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oh dear oh dear. No end in sight. 0% here we come
Comments
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Dithering_Dad wrote: »
Oh right, that was so that people bought more diesel cars (?) May be they will do something similar then for the car industry.0 -
Thrugelmir wrote: »Banks raise capital funds from 3 sources to lend. Depositors, Shareholders and Wholesale markets.
The reason that banks cannot repay all depositors on demand is that they they borrow short and lend long ( eg mortgages).
The government had to bail out the banks as the wholesale money markets froze. As no one knows who holds the worthless paper issued by Lehmans etc. To comply with Accounting and Banking Regulations the banks have had to write down the value of the toxic assets to a value of 20% of cost. It is forecast that a lot of these investments will realise nearer 60% to 70% of value upon maturity.
Banking has been around for centuries. Though only in the past 15 years or so has the distinction between investment and retail banking become cloudy. As previously there was a clear dividing line.
Also, the real reliance on wholesale markets for money to lend on started around 2000:
http://www.guardian.co.uk/business/2007/sep/30/4
The Bank of England report in question:Just how radical the change in banks' behaviour has been over recent years is illustrated by the rapidly expanding 'customer funding gap' - the difference between how much banks take in deposits and how much they lend out.Bank of England figures show that this 'funding gap' exploded, from close to zero in 2000, when the financial sector was still practising the 'good old-fashioned banking' favoured by Alistair Darling, to £530bn by the end of 2006.
http://www.bankofengland.co.uk/publications/fsr/2008/fsrsum0810.pdf
See the graph at the bottom of page 2, as of 2000 onwards household savings fell and dependence on foreign interbank lending rose, leading to a huge rise in the funding gap.
When the credit markets dried up, this left the banks high and dry for funding.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
Also, the real reliance on wholesale markets for money to lend on started around 2000:
How strange, I guess it's no coincidence that this is when silly HPI took off, the previous 5 years had much more manageable HPI of around 3% p.a. in my area, then in went up 100% in 2.5 years. As if anyone could possibly think this kind of thing was sustainable.0 -
Interest rates should go up. Interest rates at 0% will do nothing for the confidence of the public. Savers need to start investing again and we need to start normalising the situation somehow.The forest would be very silent if no birds sang except for the birds that sang the best0
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Interest rates should go up. Interest rates at 0% will do nothing for the confidence of the public. Savers need to start investing again and we need to start normalising the situation somehow.
Are you mad? We need to borrow our way out of debt. Get with the program.
Yeah, you would think that addressing the funding gap that the BoEs own Financial Stability Report highlighted might be a good start to restoring, er, financial stability.
But apparently not so, according to Gordon. Obviously Sir James Crosby (who fired the HBOS Risk Manager for warning of risk to HBOS) has been whispering in his ear.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
As someone with savings and no mortgage higher interest rates would benefit me and I am sure most people calling for them have some vested interest (no pun intended). What I think is more important is to drag the economy out of what, at best, will be a very hard recession and at worst a depression. I believe it is essential to have 0% interest rates and also for the BofE to emabark on quantitative easing to pull us out of a very grave situation. What is important to me is to get us out of the mess we have created as quickly as possible and then learn from the mistakes.
That said I understand the frustration for those reliant on savings income, especially where other investments have no doubt performed badly. Often the hardest hit are unable to replace lost income as they are retired. It also seems somewhat immoral that low interest rates are rewarding the massively indebted that have helped get us in this position whilst punishing the prudent who have saved.0 -
Are you mad? We need to borrow our way out of debt. Get with the program.
Yeah, you would think that addressing the funding gap that the BoEs own Financial Stability Report highlighted might be a good start to restoring, er, financial stability.
But apparently not so, according to Gordon. Obviously Sir James Crosby (who fired the HBOS Risk Manager for warning of risk to HBOS) has been whispering in his ear.
He's lost his job as well today.0 -
BTL Mortgages that were £1100 per month are now £300 yet the rent is still £1250 - how long do you think 'they' will allow this to go on for.
They are waiting for enough savers to jump on the 'gold' bandwagon and a few ftb's with deposits to jump in and rates will shoot up again.
SO could it come to a position that LandLords will have to 'pass the saving on'?end the tv tax0 -
As someone with savings and no mortgage higher interest rates would benefit me and I am sure most people calling for them have some vested interest (no pun intended). What I think is more important is to drag the economy out of what, at best, will be a very hard recession and at worst a depression. I believe it is essential to have 0% interest rates and also for the BofE to emabark on quantitative easing to pull us out of a very grave situation. What is important to me is to get us out of the mess we have created as quickly as possible and then learn from the mistakes.
That said I understand the frustration for those reliant on savings income, especially where other investments have no doubt performed badly. Often the hardest hit are unable to replace lost income as they are retired. It also seems somewhat immoral that low interest rates are rewarding the massively indebted that have helped get us in this position whilst punishing the prudent who have saved.
But it could be argued that people who cashed in their house and stock market investments at the right time also benefited from the rise in created wealth.
Its also worth remembering that Icesave's deposit rates were unsustainable ( as was found out later).0
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