3-mth dlr, euro, stg Libor rates reach new lows

inspector_monkfish

purch wrote: »

....or at the moment don't :eek:

haha, indeed that is true

but there are alot of corporate customers that have long term loans based against libor that banks have to lend at, as its in the initial agreement

purch

Yeah yeah..........

LIBOR plus 1/4....

Corporate Desk get's their cut of the 1/4, and your left with a Loan you can't cover at anything close to LIBOR !!! :eek:

All the fun of the fair !!!! :j

......now where did I put my arbitrage calculator ???

inspector_monkfish

purch wrote: »

Yeah yeah..........

LIBOR plus 1/4....

Corporate Desk get's their cut of the 1/4, and your left with a Loan you can't cover at anything close to LIBOR !!! :eek:

All the fun of the fair !!!! :j

......now where did I put my arbitrage calculator ???

you used a calculator for that !!!???;)


no, we can cover at better than LIBOR:D

Thrugelmir

chucky wrote: »

the below gives you an indication of what is happening to spreads in the market - it's for Fixed rate deals not SVR's but shows that the banks are absorbing extra profit on deals by not passing on the margins.


http://www.gscape.com/images/econ/charts/fixedratespreads.gif

On a daily basis banks either need short term liquidity to balance their books or have excess funds that they are willing to lend. Hence Libor was created to manage this market.

Fixed term mortgages are primarily based on corresponding fixed term deposits. As competition has increased to secure fixed rate deposits the cost of fixed rate mortgages has increased. There have been an increasing number of adverts in the Sunday press looking for fixed term deposits up to £2 million pounds at reasonable rates for a 3 year term. Last week there was one which offered stepped rates if the funds were left deposited for 3 years. 3% year one, 4% year 2 and 5 % year 3.

michaels

Ok - HSBC need for example 200k to cover my mortgage at a rate linked to their svr - the property has more than 50% equity so I would have thought the capital risk was pretty close to zero There is also an erp so they don't need to worry about early redemption. They have a good credit rating, how much will it cost them to secure these funds if not something arround 3 months libor?

michaels

Thanks for this, Feb 08 when they approved my mortgage would also be interesting.

inspector_monkfish wrote: »

last boe rate cut was March 5th from 1.00pct to 0.50pct
on that date 3mth Libor was 1.99pct, today it is 1.045pct
6mth was 2.18pct, today it is 1.27pct
12mth was 2.33pct, today it is 1.57pct

boe rate cut before that was on Feb 5th from 1.50pct to 1.00pct
on that date, 3mth Libor was 2.15pct
6mth was 2.33pct
12mth was 2.47pct

hope that helps vent your frustration !!

inspector_monkfish

michaels wrote: »

Ok - HSBC need for example 200k to cover my mortgage at a rate linked to their svr - the property has more than 50% equity so I would have thought the capital risk was pretty close to zero There is also an erp so they don't need to worry about early redemption. They have a good credit rating, how much will it cost them to secure these funds if not something arround 3 months libor?

for 200k they won't even go to the market !

purch

They have a good credit rating, how much will it cost them to secure these funds if not something arround 3 months libor?

They won't be covering a 25 year Asset with a 3 month Liability.

michaels

So someone who knows how do banks fund variable rate mortgages - these can obviously (once the erp period passes) be redeemed at any time but also obviously can have the rate reset on changes in interest rates - I assumed they would just role over short term money - would they do it differently?

Thrugelmir

michaels wrote: »

So someone who knows how do banks fund variable rate mortgages - these can obviously (once the erp period passes) be redeemed at any time but also obviously can have the rate reset on changes in interest rates - I assumed they would just role over short term money - would they do it differently?

Simple explanation of bank balance sheets.

On one side (A):

Shareholders Equity
Retained Profits
Deposits
Current Accounts (in credit)

This is money they can lend.

On the other (B).

Overdrafts (personal and corporate).
Mortgages
Corporate Loans

On a daily basis if (a) exceeds (B) then the bank will lend money to the market. If other way round then borrows.

With regard to floating money rates. Current accounts earn less than base rate , money advanced is over BOE base. So the bank makes its margin.

Banks utilise other peoples money not their own (other than core share capital). Banks borrow short and lend long.