BOE base Rate cut to 1%

keet83

its right, the worst has happened for me and other sensible savers! 1 messily percent! :mad: It is obviously not helping companies as NIESR said. will they continue to lower the interest rate in the next few months to 0.5% or even worse, 0%? YBS put their interest rate down earlier this month before the BOE confirmed there was going to be a reduction!
i'm getting very annoyed with this interest reduction. I just hope that theres a decent fixed bond ISA available in April so i can stash some of my well earned and saved money!

beecher

JMitchell wrote: »

If that reply is to me beecher then thanks but I was talking specifically about fixed rate mortgages which aren't mentioned in that article.

No it was just a general comment as many people were asking if the cut would be passed on.

I'm sitting on the SVR waiting for a 4% 5 year fixed rate - might turn up, might not. My LTV is under 30% so I am able to wait and see what happen - if my LTV was close to 75% or 90% I'd be fixing now.

JMitchell_2

They were with NatWest - the 2 year one is assuming you have a NatWest bank account, there was a similar rate with slightly higher fees for people who don't have an account with them. (I don't know if there's anything stopping you opening an account and then not using it...)

Charlton_King

Has there been any generally observable trend in lenders' reactions to the rate cut yet?

Has the CML made any pronouncements?

Heyman_2

Charlton_King wrote: »

Has there been any generally observable trend in lenders' reactions to the rate cut yet?

Has the CML made any pronouncements?

The CML have been crowing recently about wanting to introduce an industry-wide collar on existing tracker mortgages because most of their members are so poor at the moment!

:mad::mad::mad:

As I've said before, as long as they introduce a mortgage ceiling rate at the same time then I don't have a problem with it. While they're at it, they can introduce a savings rate collar as well! Not that they will of course, because they have absolutely no shame.

Despite everything that's happened and all the problems their members have brought on the country, they still want to have their cake and eat it, despite keeping most current Fixed and Tracker Rate deals very high to protect their margins.

Charlton_King

Yes indeed.

This is the defensive, don't-expect-much-action crap they were putting out yesterday:

http://politics.co.uk/opinion-formers/press-releases/economy-and-finance/cml-media-note-in-advance-of-tomorrow%E2%80%99s-mpc-decision-on-interest-rates-$1266322$364298.htm

2latenow

In many ways it seems madness that in a country where part of the problem was people (generally) borrowed far more than was sensible for them, the low rates just encourages people to keep their borrowing and actually dis-incentivises a savings habit. Only people on currently-comparitively-high fixed rates have an incentive to reduce their borrowing which is the closest anyone can get to worthwhile 'savings'. If do feel sorry for anyone that's been responsible enough to pay off their debts and build a nice cushion of net savings, whether they're pensioners of 80 or prudent people in their 40s.

mad mad mad!

Going_Digital

The economy is going to be in worse shape not better thanks to a rate cut.

The pound is weak against the euro and US dollar at the moment and further interest rate cuts will weaken the pound further. So why is that a problem ?
Well the UK imports a significant amount of our goods from China. All those imported goods are paid for in US dollars.

So before the credit crunch £1 bought approximately $2 so a pair of socks bought in china could be bought for £1 and sold for £2 on the high street a 70p profit margin after VAT.

But now £1 buys $1.40 so now that same pair of socks costs £1.40 meaning the profit margin has now gone down to 34p after VAT at the new rate. As a result the profit on a sale has halved.

Now add into that the fact that we have price deflation because people are spending less. As a result companies are forced to lower prices to encourage sales. All this does is result in companies laying off staff so they are not spending more on staff than they are earning in profits, because lets face it they cant get a loan to keep them going.

So why are people spending less ?

They have uncertainty about their job security, a rate cut won't change this as the weakening of the pound will result in more redundancies as margins are squeezed. As a result people may even spend less.

People wanting to buy a house are saving to get the huge deposit required. A rate cut will not help with this, in fact it will take these people longer to save for a deposit as interest on their savings will be less. They are also unlikely to see any benefit in any mortgage they may be offered. The rate cut will not make more credit available.

And people who are tempted to risk spending money they don't have for example to buy a car that is heavily discounted due to poor sales can't get a loan lowering the rates are meaningless and will not increase availability.

Savers will have less money, especially pensioners who rely on interest as their main income so they will spend less adding further fuel to the fire. So cutting interest rates will have an adverse effect on the economy in this case.

The only people to benefit will be those who are fortunate enough to be on a good tracker mortgage that has no collar. But the banks will be feeling the pinch on those mortgages and trying to claw back some of the losses from these products by increasing their margins on other products.

So in summary I think all that this rate cut has done today is add fuel to the recession fire. So it is just going to accelerate the downward trend.