Drop in saving rates, no budge on mortgate rates!!!

ian-d

More of a rant than anything useful, sorry

It seems to me with the current climate that those with savings are the ones suffering and being ignored. Fair enough interest rates for savers were always going to drop as a result of the last few months, but to have no drop in most rates for mortgages, how can that be fair!

If BOE rate drops 0.5%, fair enough, the banks can drop the same, but most have dropped more than this, to improve their position. The same hasn't happened with mortgages though, most have remained the same, again resulting in banks improving their financial position, why aren't the government forcing the banks to reduce on all levels?

The way I see it, I'm now X amount less in pocket each month with my savings (same as most in here no doubt), yet when my mortgage renewal is due in December, I could be paying significantly higher interest levels, leaving me with no option than to make over payments on the mortgage rather than putting into savings!

Is that the gist of it, or am I missing something?!?!

Lokolo

I haven't actually had any of my savins rates go down. Egg Savings, Egg ISA, and Barclays ISA. Obviously compared to the number of accounts out there this is very little.

I would assume that soon enough when things really start to go downhill banks will follow with mortgages, but for now they want to try and get the most out of the customers!

Reaper

Broadly speaking (meaning I haven't looked at enough examples to be sure!) it is the fixed interest rates which have been the first to fall - both savings and mortgage offers.

Variable rates for both savings and mortgages have been slow to reduce.

Milarky

When talking about a bank rate 'at 2%', what SVR mortgage rate and typical savings rate have they in mind I wonder?

What is the motivation for deep cuts in bank rate? Will it, for instance, allow the UK govt to finance a lot of its new indebtedness much more cheaply? Can they actually persuade investors (and which investors?) to roll over their Gilts at 'silly' prices?

(Any observations as to where we might be headed greatly welcomed)

Reaper

Milarky wrote: »

What is the motivation for deep cuts in bank rate?

They want people to spend again to limit the recession.

Low interest rates =
* Low mortgage repayments so people feel richer
* Low savings rates so the incentive to save is reduced
* Businesses are more easily able to borrow and therefore invest

That's the theory. In practice, however, rates are curently reluctant to follow the BoE rate down, and even if they do that doesn't mean banks are willing to start lending again, nor are people willing to borrow more than they have to due to the climate of fear.

dunstonh

Many mortgage rates have dropped. At least those linked to the BoE. However, many mortgages are based on LIBOR and not BoE.

Milarky

dunstonh wrote: »

Many mortgage rates have dropped. At least those linked to the BoE. However, many mortgages are based on LIBOR and not BoE.

More probing and analysis, please. What would bring LIBOR down? Would a drop in LIBOR automatically link to mortgage pricing? (i.e. interest rates) Would this just benefit new mortgage deals? [Of course there is a natural turnover of 2 yr old mortgages as fixed rates expire - and better new deals would sustain more of that rather than leave peoples stuck on higher SVRs?] What prospect for savers whilst LIBOR remains 'high' - banks are able to cut rates on 'tracker' savings products of course - will their response be determined by savers then leaving tracker accounts ASAP and the banks' need for a substanitial retail base? So far, banks seems to have competed agressively for savings - high fixed rates etc - but how soon does this 'competition' unwind with all these 'mergers' taking place and we reach a 'cartel'?

ManAtHome

Milarky wrote: »

What is the motivation for deep cuts in bank rate? Will it, for instance, allow the UK govt to finance a lot of its new indebtedness much more cheaply? Can they actually persuade investors (and which investors?) to roll over their Gilts at 'silly' prices?

That's what I've been trying to get the brain round as well... We're going to be in competition with the rest of world for any free cash floating about - not sure where we'll rank in the 'interest rate versus currency risk' table.