0.5 rate cut not enough

tightrs

the pm yesterday announced a rate cut by 0.5% and said that america and europe would follow suit with a 0.5% cut and said these cuts should be done together.
i would have no problem with this but the fact remains that interest rates in europe and america are far lower than ours to start with so the global reduction does not work
oh sorry i forgot this is rip off britain :rolleyes:

Wutang_2

what do you mean by "this is rip off britain"?

ad9898_3

Rates are historically low, rates are now officially below inflation. Low rates at the wrong time is what caused this debt fueled boom in the first place, perhaps now people will use the low rates to pay off their mortgage instead mewing. Time will tell.

rp8049

Rates will continue to fall next year as the recession really bites, this is just the start.

Rafter

tightrs,

Although they won't admit it, there isn't much the authorities can do about borrowing costs.

The fact is there just isn't enough money in the system to support current borrowing or the amount needed to support current house prices.

This is because all that 'engineered' money that has come from China and the middle east has dried up.

All is not lost though. As recently as 2001, the amount of deposits and the amount of loans in the UK was balanced.

The UK needs to learn how to save again though to restore this balance. And saving won't be encouraged if the return on savings is less than inflation. So savings rates need to stay high and banks can't lend money at less than the cost of their savings without losing money so mortgage costs will stay high too.

At some point things will balance out, house prices will fall such that not as much needs to be borrowed to buy one and people will have to save a deposit and will only be able to borrow 3.5 times their income.

It isn't rocket science. Problem is that the boffins of the finance industry tried to invent a new system that has blown up spectacularly and we are all going to have to pay for the mess either through higher taxes or lower growth.

R.

tightrs

Rafter wrote: »

tightrs,

Although they won't admit it, there isn't much the authorities can do about borrowing costs.

The fact is there just isn't enough money in the system to support current borrowing or the amount needed to support current house prices.

This is because all that 'engineered' money that has come from China and the middle east has dried up.

All is not lost though. As recently as 2001, the amount of deposits and the amount of loans in the UK was balanced.

The UK needs to learn how to save again though to restore this balance. And saving won't be encouraged if the return on savings is less than inflation. So savings rates need to stay high and banks can't lend money at less than the cost of their savings without losing money so mortgage costs will stay high too.

At some point things will balance out, house prices will fall such that not as much needs to be borrowed to buy one and people will have to save a deposit and will only be able to borrow 3.5 times their income.

It isn't rocket science. Problem is that the boffins of the finance industry tried to invent a new system that has blown up spectacularly and we are all going to have to pay for the mess either through higher taxes or lower growth.

R.

the reasons the rates are being cut are to restore confidence ,now what you are saying is they are going the wrong way( which may well be true ) but why are us rates at 1.5%,european rates at 3.75% and uk rates at 4.5%,surely the confidence thing is to get people spending again (money they dont have)and if our interest rates were at 1.5% we would be paying less back on mortgages releasing money to spend on other things