Whinging.

wymondham

ILW wrote: »

There does appear the be rather a lot of indignant wailing going on because some banks have put .5% on their SVRs. Did all these people truly expect to be paying peanuts forever?

apparently they did...

leitmotif

RUN_RABBIT_RUN wrote: »

the only indignant wailing i've noticed is from savers because banks have cut interest rates on their accounts, decreasing the free money they get. did all those people truly expect to be paid generously forever for doing nothing with their money?

Interest paid on savings is not free money; you are lending money to the bank. You have a choice what to do with that money (spend, invest, save, etc.), and in a free market the banks have to compete for the money of those who choose to save.

RenovationMan

ILW wrote: »

There does appear the be rather a lot of indignant wailing going on because some banks have put .5% on their SVRs. Did all these people truly expect to be paying peanuts forever?

A lot of people are indignant that Halifax has increased their rates independantly of the BoE, but as I said on the Halifax thread, newspaper commentators and the general public seem to be confused between a bank's SVR and their BoE tracker offerings. The bank is allowed to increase their own SVR whenever and by whatever amount they want. Their customers can either stay on the revised SVR or choose a new mortgage product and subsequently make their decision whether to stay with the Halifax with that new product or move elsewhere.

Personally, I'll be sticking with my BoE tracker until the deal expires in May 2013 and I'll then be looking at picking up a cheap 10 year fix. All the predictions and forecasts seem to be working extremely well in my favour. Perhaps the moaners should just have planned better? (and I mean both savers and lenders in this analysis)

ukcarper

oldvicar wrote: »

You think that will stop them?

Logic, common sense, and good business didn't stop the excesses of bank lending which got us in to this mess. What's to stop them going too far the other way, especially with regulators demanding they re-build balance sheets (get rid of lending) ?

It’s obviously a balancing act but if the losses incurred by people defaulting exceed the profit from the extra interest I think they will stop. I know some people on here are hoping for mass defaults so that property prices will fall but that is not in the banks interest and I don’t think they will risk that just to increase margins.

StevieJ

leitmotif wrote: »

Interest paid on savings is not free money; you are lending money to the bank. You have a choice what to do with that money (spend, invest, save, etc.), and in a free market the banks have to compete for the money of those who choose to save.

Yes, that is exactly what they are doing, so why all the whinging from savers?

leitmotif

StevieJ wrote: »

Yes, that is exactly what they are doing, so why all the whinging from savers?

Savers aren't happy because interest rates offered for savings have been far lower than inflation for three years. Savers aren't annoyed at the individual banks (if they are, it's misdirected irritation); they're annoyed at the fact that the BOE has deliberately fostered a culture of persistently low interest rates on savings accounts by lowering the base rate in order to resolve (read: palliate) the country's economic woes. In short, they feel that they are losing out in order to inflate away the country's debts and prop up house prices.

The result of the BOE's approach was/is a 25% drop in the value of sterling (which has its advantages, e.g. cheaper for foreign companies buying from us) and house prices that are more or less 'the same' as during the tail end of the boom years (2005-2007), though I use the '' to reflect the fact that though number on the price tag may have only fallen slightly, the value of that amount of sterling is substantially lower due to the devaluation of the currency and high inflation. This has been achieved through historically low interest rates, which savers perceive to be at their 'expense' (the muppets who overborrowed on mortgages during those years are enjoying historically low mortgage rates whilst frugal types or pensioners reliant on savings are losing out, relative to historical rates). In real terms it's a shift in wealth from savers to borrowers. I can understand both savers' frustration and why Mervyn King might not be too bothered about their plight, not least because hardcore savers stash their money away, and that money isn't doing anything towards the recovery.

Now I'm on the fence when it comes to this issue. One lesson to the savers is don't rely on savings - all interest is a nice to have, but it's hardly guaranteed security. And don't rely on the BOE to take the side of the frugal. On the other hand, the trouble with long-term low interest rates is twofold (from my layman's perspective): 1) they engender a sense that we are still in crisis and create caution and doubt on the part of businesses and potential entrepreneurs - they're a kind of quantification or, in a more abstract sense, an expression of that doubt; and 2) they encourage further borrowing (where available), and the way out of a debt-fuelled crisis is surely not further debt. Although the government has made clear that it aims to keep interest rates as low as possible for as long as possible, this is not to help homeowners out but to give a boost to enterprise. A typical mortgage has a term of 25 years, and interest rates will - eventually, inevitably - rise considerably at some point. Still sitting on the fence, saving may not have been the most shrewd move over the past few years - in hindsight - but I wouldn't encourage those who went down the overborrowing route to be too smug about that. If they've overstretched themselves, it will catch up with them.

oldvicar

ukcarper wrote: »

It’s obviously a balancing act but if the losses incurred by people defaulting exceed the profit from the extra interest I think they will stop. I know some people on here are hoping for mass defaults so that property prices will fall but that is not in the banks interest and I don’t think they will risk that just to increase margins.

People can default on their mortgages, and banks foreclose, without the banks losing out. There can be enough equity (or insurance cover taken on high LTV loans) left for the bank to get back what it is owed, and even if there isn't then the (former) homeowner still owes the difference to the bank and will have to pay up. 'Handing back the keys' does not clear the debt.

Mass defaults will almost certainly reduce property prices, but it need not hurt the banks.

ukcarper

oldvicar wrote: »

People can default on their mortgages, and banks foreclose, without the banks losing out. There can be enough equity (or insurance cover taken on high LTV loans) left for the bank to get back what it is owed, and even if there isn't then the (former) homeowner still owes the difference to the bank and will have to pay up. 'Handing back the keys' does not clear the debt.

Mass defaults will almost certainly reduce property prices, but it need not hurt the banks.

I’d like to see figures on how much in addition to initial amount they get back I suspect it’s not very much.

HAMISH_MCTAVISH

oldvicar wrote: »

Mass defaults will almost certainly reduce property prices, but it need not hurt the banks.

:rotfl:

Comments like that make me think it should be compulsory to pass an IQ test before posting on this board.

oldvicar

HAMISH_MCTAVISH wrote: »

:rotfl:

Comments like that make me think it should be compulsory to pass an IQ test before posting on this board.

I'll let you in to a little secret Hamish: When I took the MENSA test my IQ was 155 (on the 'easy' Cattell-B scale). That's top 1%. In fact nearly everything about me is top 1% :j, depending on how you want to measure it.