Fixed rate mortgage interest rates could fall soon.

inspector_monkfish

michaels wrote: »

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

libors?

puddy

this is probalby a silly question, but if the big bank, pays the little bank less on its deposits and so the little bank gets less income coming in, wont the little bank just charge me the consumer more, to offset what they are 'losing' from the big bank??

inspector_monkfish

jenner wrote: »

this is probalby a silly question, but if the big bank, pays the little bank less on its deposits and so the little bank gets less income coming in, wont the little bank just charge me the consumer more, to offset what they are 'losing' from the big bank??

no, the little bank will just pay the bucket shop bank or corporate customer less for their deposit, before they then lend it to the big bank..

eg.

little bank takes money from bucket shop at 0.40%
little bank gives it to big bank at 0.50%

if big bank says he will only pay 0.25%
little bank tells bucket shop he will only pay him 0.15%


there is obviously a bit more to it than that, but that is the basics !

michaels

Gilts or whatever the GBP curve is priced off.

inspector_monkfish wrote: »

libors?

inspector_monkfish

michaels wrote: »

Gilts or whatever the GBP curve is priced off.

no idea, sorry
not my market, but i'll have a look around and see what i can find....

inspector_monkfish

michaels wrote: »

Gilts or whatever the GBP curve is priced off.

15:11 16Sep09 Gilts Fall Sharply After Bank Of England Buyback

LONDON--The Bank of England's latest reverse auction attracted an offer-to-cover ratio of 3.26 times Wednesday, below the 3.84 outcome at the equivalent operation held Sept. 9.

However, the December gilt futures contract fell sharply to its intraday low of 117.36 in reaction to the relatively high offer-to-cover ratio, which suggested traders were keen to sell bonds at current market levels.

However, the high cover ratio was not unexpected, said a trader, given the Debt Management Office will reopen GBP5.25 billion of the 2.25% 2014 UKT Thursday.

"Today's buyback operation offered an ideal opportunity to position books ahead of Thursday's supply," he added.
As part of its quantitative easing program, the Bank bought GBP1.4 billion of eligible gilts in the March 2013-September 2019 maturity bracket in a competitive reverse auction Wednesday, out of a total of GBP4.558 billion offered.

A noncompetitive reverse auction conducted earlier in the day had attracted no offers.
The 4.5% 2013 UKT accounted for the bulk of the buyback, with the Bank accepting GBP958 million out of GBP1.468 billion of the issue on offer.

The Bank also purchased GBP194 million out of GBP1.465 billion of the 4.5% 2019 UKT offered.
However, the Bank bought none of the GBP567 million of the 3.75% 2019 UKT on offer.

At 1400 GMT, the December gilt futures contract was down 0.65 on the day at 117.45, from around 117.70 prior to the buyback results, and within an intraday trading range of 117.36-118.39.

The 10-year benchmark gilt was down 0.57 at 106.465, yielding 3.685%, from around 3.655% prior to the results.
Gilts had earlier turned negative after July TIC flow data indicated falling demand for U.S. Treasurys, then extended their decline following
stronger-than-anticipated U.S. industrial production and capacity utilization data for August.

The gilt yield curve moved steeper, with the 2-year/10-year benchmark yield spread widening to +293.5 basis points from Tuesday's +289.0 bps.
The front end continued to outperform, with the yield on the 2-year benchmark gilt falling to a record low of 0.665% Wednesday in reaction to comments from BOE Governor Mervyn King Tuesday.

Testifying before the Treasury Select Committee, King said that policymakers were considering cutting the remuneration rate, currently 0.5%, paid on commercial banks' reserves deposited with the central bank.

purch

So.

The BOE reduces the rate for O/N Deposits from 1/2 % to say 1/4 %, or even b*gger all, it'll have a huge effect on fixed Mortgage Rates for 2 ,3 and 5 Years ???

What a stupid article.

Typical This is Money drivel, rehashing an old story.

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

That's back to front.

There is no existing glut of lending....that's the whole point.

It might encourage Banks to Lend more into the both the wholesale and retail markets, but it won't make the price much cheaper, if at all.

puddy

im not convinced, its nearly always me the public that pays for this stuff, surely that would mean higher mortgage rates and even lower savings rates??

purch

Gilts or whatever the GBP curve is priced off

The curve is slightly flatter than it was...by a tiny amount.

inspector_monkfish

jenner wrote: »

im not convinced, its nearly always me the public that pays for this stuff, surely that would mean higher mortgage rates and even lower savings rates??

(even) lower savings rates possibly
how would it lead to higher mortgage rates?