Banks Offered Unlimited Funds at .25%

Rinoa

http://www.bbc.co.uk/news/business-18822401

A multi-billion pound scheme designed to make more - and cheaper - loans and mortgages available to businesses and individuals has been outlined.
The scheme, called Funding for Lending, will see the Bank of England make low-cost funds available to banks and building societies.
They will initially be able to borrow the equivalent of 5% of the amount they currently lend.
But if they increase their lending, they will be able to borrow more.
There is no upper limit on the amount financial institutions can borrow, but the first allocation is expected to be worth £80bn, which is 5% of the current stock of lending.
The eurozone debt crisis has damaged confidence, leading to falls in lending levels and higher borrowing costs, and this initiative aims to tackle those problems.
The Funding for Lending scheme will begin in August and will be open for 18 months, according to details released by the Treasury and the Bank of England.
Banks and building societies will be able to borrow, for a fee of 0.25%, over four years. That interest rate is much lower than it currently costs them to borrow on the wholesale markets.

Interesting to see how this develops.

grizzly1911

Rinoa wrote: »

http://www.bbc.co.uk/news/business-18822401

Interesting to see how this develops.

It will.

I guess the devil will be in the detail and how complex the rules are for defining what constitutes compliant lending for a matched funding.

"There are penalties built in to the scheme, too. If financial institutions cut the amount they lend, the Bank of England will charge them interest up to a maximum of 1.5%. " BBC

Interesting penalty clause that could come back to bite the banks if growth continues to stall.

There is also no mention of the margin that the Bank's will be expected to work within, if they continue to price high then that will stifle demand. The Banks may not wish to lend in a risky environment to risky businesses without a price to reflect this.

CLAPTON

unbelieveable

so the banks borrow our money for very little
lend it out for a lot
make a big profit
pay massive bonuses because they have been so clever to make all that money

the whole system is uttely corrupt

abaxas

Time to open a bank.

Loughton_Monkey

When will we learn that Banks respond only to sticks and not carrots?

As has been stated, all the banks will do is make a few phone calls to their huge corporate clients [wanna borrow £280m at 2.25% Mr Tesco?]. On £80 billion, that another £1.6 billion in the bonus fund.

Large Gin & Tonics all round.....

sabretoothtigger

Theres a show on ch4 about starting a bank. Funding advantages are probably massively biased to giant banks hence Goodwin's strategy

Fed Call: Fed to Buy Treasurys for 'Twist' Friday
The Federal Reserve is scheduled to buy Treasury securities Friday for its stimulus plan that extends the average maturity of the U.S. government debt sitting on its balance sheet.

The central bank aims to buy $1.5 billion to $2.0 billion in long-dated Treasurys due between February 2036 and May 2042. Results of the operation will be out at 11 a.m. EDT.

The so-called Operation Twist stimulus program originally was set to end in June, but it was extended at the Fed's last policy meeting to year-end for the Fed to exchange an additional $267 billion in short-dated notes for longer-dated ones.

These sales and purchases will keep the Fed's balance sheet size steady. By purchasing longer-term Treasurys, the Fed hopes to push long-term borrowing costs lower for consumers and businesses to facilitate the economic recovery.

The Fed funds rate was last at 0.175%, within the central bank's 0%-0.25% target range.

July 13, 2012 07:58 ET (11:58 GMT)

Rinoa

It can't just be coincidence that HSBC has launched a 5 year mortgage fix at 2.99% today, albeit with a £1495 fee.

Could be the catalyst the market needs.

sabretoothtigger

Whats the LTV on that, I think santander does similar for 60%

Generali

abaxas wrote: »

Time to open a bank.

You need a minimum of £1,000,000 in equity and a couple of years to complete the paperwork.

kabayiri

abaxas wrote: »

Time to open a bank.

Bank of Dave, last night, C4

I have it recorded.

ILW

Generali wrote: »

You need a minimum of £1,000,000 in equity and a couple of years to complete the paperwork.

So, if I could come up with 1 million. Could I get to borrow unlimited funds at .25%?

Sounds like a good little earner to anyone with a North London Semi.