Lending drops again - It's the fault of National Savings

zappahey

http://news.bbc.co.uk/1/hi/business/7952198.stm

Mortgage Lending has dropped again and it's because National Savings is hoovering up the money, according to the Council of Mortgage Lenders.

overlander

Ohhh dear backfiring on them is it, they were squealing for the low rates. Yess this is another labour c0ck up to add to the long list.

Quote

Michael Coogan, CML director general, said: "Retail savings are now the predominant source of funding for mortgages.
"But banks and building societies have seen savings ebb away to National Savings and Investments, which has a negative impact on their ability to lend.
"This is yet another example of fractured policy. There are now fewer active lenders in the market, but the government wants them to lend more.
"At the same time, the government's own savings institution is sucking away the funds that would enable them to do so. Until funding improves, the capacity of lenders to lend will remain constrained."

overlander

So interest rates up soon if they had any sense but crash has no history of doing the right thing.

zappahey

overlander wrote: »

"At the same time, the government's own savings institution is sucking away the funds that would enable them to do so. Until funding improves, the capacity of lenders to lend will remain constrained."

In their defence, I don't think the returns on National Savings accounts are all that competitive.

Is it the case that people are chasing security rather than returns?

Either way, I don't think that a Pavlovian "blame Labour/Crash/The Government" response really adds to the debate. Neither here nor on a national level.

neas

good news good news

baileysbattlebus

zappahey wrote: »

In their defence, I don't think the returns on National Savings accounts are all that competitive.

Is it the case that people are chasing security rather than returns?

Either way, I don't think that a Pavlovian "blame Labour/Crash/The Government" response really adds to the debate. Neither here nor on a national level.

You are right - they aren't really competitive but are 100% secure and that's what people want now.

A lot of people are risk averse now and who can blame them.

There was also a huge outflow money from here to Irish banks after the Irish government guaranteed all money for 2 years.

Northern Rock has over £10bn in additional savings over the last year - they still have the government guarantee of 100% too. They aren't competitive either.

As someone said "damned if they do, damned if they don't"

baby_boomer

People might also be chasing higher income via other, more risky, avenues.

Private lenders and NSI are both offering lousy rates.

And the carpetbaggers no longer have any reason to keep money invested in building societies.

Count_Dante

The government needs to borrow tons of cash and it has to come from somewhere. The less lent to NS, the more it has to borrow on the bond markets. It is as simple as that. Personally, the only products that are still worth bothering with are the Index Linked certs because of the piece of mind you get from the RPI linking, but that is it.

itsnever2lateisit?

Typical! When something doesn't work the way they want it - blame someone else.

NSI offers poor rates, but 100% secure (so we are led to believe;) )
B Socs not so secure. Now people have always taken risk in exchange for reward, so the CML needs to tell its members to offer better rates to savers to counter the security NSI offers. It has always been that way, and will never change. Just because BoE rate is low does not mean that Building Societies have to follow it like sheep, nothing to stop them offering savers upwards of 2% and lend out at +5% IMHO

Thrugelmir

itsnever2lateisit? wrote: »

Typical! When something doesn't work the way they want it - blame someone else.

NSI offers poor rates, but 100% secure (so we are led to believe;) )
B Socs not so secure. Now people have always taken risk in exchange for reward, so the CML needs to tell its members to offer better rates to savers to counter the security NSI offers. It has always been that way, and will never change. Just because BoE rate is low does not mean that Building Societies have to follow it like sheep, nothing to stop them offering savers upwards of 2% and lend out at +5% IMHO

Both the Coventry BS and Northern Rock offer savers 3%+ and then lend at 6%+.

The issue with this is that only people who have to borrow at these rates of interest because of their LTV ratios do.

Remember that a lot of existing mortgage holders are on rate trackers and low fixed rates already. BS's can't offer savers rates that don't make a margin against the money they've lent. We have a life time rate tracker of .35% above base. This has to funded by someone.

You are right in the longer term though. As savings rates offered will increase as the BS's will be competing with the Government to borrow money.

Davesnave

baby_boomer wrote: »

People might also be chasing higher income via other, more risky, avenues.

Private lenders and NSI are both offering lousy rates.

And the carpetbaggers no longer have any reason to keep money invested in building societies.

But my BSocs are still paying me 6.25 - 6.97%, which I don't see as particularly 'risky.' Stuck some more in this morning, in fact. NSI seems bit of a joke, unless you are betting on long term index-link, and the Rock is only paying 2% or something.