Mervyn King warns mortgage rates are likely to soar and tells banks to slash bonuses

geneer

http://www.dailymail.co.uk/news/article-2068875/Mervyn-King-warns-mortgage-rates-likely-soar-tells-banks-slash-bonuses.html

INCOMINGGGGGGGGGGGGGGGG!

Mortgage rates are set to soar as the Governor of the Bank of England warned the 'extraordinarily serious and threatening' crisis in the eurozone is damaging Britain.
The Bank's financial policy committee said banks were facing higher borrowing rates and may try to pass this on within months – resulting in a 'significant increase' in lending rates.
The sobering report came as governor Sir Mervyn King issued a dire warning about the threat posed to Britain by the euro crisis – because our banks have more than £500billion tied up in European institutions.
Sir Mervyn said the situation was spiralling out of control and deteriorating conditions in the markets were 'characteristic of a systemic crisis'.
'Faced with a crisis of the euro area system, we are seeing at first hand the costs of financial instability,' he said.
As a result, the Bank's governor:

• Ordered UK banks to slash bonuses to staff and dividend payments to shareholders to help prevent financial disaster as Britain braced for a second credit crunch
• Said lenders needed to put their houses in order to shield themselves from the 'extraordinarily serious and threatening' financial storms.
• Insisted banks must continue to lend to households and businesses despite pressure to keep more funds in reserve.

The Financial Stability Report raised the spectre of a rerun of the last credit crunch that crippled the banking system and plunged the global economy into recession.
The Bank gave no estimate of the likely rise in mortgage rates – effectively to pass on increases in the inter-bank lending rates. But even a one per cent increase would add almost £1,000 a year to the cost of a typical £140,000 mortgage.

robmatic

More great news for prospective first-time buyers?

gailey_2

If mortgage rates are forcast to soar then interest rates probably on way up!
I always felt small gradual rises be best but if al goes horribly wrong reckon there be large hike.

Hes not exactly mr cheerful but its not his decisionb alone.
Interest rate rises go to a vote and very few wish it to rise.

if it rises with no change in base rate then it says what I alway base rate is irrelevent and bank of england lost ways to control situation. truly think qu 3 be disastrous idea and dont believe inflation will fall next year to target.

AD9898_2

Good news if it's passed on to savings accounts, after all anyone whose bought, including BTL'ers would have factored in 6-7% mortgage rates when they signed up so should have the back up to cope fine.

Of course if there are any gambling f-eckless !!!!!! who thought they could make money for nothing, then I've zero sympathy for them.

grizzly1911

Personally I would be quite happy for a better savings return, I have been prudent and done nothing to fuel lending.

I am also sure there are a great many in the same position.

I do acknowledge that should that happen the country will suffer massively.

If anyone has brought and gambled on interest rates staying low I wouldn't have much sympathy.

If anyone is in genuine difficulty then I can genuinely empathise.

Low interest rate don't appear to be doing much for new businesses. Banks aren't going to lend to basket cases end of.

I just love it when Merv says to the Banks build up your balance sheets, brace yourself and on the other the Government says spread it like confetti under Merlin. But then again they are independent
:rotfl::rotfl::rotfl:

No doubt bonuses swill be curtailed for the rank and file, hard times you know, while the chiefs continue with their snouts in the trough.

Thrugelmir

BOE has known that this was very likely for some time. Events in Europe appear to have brought forward the envitable. At least 2 years of low rates have brought relief to many in these cash strapped times.

gailey_2

Build up balances and hold more capital will be less lending , very much doubt they curb there bonuses!

Im not sure he was saying base rate would change?

It appeared to me that banks would up their mortgage rates anyway regardless of base and probably keep saving rates very low!wish we had alternative to banks for savings.

if everyone withdrew their savings due to crap interest rates they be screwed then!

Thrugelmir

gailey wrote: »

if everyone withdrew their savings due to crap interest rates they be screwed then!

Then be prepared to pay a fee of say £10 per month just to have a current account with one.

Banks hold the upper hand.

Heyman_2

Already being discussed -

https://forums.moneysavingexpert.com/discussion/3649317

gailey_2

Thrugelmir wrote: »

Then be prepared to pay a fee of say £10 per month just to have a current account with one.

Banks hold the upper hand.

I already opted for fee paying bank account thanks.

Theres no such thing as free banking.

some poor sod pays the price!

geneer

robmatic wrote: »

More great news for prospective first-time buyers?

Indeed. Falling houses pricess will be very welcome for prospective first time buyers.