be looking good.

Maybe a bit too optimistic?

Walletwatch

I think the one good thing that might result is that the competitive rates for deposits that seem to have dried up since ICICI last came up with the 7.2% for a one-year no access deposit might get rekindled... ALM is going to be big over the next few months is my guess, and banks borrowing for shorter tenures to fund longer term assets is going to be frowned upon by one and all - while I don't see the rate going much beyond 7.5% (I think A&L have launched a one year fixed rate deposit at that rate for over 50s), I expect more banks to come out with these, which is just as well, wifey and I have maxed out our ICICI FSCS limit of 70000...

Cheers
WW

ad9898_3

Walletwatch wrote: »

I think the one good thing that might result is that the competitive rates for deposits that seem to have dried up since ICICI last came up with the 7.2% for a one-year no access deposit might get rekindled... ALM is going to be big over the next few months is my guess, and banks borrowing for shorter tenures to fund longer term assets is going to be frowned upon by one and all - while I don't see the rate going much beyond 7.5% (I think A&L have launched a one year fixed rate deposit at that rate for over 50s), I expect more banks to come out with these, which is just as well, wifey and I have maxed out our ICICI FSCS limit of 70000...

Cheers
WW

Well anything that ups the % on my savings is a good thing, since NuLab seem to want to take anything that is going up out of the inflation figures and so as to make them look better than they are.

Generali

clobber wrote: »

Anyway, so it doesn't matter if banks are lending mortgages from deposits and reserves - have I got that right? Are any of them still doin that? Or is it all a great paper money merry-go-round, everyone lending to each other and flogging their liabilities to each other? Cos if it's the latter, surely LIBOR goes up=mortgage rates go up.

The reality lies somewhere between the 2 positions. The thing is, banks lend to make money so if they have retail deposits simplistically you could say they could lend it to me as a mortgage or to Megacorp Bank in the money markets. I am thus in competition with Megacorp Bank to become a recipient of that cash so I have to outbid them in risk adjusted terms.

Don't forget that this doesn't directly impact on fixed rate mortgages as fixed rates are set in the swap market.

dad-of-4

maybee the banks will just increase their interest rates to compensate them for the corrected house prices that are comming and the reposessions that will be inevitable.

i presume if a house with a loan of 100k was to be reposessed by the bank and sold for 50k they would only need to give a loan with double the interest rate to be right back on track to the profit the original 100k loan would have produced.
ineffect, win, win as usual for the banks.

Generali

dad-of-4 wrote: »

maybee the banks will just increase their interest rates to compensate them for the corrected house prices that are comming and the reposessions that will be inevitable.

i presume if a house with a loan of 100k was to be reposessed by the bank and sold for 50k they would only need to give a loan with double the interest rate to be right back on track to the profit the original 100k loan would have produced.
ineffect,

Banks vary interest rates according to the risks they feel that they're taking. It's why you pay a higher rate of interest on a car loan than on a mortgage usually.

dad-of-4 wrote: »

win, win as usual for the banks.

I shouldn't think too many people were saying that at Lehmans this morning!