Great news / terrible news.

dopester

Are these cuts feeding through to borrowers?

Lenders have a new market-price to reflect risk and requirement to move from wafer thin "maximising market share" strategy of old, no matter what the BoE rate is set at.

BoE can cut interest rates to 2% or lower but I doubt you'll see anything approaching that for mortgages or loans... unless you got lucky with some tracker which has to promise it.

IveSeenTheLight

!!!!!!? wrote: »

The best way to lower debts is to pay off the principal.

Lower interest rates just help you service the interest on the debt.

Will all the people benefitting from lower interest rates be sensible enough (or able, or want) to overpay and reduce the capital amount of the debt? My guess is that only a small proportion will do so.

The markets are telling us loud and clear "There has been too much borrowing, time to stop it and pay the money back".

Is this not exactly what I have said

Lower interest rates, means lower interest payments, meaning you can pay the difference into paying off the debt (assuming you have a BoE tracker / discounted mortgage or the lender passes the rate on (for the benefit of dopesters post))

Realy

dopester wrote: »

Are these cuts feeding through to borrowers?

Lenders have a new market-price to reflect risk and requirement to move from wafer thin "maximising market share" strategy of old, no matter what the BoE rate is set at.

BoE can cut interest rates to 2% or lower but I doubt you'll see anything approaching that for mortgages or loans... unless you got lucky with some tracker which has to promise it.

Just got AIP on my life time BOE tracker today phew.;)
But a lot of lenders do Guarantee their SVR not to be more than 2% higher than BOE BR (well nationwide do) so any more drops they will have to lower their SVR. (Currently 6.49)

dopester

Realy wrote: »

Just got AIP on my life time BOE tracker today phew.;)
But a lot of lenders do Guarantee their SVR not to be more than 2% higher than BOE BR (well nationwide do) so any more drops they will have to lower their SVR. (Currently 6.49)

Yeah; I was listening to some radio phone-in whilst out today... an expert panel with callers asking all sorts of questions, from repossession, to BTL financing to SVRs... and a panel guy answered that most trackers have a "collar" in them, or another option in the small print, which usually allows the lender to raise the rate by a maximum of 3% over the base rate.

Realy

dopester wrote: »

Yeah; I was listening to some radio phone-in whilst out today... an expert panel with callers asking all sorts of questions, from repossession, to BTL financing to SVRs... and a panel guy answered that most trackers have a "collar" in them, or another option in the small print, which usually allows the lender to raise the rate by a maximum of 3% over the base rate.

That is certainly true on most which are usualy based on the companies SVR.
Most have a SVR that can go no lower than a certain % also.

WTF?_2

IveSeenTheLight wrote: »

Is this not exactly what I have said

Lower interest rates, means lower interest payments, meaning you can pay the difference into paying off the debt (assuming you have a BoE tracker / discounted mortgage or the lender passes the rate on (for the benefit of dopesters post))

Yeah - and I'm saying that this isn't the purpose of the policy of lower rates. It's primarily to stimulate economic growth through cheaper (for business)/more (by consumers) borrowing and more profitable lending (gives the banks increased room to make margin)

Maybe a few people will use the savings offered by lower interest rates to reduce their capital debt but I'm going to go out on a limb and say that most won't. My guess is that these rates will not find their way into much cheaper SVR or fixes and they won't be passed on to credit cards or personal loans either. And frankly, if you're at the point where you simply can't service your current debt with a <5% base rate then there's not much hope for you.

Meanwhile - even less incentive for the masses to save because the rates are lower - lower even than official inflation figures. Fair enough for the wider economy but not great news for bank recapitalisation. Still, now the taxpayer seems to be bearing the brunt of that maybe banks don't need savings any more......

But - not to worry. The government is going to have to increase its borrowing from merely the current massive levels to outright phenomenal levels. With a fast-sinking GDP the bond markets will dictate how much room there is for interest rate reduction from now on, I reckon. More good management from our wonderful prudent leader.... :rolleyes:

kennyboy66_2

you can't have it both ways. If people are not going to spend more because of lower interest rates, you can't also claim that they will save less because it is a dis-incentive to save.