MSE News: Eurozone crisis could push mortgage rates up

Former_MSE_Helen

This is the discussion thread for the following MSE News Story:

"Banks pay more to fund home loans which could mean higher costs for mortgage holders ..."

Read the full story:
Eurozone crisis could push mortgage rates up

brit1234

This will help deflate the housing bubble faster, let hope the house price falls are speeding up so people can buy affordable homes again.

Even with these coming mortgage rate rises they will still be low on a historic basis. I just hope they bump interest rates for savers who have been the true loosers this last 4 years.

jamesd

If I recall correctly both HSBC and RBS fund almost all of their mortgage lending from deposits and RBS was saying it wasn't lending as much as it could from deposits and was looking to do more.

If my recollection is correct this makes me wonder why RBS would have a reason to use increased borrowing costs as a reason to raise rates.

The_J

brit1234 wrote: »

Even with these coming mortgage rate rises they will still be low on a historic basis. I just hope they bump interest rates for savers who have been the true loosers this last 4 years.

I've been saving for the last 4 years at very decent rates of return. You haven't been investing in cash have you brit? Because that would be silly. Someone as financially astute and aware of risk as you will have an incredibly diverse portfolio.

It's nice of you to think of the ordinary man saving his £50 a month but I'm pretty sure he's just happy to have his money. Unlike you or I, I don't think he wants to think too much about it. He just wants to know his £50 is safe which is fair enough in the deepest recession of our lifetimes.

Frozenace

I'm moving to HSBC if they're willing to accept me... getting a decision next week.

Credit-Crunched

Frozenace wrote: »

I'm moving to HSBC if they're willing to accept me... getting a decision next week.

Lol good luck

Conrad

Yes mortgage rates could be pushed up, and..........?? Whats to discuss? It is what it is.

Consumerist

jamesd wrote: »

If I recall correctly both HSBC and RBS fund almost all of their mortgage lending from deposits and RBS was saying it wasn't lending as much as it could from deposits and was looking to do more. If my recollection is correct this makes me wonder why RBS would have a reason to use increased borrowing costs as a reason to raise rates.

Reading between the lines of what you recall, it's possible that RBS has continued to rely mainly on the money markets to fund mortgages. If they now intend to use savers deposits then they will need to improve savings rates to attract those deposits. Maybe that's the underlying reason for claiming increased borrowing costs.

Just a thought but if that sentiment is repeated throughout the mortgage industry then it bodes well for savers down the line if only the BoE could be relied on to constrain inflation. Little hope of that with QE working its way through the system.

jamesd

If I recall correctly the claim was that they were lending less than 90% of what they had on deposit with them, something like 86 or 88%, but in any case under 90%.

Consumerist

jamesd wrote: »

If I recall correctly the claim was that they were lending less than 90% of what they had on deposit with them, something like 86 or 88%, but in any case under 90%.

That's higher than I expected. Aren't banks required to hold a certain proportion of deposits in reserve, anyway?

danothy

Consumerist wrote: »

That's higher than I expected. Aren't banks required to hold a certain proportion of deposits in reserve, anyway?

I don't think the UK has a fraction prescribed as such, but it has other requirements for banking liquidity that can effectively enforce one and there is supposedly a practise of voluntary reserve fraction ... the list on wikipedia has reserve fractions from 0% to 30% in various other countries.