MSE News: Base rate held at 0.5% again

A_Flock_Of_Sheep

I puzzle why banks charge 18%+ for credit cards and only 4-5% for mortgages. If the interest rate is set at only 0.5% how come credit cards aren't 6 or 7%?

Make mortgages 18%, credit cards 30% and savings 10%

gadgetmind

A_Flock_Of_Sheep wrote: »

I puzzle why banks charge 18%+ for credit cards and only 4-5% for mortgages.

Because credit card debit is unsecured, which means there isn't an asset for the bank to seize if someone defaults.

Interest rates and yields are all about risk versus reward. With low risk, come low rates and vice versa.

JuicyJesus

A_Flock_Of_Sheep wrote: »

I thought the tories looked after those that were prudent. I am sadly mistaken.

The BOE sets rates independently of Government. I dislike the Tories intensely but on this particular point they can't be blamed. Regardless, at this point in time increasing the BOE rate would be the worst possible thing to do for the economy at large. The BOE clearly agree.

Unfortunately, the Tories are not helping matters by constricting spending. What Labour was doing was helping. What the Tories are currently doing is at best leading to stagnation. I still consider raising the VAT rate to 20% easily one of the most idiotic decisions they could possibly have taken in the midst of a recession.

gadgetmind wrote: »

Because credit card debit is unsecured, which means there isn't an asset for the bank to seize if someone defaults.

Interest rates and yields are all about risk versus reward. With low risk, come low rates and vice versa.

Pretty much this. Also, depending on which bank, lending might be funded by borrowing from other banks, which is not generally at BOE base but instead at LIBOR, which is higher. This is generally why banks who have their lending books fully backed by savings (HSBC being the prime example) tend to have better mortgage deals - their costs of funding are lower.

sabretoothtigger

VAT rate to 20% easily one of the most idiotic decisions they could possibly have taken in the midst of a recession.

Earning money is more useful then spending it, there is alot more secondary benefit.
They have to raise taxes so instead of NI like Labour had planned it went onto vat which is probably for the best especially as we import alot anyway

Thrugelmir

[QUOTE=JuicyJesus;53676581What_Labour_was_doing_was_helping._[/QUOTE]

To do what? Labour's policy would have resulted in an even higher national debt. So doesn't tackle the fundamental issue of balancing the books.

Growth is a politicians excuse nothing else.

A_Flock_Of_Sheep

Remind me how we have all gotten into the national financial mess we are in. Don't just say the last Government I need reminding of the mechanics.

sabretoothtigger

Debt, thats all. Money is tied up now paying interest on ideas from yesterday.
If we had run a surplus for the last ten years we'd be richer, obviously because we pay less interest but also because alot of the spending was not conductive to further growth


Also there is a much harder to explain subversive element to it all where capitalism itself is said to have failed.
My take on this is that capitalism is a system where people just like you and me hold equal rights but not amounts to a section of the countrys wealth.
So all I mean by that is my pound coin is the same as Gordon Browns pound coin, he might have more but we are equal in our opportunity use

As it stands now this is not the case, the central bank is creator and ruler of the countrys wealth. They decide how much it costs to borrow and even create new sections of this capital.
So it is not equally divisible, as government is far closer to that outflow of new wealth they are very much better off

Its called a hidden tax by some and we would call it inflation but really its inefficency in the movement of all capital through the economy; it means the economy spins its wheels as the weight of profit is always centered over towards such schemes as QE which is government debt

The fastest growth in any country always comes from the smallest people. If you have an amazing idea you can double your income. Maybe thats unlikely but with hard work its supposed to be possible
By centring the countrys wealth towards debt or low mortgage rates perhaps it takes the focus away from individuals and away from the highest growth towards failed ideas such as bubble housing

Thrugelmir

A_Flock_Of_Sheep wrote: »

I puzzle why banks charge 18%+ for credit cards and only 4-5% for mortgages.

To cover the bad debt that gets written off.

In 2011 £3.6 billion or 7% of card debt was written off by the banks.

JohnRo

Thrugelmir wrote: »

There's good rates available is one bother to look.

This site lists them ............

Yeah yeah. It's only within the last couple of months or so that high street savings rates have slightly outpaced (official) inflation figures and then only if you're prepared to lock your money away for years. As anyone living within their means and relying on savings interest within a tight budget knows, the official inflation figure bears little relation to everyday spending on essentials.

Last year food inflation was running at close to 2% a month, compounded by higher charges hidden in reduced weight goods. Domestic fuel bills for most were up by around 20% annually.

JuicyJesus

sabretoothtigger wrote: »

Earning money is more useful then spending it, there is alot more secondary benefit.
They have to raise taxes so instead of NI like Labour had planned it went onto vat which is probably for the best especially as we import alot anyway

At the same time it constricts consumer spending, and with one of the key economic issues at the moment being depressed retail sales, we need less spending like we need a hole in the head.

The 15% VAT rate instituted by Labour was a good step, and boosted sales, and did help restore growth. I agree that growth is not the be-all and end-all, but it is certainly better than the mild stagflation we have at the moment.

Thrugelmir wrote:

To do what? Labour's policy would have resulted in an even higher national debt. So doesn't tackle the fundamental issue of balancing the books.

The time to balance the books is when we are in growth and when we can afford to put money towards clearing debt - not when reducing spending will take money out of an economy that is already in recession, and in the midst of a global economic crisis. The Government's current approach appears to be one of reducing the deficit at literally any cost, regardless of whether it makes sense for the country's economic health in the long term. Right now all I see is economic stagnation, rising unemployment, depressed consumer spending and a Government that is doing precisely sod-all to remedy any of those things.