We must all remember with some shock and horror when the UK treasury announced that they would be cutting bank interest rates to next to nothing to help the business community and keep the major banks from going “belly up.”

If you were one of these people who were fortunate of unfortunate enough to have money on deposit and even more so if you were dependant on the interest earned on a day to day basis, you had no option but to sit back in horror and disarray and watch the interest rates that you were earning on your deposits fall from three of even four percent to less than one.

Although there is a return to optimism that the financial crisis has at least bottomed out and that the economy is now in cautious recovery mode, there are little signs in general that interest rates on deposits are beginning to climb.

When the rates paid out on deposits first began to plummet, the best move that anyone could make was to stay put, dig in and be patient. Especially as the likelihood of finding another bank or building society that were paying out more than one percent was very slim.

However there now indications that higher interest rates on deposits are now available, under certain terms circumstances, For example, both the Abbey and Newcastle Building Societies have recently announced increases in lending rates that, while being far from spectacular, do allow the possibility of actually seeing your savings begin to accumulate for the first time since late last year.

The significance of the interest rate not only strengthens the general feeling that the recession is slowly dwindling and for the families and individuals who had refused to panic the time has come to begin to reorganize their finances and have them work for you once again.

Trends in finance are generally consistent, and mean that if one or two building societies or even the banks begin to offer improved deposit rates it is only a matter of time before they all do. So take the time to check out which deals are likely to be worth your while, and for the long term

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Tags: Bank, Bank of England, Banking, Intrest Rates, Money, Money Management, Savings, UK Banks

Today’s credit crunch spotlight is shining on high street department store group Debenhams.

The firm is seeking to raise more money from investors to aid cash flow, reported the Financial Times.  Trading problems are on the agenda for the next Debenhams board meeting on January 6.

Also struggling to cope with the bills is the Globe Pub Company, which is appointing ‘restructuring consultants’ after admitting difficulties in meeting payments and is close to breaching loan agreements.

In a quarterly update to bondholders, Globe, which owns 424 pubs, said operating profits for the 12 weeks to 29 November had plunged to £5.3m, down 20% on the same period last year. Meanwhile the cost of servicing debt had risen 2% to £4.4m.

Thousands of families are waiting to hear from photographers Olan Mills whether they have lost portraits and gift boxes they have already paid for. The chain, with 34 outlets mainly in Mothercare stores has collapsed and ceased trading.

An administrator will be appointed and the company says it was “endeavouring” to fulfil all outstanding orders and post photographs direct to customers’ homes during January.

People who have bought a gift box or voucher from Olan Mills become unsecured creditors who need to register claims with the administrators – giving a slimmer chance of a refund. Customers who paid by credit card should contact their credit card company.

Parity between the Pound and Euro is becoming more of a reality as sterling values ebb on the back of low interest rates and fears for the state of the British economy.

The Bank of England is expected to reduce interest rates to 1% or less next week, which will put more pressure on the currency markets.

The Pound closed at 1.0389 Euros, down ever so slightly from 1.0390. The Pound remained at US $1.457.

The FTSE was up 102.8 points from 4216.6 to 4319.4 and the DOW closed down 319.4 points at 8483.93from 8515.87.

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Tags: Bank of England, Debenhams, Globe Pub Company, Intrest Rates, Mothercare, UK Credit Cards

Interest rates are ready to tumble again after Christmas, according to City experts.

The Bank of England interest rate stands at 2% – the lowest since 1951.

The 58 economists, polled by news agency Reuters yesterday, feel the rate will fall to 1% by March, and will stay there until 2010 before rising again.

Any cut below 2% would set rates at a level never seen since the Bank of England opened in 1694, and markets are pricing in rates falling to a trough of 1% by June.

Forty of 50 economists in the poll saw the bank’s next move coming in January, with 35 of them forecasting a more modest interest rate cut of 0.5% to 1.5%.

Until recently, the Bank of England could not cut interest rates as inflation was running at more than double its 2% target.

Data released last month confirmed the British economy shrank 0.5% in the third quarter, the first decline in 16 years, after stagnating in the second quarter.

Recent data suggest the UK is now in recession, usually defined as two consecutive quarters of economic contraction.

Figures earlier this week about the UK’s manufacturing and service sectors suggested the economy might have contracted more sharply in the final few months of this year than in the third quarter.

Many are now worried that inflation may undershoot the 2.75% target and some are even concerned about the threat of deflation.

Economists see deflation – a sustained fall in prices – as a nightmare scenario where economies slump as consumers and firms hold back on spending hoping that goods will become cheaper the longer they wait.

The credit crunch is a global problem, forcing banks to put the brakes on lending, hitting Britain’s economy hard. House prices, an indicator of consumer wealth, have fallen 18% from last year’s peak, unemployment is soaring and consumer confidence is plummeting.

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Tags: Bank of England, British Economy, Credit Crunch, Economics, Intrest Rates