FED cuts by 0.5%

StevieJ

!!!!!!? wrote: »

If I'm understanding your obfuscated comments correctly, you are saying that you have an offset account with IR tracking the base rate then? So you do have quite a vested interest in lower base rates.....

( By the way, If you really feel that whether or not you draw upon the offset account makes one iota of difference to 'other people who need the cash' then I suggest you just settle the mortgage now and make the cash available to the 'needy' :rolleyes:)


Yes, I am sitting on top of quite a pile of cash but almost exactly half of it is not in sterling, so a weaker sterling (which is coming due to interest rates being thrown to the wind) will actually benefit me that way and in any case - house prices are only heading DOWN for the foreseeable future, cuts or no cuts.

What I do care about is seeing the economy of the country (in which I will be sinking my cash pile into buying property in) go down the pan and generally staying there for maybe a decade or longer as a result of bad decisions taken now.

I do not have a offset account, but I am allowed to borrow back the money I have paid off my mortgage.

I thought you were trying to do a Good Old Days with the word obfuscated, then I remembered that you were a computer bod.

WTF?_2

HSBC give two fingers to reducing the cost of lending Brown-style:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aq7CsImZuGxc&refer=home

Nov. 3 (Bloomberg) -- HSBC Holdings Plc defied a call from U.K. Prime Minister Gordon Brown to revive lending, signaling it probably won't pass on to consumers and businesses the full impact of rate reductions from the Bank of England.

David Hodgkinson, who is chief operating officer of Europe's largest bank, said banks around the globe are re- evaluating the price they put on risk, raising the price of loans when compared with levels in previous years.

``Credit has to be priced appropriately to reflect the risk,'' Hodgkinson said in an interview today. ``If interest rates are brought down significantly, then rates for borrowers will come down. But I'm not going to say it's absolutely linear because it depends on the particular transaction and the risk.''

Brown has called on banks to return lending to 2007 levels after a worldwide squeeze on credit dried up the appetite for risk at banks. In Britain, banks approved 33,000 mortgages last month, a third of the 104,000 a month average last year.

AFAIK HSBC are one of the few banks these days who don't rely on the money markets to fund their lending, they do it from their own deposit base. Accordingly they haven't needed to be rescued by either the government or rich Arabs.

Still, maybe our newly nationalised banking sector will oblige Gordon, no doubt using public money...... :rolleyes:

StevieJ

``Credit has to be priced appropriately to reflect the risk,'' Hodgkinson said in an interview today. ``If interest rates are brought down significantly, then rates for borrowers will come down. But I'm not going to say it's absolutely linear because it depends on the particular transaction and the risk.''

Thanks for that !!!!!! sounds pretty positive.

WTF?_2

StevieJ wrote: »

``Credit has to be priced appropriately to reflect the risk,'' Hodgkinson said in an interview today. ``If interest rates are brought down significantly, then rates for borrowers will come down. But I'm not going to say it's absolutely linear because it depends on the particular transaction and the risk.''

Thanks for that !!!!!! sounds pretty positive.

So if we slash rates to the bone, real world rates might come down by some lesser, undefined amount.

Meanwhile the currency crashes and the cost of our imports goes through the roof - thus doing even more damage to our retail sector and making us all worse off as imported goods, including some essentials, rise in price. Lovely.

Looks like Gordon is determined to see the return of 2007-style looney lending. Too bad he won't, can't, get it. The cash provided by the 'new financial instruments' isn't there. If he wants the liqidity, he's going to have to print the money up.

Now, is he really that stupid? Is he really so incapable of mapping a path ahead that doesn't entail trying to send the economy through a timewarp a year into the past?

StevieJ

!!!!!!? wrote: »

So if we slash rates to the bone, real world rates might come down by some lesser, undefined amount.

Meanwhile the currency crashes and the cost of our imports goes through the roof - thus doing even more damage to our retail sector and making us all worse off as imported goods, including some essentials, rise in price. Lovely.

Looks like Gordon is determined to see the return of 2007-style looney lending. Too bad he won't, can't, get it. The cash provided by the 'new financial instruments' isn't there. If he wants the liqidity, he's going to have to print the money up.

Now, is he really that stupid? Is he really so incapable of mapping a path ahead that doesn't entail trying to send the economy through a timewarp a year into the past?

Hang on I was only thanking you.

WTF?_2

StevieJ wrote: »

Hang on I was only thanking you.

Thanks, but I felt I should point out that this report indicates that the policy of slashing rates isn't going to actually be as effective as some think though.

Cut points 100bps to get, what, 50bps at best?

chucky

!!!!!!? wrote: »

So if we slash rates to the bone, real world rates might come down by some lesser, undefined amount.

Meanwhile the currency crashes and the cost of our imports goes through the roof - thus doing even more damage to our retail sector and making us all worse off as imported goods, including some essentials, rise in price. Lovely.

there's a big difference between lowering rates by 1% than saying "slash rates to the bone". there's a bit of a dramatic exaggeration going on here.

lisyloo

Cut points 100bps to get, what, 50bps at best?

Rather than what? rates rising?
If no action would result in +50bps on borrowing, then it is in fact a 1% cut on what WOULD have happened.

chucky

!!!!!!? wrote: »

Thanks, but I felt I should point out that this report indicates that the policy of slashing rates isn't going to actually be as effective as some think though.

Cut points 100bps to get, what, 50bps at best?

agreed, it may only be 50bps which will still be good - with Libor Rates dropping it may be more, you don't know.

WTF?_2

lisyloo wrote: »

Rather than what? rates rising?
If no action would result in +50bps on borrowing, then it is in fact a 1% cut on what WOULD have happened.

Interest rates aren't just an arbitrary figure that can be raised or lowered at a whim, with no consequences.

If cuts in the base rate are not going to be passed on in full to borrowers (we can be reasonably sure they probably will be passed on to savers.....) then it introduces all sorts of additional problems. You are taking hits for cutting rates but not getting the full 'benefit'.