Thinking of buying? Abbey to raise all mortgages 0.3 % from Monday 10.03

WTF?_2

See here:

http://www.mortgagesolutions-online.com/public/showPage.html?page=733176

Abbey has confirmed it is to increase rates on all of its products by 0.3% on Monday.


A sign of things to come - BoE rates have not gone up but the banks are having to raise anyway.

There won't be a mid-2005 style rally of the housing market inspired by interest rate cuts this time, methinks.

merlinthehappypig

Following the BOE's decision to hold interest rates the rate on Halifax's two-year fixed mortgage has gone up from 5.67% to 5.77%. Its two-year tracker mortgage has been pushed up even more, from 5.74% to 5.99%.

I agree and hence losing even more sleep about our current purchase.

Generali

merlinthehappypig wrote: »

Following the BOE's decision to hold interest rates the rate on Halifax's two-year fixed mortgage has gone up from 5.67% to 5.77%. Its two-year tracker mortgage has been pushed up even more, from 5.74% to 5.99%.

I agree and hence losing even more sleep about our current purchase.

I wouldn't worry too much about this. If the BoE sees effective rates rising then they'll cut the base rate. For most of the economy the base rate isn't important, the actual rate of interest being paid is.

If lenders raise rates by 30bps compared to the base rate and the base rate falls by 30bps, the borrower hasn't lost out at all.

WTF?_2

Generali wrote: »

I wouldn't worry too much about this. If the BoE sees effective rates rising then they'll cut the base rate. For most of the economy the base rate isn't important, the actual rate of interest being paid is.

If lenders raise rates by 30bps compared to the base rate and the base rate falls by 30bps, the borrower hasn't lost out at all.

There is the slight issue of what happens to inflation if base rates are cut.

If the pound falls, as it surely will, expect to see pretty rapid rises in the cost of fuel and food. All the fudged inflation rates in the world can't disguise the real-life rises in the cost of living and one way or another people are going to be squeezed for cash.

carpetbelly

banks have been chasing market share hence rates have been low in comparison. At the moment a lot of banks are changing back to the view of profit rather than market share, hence why you will see rates rise on products. Give it a year (couple of years) for uncertainty to drop off then you will probably see banks gunning for market share again.

Generali

!!!!!!? wrote: »

There is the slight issue of what happens to inflation if base rates are cut.

If the pound falls, as it surely will, expect to see pretty rapid rises in the cost of fuel and food. All the fudged inflation rates in the world can't disguise the real-life rises in the cost of living and one way or another people are going to be squeezed for cash.

It isn't base rates that impact on inflation though. It's the rate of interest that borrowers are paying.

Higher interest rates reduce inflation in 2 main ways:

1. They make investment less profitable so companies need fewer workers = higher unemployment = lower wage demands and less money in people's pockets to buy things. The more people want or are able to buy, the more companies can charge. Companies charging more = inflation.

2. People would rather save a bit more than borrow to spend. People can't afford to borrow so much for a car/house etc as they can't afford the repayments.

Both of those things are a result of the interest rate that people/companies actually pay rather than the base rate although the 2 are usually closely corelated. If the spread between base rates and market interest rates is rising, it makes sense to cut if you want to keep market interest rates at the same level.

There is another argument about whether Governments (or Govt owned central banks) should be setting interest rates at all. I have my doubts as to whether its a good idea but I lost that one in about 1930!