Fixed rate mortgage interest rates could fall soon.

Graham_Devon

A move by the bank of england to drop the rate of interest it pays to high street banks on their deposits could see the cost of fixed rate mortgages drop. Mervyn King has now stated he is looking at this as a way of encouraging banks to lend.

http://www.thisismoney.co.uk/mortgages-and-homes/article.html?in_article_id=490790&in_page_id=8&ct=5

Could this work?

Apparently it won't generate any new lending, but will make the existing glut of lending cheaper....in theory.

inspector_monkfish

Graham_Devon wrote: »

A move by the bank of england to drop the rate of interest it pays to high street banks on their deposits could see the cost of fixed rate mortgages drop. Mervyn King has now stated he is looking at this as a way of encouraging banks to lend.

http://www.thisismoney.co.uk/mortgages-and-homes/article.html?in_article_id=490790&in_page_id=8&ct=5

Could this work?

Apparently it won't generate any new lending, but will make the existing glut of lending cheaper....in theory.

have to wait and see what Merv does next month
interbank rates are tumbling, so would make sense

Really2

Graham_Devon wrote: »

Apparently it won't generate any new lending

I thought the idea was to increase new lending.

The banks do not get 0.5% for stashing it with the BOE.

Banks have to go out and get a return from other sources.

Cant 'see how it would not lead to increased lending myself.
But that does not mean that the money has to flow in to mortgages (but the return is good at the moment)

inspector_monkfish

Really2 wrote: »

The banks do not get 0.5% for stashing it with the BOE.

Err... currently, yes they do.

Heyman_2

Maybe.

I think the banks are getting too used to their nice high margins at the moment though.

Really2

inspector_monkfish wrote: »

Err... currently, yes they do.

err the idea is they don't though and that is what I am talking about.

not sure what is got in to you but you are a picky little bleeder.

Really2 wrote: »

A)The banks do not get 0.5% for stashing it with the BOE.

Banks have to go out and get a return from other sources.
Cant 'see how it would not lead to increased lending myself

it's a term of events, perhaps should have done the above to avoid picky posting.

inspector_monkfish

Really2 wrote: »

err the idea is they don't though and that is what I am talking about.

not sure what is got in to you but you are a picky little bleeder.

pot, kettle...


you said Banks do not get paid 0.50% for stashing money with BOE.

i can catagoricaly confirm that they absolutely do


no nit-picking, just correcting you...

inspector_monkfish

now you have amended your post, i see where you are coming from.
sorry for confusion.

chucky

Really2 wrote: »

err the idea is they don't though and that is what I am talking about.

not sure what is got in to you but you are a picky little bleeder.


it's a term of events, perhaps should have done the above to avoid picky posting.

the banks can get 0.4% (or whatever Libor is) on the interbank market but get 0.5% by depositing it at the BOE overnight. it's risk free and get's a better return.

i'm not sure about the articles accurancy though - why would Libor affect Fixed rates when Libor only goes out to 12 months? :rolleyes:

inspector_monkfish

chucky wrote: »

the banks can get 0.4% (or whatever Libor is) on the interbank market but get 0.5% by depositing it at the BOE overnight. it's risk free and get's a better return.

i'm not sure about the articles accurancy though - why would Libor affect Fixed rates when Libor only goes out to 12 months? :rolleyes:

i think they are trying to harp back to the good old days when 3mth LIBOR had some sort of bearing on certain fixed rate mortgage products....

not anymore though!! (well not in the way it used to)

michaels

So what has been happening to the 2s to 5s?