Next interest rate move - post NR

Gorgeous_George

I know that the MPC are 'independent' of the Government but...

... now that Northern Rock has been brought under 'temporary public ownership', will this affect the next interest rate move? And what about IRs in the mid-to long-term?

Will GB (Gordon Brown, not Great Britain) allow rates to rise, possibly leading to higher repossession levels? Or will we have lower rates to stave off the repossessions until the Tories are on watch?

GG

pararct

Theoretically lower rates improve the prospects for current owners within the housing market. Lower rates = Less Interest Payments.
It may not help new buyers looking to secure new mortgages as we all know the money supply has been tightened considerably.

As NR is now owned by all of us surely we all have an interest to see it not only survive but prosper giving a scenario where it can be sold back to the Private Sector.

If you are implying would/should the MPC consider the taxpayer in it decision on rate setting and providing a better 'environment' for NR then I don's think so. Their first brief is to restrict inflation below the target level.

NR should have been allowed to go to the wall in September despite the consequences. It would have been painful but a better solution to the one now facing us.

Darling and Brown have really dropped us in it now.................

Jorgan_2

Gorgeous_George wrote: »

Will GB (Gordon Brown, not Great Britain) allow rates to rise, possibly leading to higher repossession levels? Or will we have lower rates to stave off the repossessions until the Tories are on watch?

GG

The repossession question is one we were discussing in work this morning. From a business point of view you would want to liquify your assessts ASAP to get the money in, so more repossessions. But its hardly a vote winner.

merlinthehappypig

There was something on earlier that I missed part of, but it was about the bid from NR's management and how they proposed to reduce the size of the bank by getting rid of £50bn worth of mortgages.

The plan was, still is, apparently, to increase NR's mortgage rates so that half the mortgage customers are 'persuaded' to move elsewhere.

The new guy in charge at NR is apparently in favour of this approach to reduce the Government's liability.

Given NR's share of the mortgage market surely all this would do is raise mortgage rates across the board? With that scenario whatever the BOE did with interest rates would have little or no effect on mortgage rates, surely?

I may have missed a vital part of the report, but it's an interesting scenario where the Govt itself might be largely responsible for hiking up mortgage rates for most people because of NR's 'nationalisation'

Presumably NR would, under these circumstances, be left with the people who are least able to pay their mortgage ie. those who can't transfer their 125% mortgages elsewhere. They would have to pay the higher rates and thus the risk of repossession would increase. House prices would be forced down because of increasing repossessions and NR's assets would reduce further.

Something of a vicious circle, I think.

Gorgeous_George

I don't really want to get into a discussion about the rights and wrongs of the Government's handling of NR on this thread. However, FWIW, I think the Government had no choice but to act in the manner that they have.

The FSA is a pointless quango. Northern Rock managers and shareholders are the muppets weho let this happen. Not only should shareholders lose everything, any residual debt should also be covered by them.

But, as I said, this thread is more about interest rates.

My guess is that the inflation target will be relaxed in the next budget and this will allow the MPC to reduce rates - sparing HMG evicting tens of thousands of NR mortgagees.

GG

mr.broderick

pararct wrote: »

Theoretically lower rates improve the prospects for current owners within the housing market. Lower rates = Less Interest Payments.
It may not help new buyers looking to secure new mortgages as we all know the money supply has been tightened considerably.

As NR is now owned by all of us surely we all have an interest to see it not only survive but prosper giving a scenario where it can be sold back to the Private Sector.

If you are implying would/should the MPC consider the taxpayer in it decision on rate setting and providing a better 'environment' for NR then I don's think so. Their first brief is to restrict inflation below the target level.

NR should have been allowed to go to the wall in September despite the consequences. It would have been painful but a better solution to the one now facing us.

Darling and Brown have really dropped us in it now.................

Lloyds tsb just increased my platinum credit card that i never used from £6000 to £9700 they are constantly trying to offer me loans and were desperate to offer me a mortgage recently, went with abbey in the end.
They have recently put my overdraft which i totally disagree with from £100 to £5000 ? Credit crunch anyone?

danm

from the government stand-point, to keep the arrears and repo's as low as possible is surely the prioroty now.

If you start to liquidate, then you are probably going to do so at a loss (depending on LTV's).

IMO, the assets are good. For their faults, NR has one of the best underwriting processes in the business, and the government have inherited some good quality assets paying decent rates on interest

boinging_2

merlinthehappypig wrote: »

There was something on earlier that I missed part of, but it was about the bid from NR's management and how they proposed to reduce the size of the bank by getting rid of £50bn worth of mortgages.

The plan was, still is, apparently, to increase NR's mortgage rates so that half the mortgage customers are 'persuaded' to move elsewhere.

The new guy in charge at NR is apparently in favour of this approach to reduce the Government's liability.

Given NR's share of the mortgage market surely all this would do is raise mortgage rates across the board? With that scenario whatever the BOE did with interest rates would have little or no effect on mortgage rates, surely?

I may have missed a vital part of the report, but it's an interesting scenario where the Govt itself might be largely responsible for hiking up mortgage rates for most people because of NR's 'nationalisation'

Presumably NR would, under these circumstances, be left with the people who are least able to pay their mortgage ie. those who can't transfer their 125% mortgages elsewhere. They would have to pay the higher rates and thus the risk of repossession would increase. House prices would be forced down because of increasing repossessions and NR's assets would reduce further.

Something of a vicious circle, I think.

This is actually happening. My friend is on a fixed rate that expires in April with NR. They have called him and said he would be much better looking elsewhere as they will only offer him a new rate much higher than he could get from other lenders.

They are definately looking to offload customers.

Generali

If credit is harder to get hold of, you'd expect to see it being offered to more profitable customers. Some will find credit as easy as ever to get, others harder.

I can see no reason why HRK being nationalised would have an impact on base rates. If they want to shrink their loan book, that implies less competition and so other banks being able to charge higher rates. Impossible to proove either way of course.

VFR-Rider

I wish it would rise, I really do (savings, no mortgage yet!). But I'm going to vote for a hold.

Gorgeous_George

Generali wrote: »

If credit is harder to get hold of, you'd expect to see it being offered to more profitable customers. Some will find credit as easy as ever to get, others harder.

I think it (credit) will be offered to less risky customers.

Most profitable are those who miss payments and take additional charges.

Less risky are those with low LTV ratios and secure jobs.

GG