BOE cut to o.5%

stevetodd

ad9898 wrote: »

I wonder if it will have the same effect as the other rate cuts, the VAT cut etc.., i.e. nothing, Brown wants us to spend but these kinds of decisions make me tighten the purse strings even more, and I'm sure it's the same for millions of others, especially pensioners.

It's beneficial for a proportion of mortgage holders on trackers, however I would hazard a guess that many of these will be using the opportunity to pay down debt/mortgage, so not spending anymore.

Another act of futility by the BoE/government. The hole is very deep now, I wonder when they will stop digging, obviously not yet.

Certainly makes a difference to me being on tracker mortgages

Sir_Humphrey

mitchaa wrote: »

I have no idea what good this is doing as the majority of trackers will have already bottomed out. Those that didn't have floors are surely in the very low % of mortgage holders.

Why go 0.5? Why not go the full hog and just make it 0%

It won't make much difference alone - however it is needed if other measures are to work properly. It is QE that is the bigger story.

In deflation conditions, savers needing an income can safely run down their savings and maintain their wealth in real terms. It is amazing how many people fall for money illusion.

e.g A person has 10000k in savings. Inflation is 3%, IRs are 4%. He gains £400. However, inflation is 3%, so to maintain the stash after inflation, he can only take £100 p/a.

The same person again: Inflation is -1%, IRs are 0%. To maintain his wealth in real terms, he needs £9900, so can take the £100 without losing real wealth.

This illustrates two points. One is that it is the difference between IRs and inflation that matters. The second is that people losing any more than a derisory amount of money per month must have a truly enormous cash pile. So these 'hard up pensioners' are sitting on huge piles of loot (presumably from trading down during the house price bubble).

I would rather people in that situation suffer a little than have mass unemployment, given a choice.

Cannon_Fodder

http://www.bankofengland.co.uk/publications/news/2009/019.htm

"The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 0.5 percentage points to 0.5%, and to undertake a programme of asset purchases of £75 billion financed by the issuance of central bank reserves."

"To that end, and noting the recent exchange of letters between the Governor and the Chancellor of the Exchequer concerning the use of the Asset Purchase Facility for monetary policy purposes, the Committee agreed that the Bank should, in the first instance, finance £75 billion of asset purchases by the issuance of central bank reserves. The Committee recognised that it might take up to three months to carry out this programme of purchases. Part of that sum would finance the Bank of England’s programme of private sector asset purchases through the Asset Purchase Facility, intended to improve the functioning of corporate credit markets. But in order to meet the Committee’s objective of total purchases of £75 billion, the Bank would also buy medium- and long-maturity conventional gilts in the secondary market. It is likely that the majority of the overall purchases by value over the next three months will be of gilts."

"At its future meetings, the Committee will monitor the effectiveness of this purchase programme in boosting the supply of money and credit and in due course raising the rate of growth of nominal spending, adjusting the speed and scale of purchases as appropriate."

ad9898_3

stevetodd wrote: »

Certainly makes a difference to me being on tracker mortgages

Yeh, I know Steve, I did mention it.;)

Really2

mitchaa wrote: »

I have no idea what good this is doing as the majority of trackers will have already bottomed out. Those that didn't have floors are surely in the very low % of mortgage holders.

Why go 0.5? Why not go the full hog and just make it 0%

I am .99% now:o

I new rates were going to go down but I thoght BOE lowest was going to ne 1.5% giving me 1.99%.

I owe mewbie one he said if I did not take the liftime tracker offer I would be kicking myself in a few months.

He was right, i would have been.

ad44downey

More madness. But wholly expected.

stevetodd

ad9898 wrote: »

Yeh, I know Steve, I did mention it.;)

Well I need it because I found out this morning (from this forum) that I am apparantly desperate! It came as a huge shock to me

Kez100

Well done that Mewbie!

JonnyBravo

dervish wrote: »

what about the ones trying to build a deposit to get a new house...?:rolleyes:

Continue saving until it makes sense for your personal circumstances to buy.

Is that not obvious?

:rolleyes:

ad9898_3

Sir_Humphrey wrote: »

In deflation conditions

I'd really like to know where these deflation conditions exist, because I don't see them. If I was cynical, and as far as Clown goes I am, I can't see any deflation apart from house prices and mortgages, strange that hey.