The Wilsons are going under.

aelitaman

MissMoneypenny wrote: »

Wouldn't a base interest rate of 7% (the average) help the banks to bring in more money to help cover their losses from the borrowers who have defaulted or walked away from their repayments?

Depends what they charge on the loans if it was 10% then banks would raise money at just over 7% and lend it at 10% approx 3% profit 3/7 = 42% profit margin.

Currently they are borrowing of the BoE at just over .5% and there SVR's are about 3.5% so they are making 3% profit. 3% / 0.5% = 600% profit margin.

The banks were bust and needed to recapitalise to handle the bad loans and to start new lending. The quickest way to do this is allow them to make massive profits by letting the BoE lend them taxpayers money at very low interest rates whilst the banks pay savers nothing and charge borrows a lot.

Euphoria1z

if the wilsons buy to lets are on svrs etc, then surely there no longer in trouble? they could save all the extra cash and use it for when rates go back up? or was it there exit strategy to sell around about this time anyway but got hit with a recession?

MissMoneypenny

Euphoria1z wrote: »

or was it there exit strategy to sell around about this time anyway but got hit with a recession?

I read that Fergus said their exit stategy was to sell to first time buyers. With all their houses in the same area, I'm not sure that they really thought that through. I think they just became addicted to buying.

MissMoneypenny

aelitaman wrote: »

Depends what they charge on the loans if it was 10% then banks would raise money at just over 7% and lend it at 10% approx 3% profit 3/7 = 42% profit margin.

Currently they are borrowing of the BoE at just over .5% and there SVR's are about 3.5% so they are making 3% profit. 3% / 0.5% = 600% profit margin.

The banks were bust and needed to recapitalise to handle the bad loans and to start new lending. The quickest way to do this is allow them to make massive profits by letting the BoE lend them taxpayers money at very low interest rates whilst the banks pay savers nothing and charge borrows a lot.

Therefore, putting the mortgage rates up to 7% for all (that's about an average of what the interst rates have been over the years), would give the banks bigger profits and be less of a burden on the taxpayer as their loans could be repaid quicker. The lower interest rates are helping the borrowers, not the banks or the taxpayer who footed the bill for these bank loans.

The savers also profited from taxpayer bank loans to stop some banks going under.

Plus those savers who put their money with Icelandic banks were also a drain on the UK finances and it looks like we will never get that money back. So more of a grant to the savers from the taxpayer and not a loan. That's a loss to the UK there.

Charterhouse

aelitaman wrote: »

Currently they are borrowing of the BoE at just over .5%

NONONONONONONONONONONONONONONONONO.

For Christ's sake will people stop posting this false crap.

aelitaman

Charterhouse wrote: »

NONONONONONONONONONONONONONONONONO.

For Christ's sake will people stop posting this false crap.

UK banks have borrowed 287billion (as of now) at 1.15% under the special liquity scheme.

Standard interest rates on savings accounts are from 0.5% to 2.8% at the halifax depending on amount of cash and whether you need branch access or web only.

Charterhouse

aelitaman wrote: »

UK banks have borrowed 287billion (as of now) at 1.15% under the special liquity scheme.

Standard interest rates on savings accounts are from 0.5% to 2.8% at the halifax depending on amount of cash and whether you need branch access or web only.

You are an idiot who should be banned from posting.

Do you know what the haircuts on those assets are? £187bio was lent, against £247bio of collateral, which originally had a face of £287bio. The £287bio was not the lending total. That approximates to a haircut of 25% (or, based on the original face, 35%. That gives an effective lending interest SPREAD of 1.52% or 1.76% depending on which you use, and that does NOT include the t-bill rate itself, which the 115bps SPREAD is ADDED to. So basically effectively we are looking at probably (1.15+0.50)/0.75 = 2.53% effective lending rate.

Again, I repeat, please desist from posting misinformation.

kennyboy66_2

MissMoneypenny wrote: »

Wouldn't a base interest rate of 7% (the average) help the banks to bring in more money to help cover their losses from the borrowers who have defaulted or walked away from their repayments?

No it wouldn't help the banks, as the number of defaults would soar.
It wouldn't help the economy as investment would be pretty pointless, in a lowish inflation enviroment (<3%), why borrow at 7% plus banks margin, so say 10%.
And why have the highest real interest rates in history, when money supply is falling.

Of course savings rates would not be 7%, as there would be such a collapse in demand that savers would struggle to find people to lend to. No doubt of course you would still want the government to guarantee savings.

It would however, be great for people who wanted house prices to fall or suffer some kind of deflation fantasy. Or want borrowers punished for their sins.
Of course prudent borrowers would suffer but the reckless ones would simply go bust & walk away from their debts.

dopester

Charterhouse wrote: »

NONONONONONONONONONONONONONONONONO.

For Christ's sake will people stop posting this false crap.

http://www.youtube.com/watch?v=0z_Qqnq8pI8

Pobby

Still a shame us old beggers can`t get a bit of interest. Ah, I know, should go out and get some BTLs.