The dangers of delinking from base rates. Banks play a risky game...

IveSeenTheLight

ILW wrote: »

Your argument does seem a little one sided.
You object to banks charging a market rate which you consider profiteering. If that is the case why do you not object to landlords doing the same thing or do you wish margins to be somehow centrally controlled?

For example if someone bought a BTL in the past and is currently paying around £100 per month interest, should they be banned from renting the property at £1000 per month?

I think you missed the point Hamish made about requiring increased turnover to capitalise on marketshare and obtain lower expenditure costs.

I'm not sure how this applies to BTL, although I have been able to secure reduce costs against repeat costs i.e. Boiler Servicing. I get three boilers services, yet it does not cost me 3 x service costs (more like 2.5 times) as I have them serviced by the same supplier who has given me a discount on the multiple properties.

This allows me to increase my profits without the need to increase my monthly rentals

ILW

IveSeenTheLight wrote: »

I think you missed the point Hamish made about requiring increased turnover to capitalise on marketshare and obtain lower expenditure costs.

I'm not sure how this applies to BTL, although I have been able to secure reduce costs against repeat costs i.e. Boiler Servicing. I get three boilers services, yet it does not cost me 3 x service costs (more like 2.5 times) as I have them serviced by the same supplier who has given me a discount on the multiple properties.

This allows me to increase my profits without the need to increase my monthly rentals

Sounds like you are advocating even larger and fewer banks.
Surely that is not too good?

HAMISH_MCTAVISH

ILW wrote: »

Surely that is not too good?

Distraction.

Try arguing with what I said.

For banks, keeping high levels of turnover is important to their long term viability as well, because an economy starved of liquidity is a economy that will contract, leading to business contraction, then increased unemployment, then increased bad debt, then asset price falls, then increased write offs for banks, then less lending, then rinse and repeat.

As the article points out, banks in recent times have tended to do the opposite of what is required though.

Banks should be increasing the volume of lending and reducing the margin on lending.

It's ultimately in everyone's best interests for them to do so, including their own, because if the economy enters a recession due to being starved of liquidity the banks will lose too.

HAMISH_MCTAVISH

Generali wrote: »

- Last financial year the Big 4 made about $25,000,000,000 in profit between them
- At the last census there were 7,800,000 households in Australia so the big 4 between them make over $3,200 in net profit per Australian household.

Just as a comparison, do you have comparable figures for the "Big 6" in the UK that control the majority of UK lending?

Graham_Devon

HAMISH_MCTAVISH wrote: »

Banks should be increasing the volume of lending and reducing the margin on lending.

But you keep telling us they don't have the funds?

All I know is you are taking the rise in mortgage rates extremely badly.

HAMISH_MCTAVISH

Graham_Devon wrote: »

All I know is you are taking the rise in mortgage rates extremely badly.

My mortgage rate hasn't risen, and can't unless the BOE raises base rates. But then that's just you just playing the man not the ball, and trying to score cheap internet points.

I get annoyed when I see banks threatening to derail the wider recovery and undermine the interest rate policy set by the BOE.

The economy needs low interest rates to be maintained, which is why the BOE is doing so.

Bankers undermining that to get bigger bonuses next year is something we should all be concerned about.

SecondLegDownIsTheBigOne

Graham_Devon wrote: »

All I know is you are taking the rise in mortgage rates extremely badly.

He certainly does.

shortchanged_2

HAMISH_MCTAVISH wrote: »

The economy needs low interest rates to be maintained, which is why the BOE is doing so.

.

Yes Hamish the economy does.

But does the housing market need low interest rates? Many would argue no, because all it is doing is helping prop up an overvalued sector and maybe the powers that be are actually starting to realise this.

Graham_Devon

HAMISH_MCTAVISH wrote: »

My mortgage rate hasn't risen, and can't unless the BOE raises base rates. But then that's just you just playing the man not the ball, and trying to score cheap internet points.

I get annoyed when I see banks threatening to derail the wider recovery and undermine the interest rate policy set by the BOE.

The economy needs low interest rates to be maintained, which is why the BOE is doing so.

Bankers undermining that to get bigger bonuses next year is something we should all be concerned about.

But you are on record stating that the BOE rates have nothing to do with mortgages and the housing market.

So why are you so concerned? How is this going to undermine the recovery if it's only effecting the housing market and mortgages and not the economy?

Do you now disregard what you have previously stated in response to other arguments?

ILW

HAMISH_MCTAVISH wrote: »

Distraction.

Try arguing with what I said.

For banks, keeping high levels of turnover is important to their long term viability as well, because an economy starved of liquidity is a economy that will contract, leading to business contraction, then increased unemployment, then increased bad debt, then asset price falls, then increased write offs for banks, then less lending, then rinse and repeat.

As the article points out, banks in recent times have tended to do the opposite of what is required though.

Banks should be increasing the volume of lending and reducing the margin on lending.

It's ultimately in everyone's best interests for them to do so, including their own, because if the economy enters a recession due to being starved of liquidity the banks will lose too.

The banks are supposedly independent private institutions and their boards will do what they consider to be in their shareholders interests. Saving the economy is the government and the BoEs job.

Sadly the previuos government showed themselves to be useless and the BoE have lost most of their credibility (and influence) by constantly making predictions that were way wide of the mark.