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Posts Tagged ‘UK interest rates’

Credit card firm urged to cut interest rates

December 8th, 2008 by jamie | 0 Comments | Filed in Daily News, Debt, Money Management, UK Credit Cards

Credit card firms are being urged to follow the recent cut in interest rates.

Business secretary Lord Mandelson is meeting the firms’ bosses later today to encourage them to drop their rates.

“The government is deeply concerned that borrowers aren’t getting a fair deal,” said Consumer Affairs Minister Gareth Thomas.

Credit card firms have always said their interest rates are competitive.

Bank of England Governor Mervyn King has also slated banks and building societies for failing to pass on the recent savage interest rate cuts to borrowers.

Speaking yesterday to the Commons Treasury select committee for the eighth time in the past year, King said that Britain was in “exceptional and difficult times” and that he was in “no doubt that the single most pressing challenge” to domestic economic policy is to enable the banking system to lend normally. “That is more important than anything else at present,” he said.

MPs heard that many banks and building societies are failing to pass on the full rate cuts will force the Bank’s monetary policy committee to rethink its approach in December.

“Following the 1.5 percentage point cut some banks withdrew their tracker mortgages. They are now introducing them, but with a higher spread from the base rate than before,” said King.

“This means that we must cut bank rates by more than we would otherwise have done, and we will take this into account when we calibrate the correct cut in bank rate.”

King said that the government financial support of the banks might not have come to an end. “Maybe the banks will need more capital, in which case that should be considered. We have seen that happen in the United States,” he said.

The British Bankers’ Association has announced mortgage lending plunged 52% in the year to October.

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Interest rates set to fall to record low

December 3rd, 2008 by jamie | 0 Comments | Filed in Daily News, Money Management

History is in the making as for the first time ever, the Government and Bank of England all but control the UK banking sector.

Until now, the powers that be have set the Bank of England interest rate, but banks and building societies have had the option of whether to follow or not.

Tomorrow, Bank of England governor Mervyn King has a chance to write his place in the history books by taking the interest rate to the lowest ever since the bank opened for trading 314 years ago.

The monetary committee he chairs has four options:

·     Leave the rate as it is at 3%

·     Cut the rate by less than 1%, for instance by 0.25% or 0.5%

·     Cut the rate by 1% to 2% – a rate last seen in 1951

·     Cut the rate by more than 1% to enter a historic new era. 

For the first time, the Bank of England governor knows his actions will not be undermined by speculators in the banks because the Government now calls the shots in several of the UK’s biggest banks after bailing them out with billions of pounds of taxpayer’s cash.

The odds are a 1% cut as the bank was looking to cut the rate by up to 2.5% last month according to minutes of their meeting.

This makes economic sense as inflation is falling and dropping the rate frees up cash for businesses making loan repayments and homeowners with mortgages – both moves stimulate spending that is so badly needed to shift the country out of recession.

Retailers are falling like dominoes in the high street with manufacturing and construction in dire straits.

Cutting the interest is the single act that will promote a ‘feel good’ factor in the economy and put more money in people’s pockets rather than the paltry cut in VAT.

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Good news for homeowners as falling prices stall

December 2nd, 2008 by jamie | 0 Comments | Filed in Daily News, Debt, Mortgages

Sliding in property prices are slowing down, according to the UK’s biggest building society.

Nationwide released figures showing home prices fell by 0.4% in November, compared with 1.3% in October.

The year-on-year fall has also stalled at 13.9% against 14.6% a month earlier. This is the first time property prices have stopped falling since October 2007.

The average home costs £158,442, £25,000 less than a year ago, but £25,000 higher than November 2003.

French estate agents say the UK property slump has crossed the Channel as British buyers have dropped 50% this year.

Britons hold 29% of the 260,000 foreign-owned homes in France, and have a huge influence on sales.

Overall, French property sales fell from 10% to 15% over the first nine months of this year, according to estate agent association Fnaim.

In the UK, mortgage lending is still shrinking. Approved home purchase mortgages was down to 21,584 in October, 52% lower than a year earlier.

Nevertheless, while interest rates are falling, Northern Rock has increased mortgage rates. 

The troubled banks woes are based on arrears on home loans of up to 125% of the value of a property.

These make up a third of the Rock’s mortgage book, but half of the number of mortgages in arrears and three-quarters of repossessions.

Rock bosses told a committee of MPs investigating the banking crisis they wanted to lead the way in helping people avoid losing their homes.

Bradford and Bingley were also in the spotlight before the committee as major buy-to-let lenders with mortgage arrears standing at 3% over the industry average.

Both lenders were quizzed about their controversial lending policies.

Committee chairman John McFall, closing the session, told Bradford and Bingley chairman Richard Pym: “I believe you have inherited a shambolic organisation with a giant headache.”

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Bank of England Under Pressure To Deliver

November 6th, 2008 by admin | 0 Comments | Filed in Central banks

The Bank of England was under intense pressure last night to cut interest rates by a full percentage point, the largest points decrease in 15 years.

Many economists have said that a widely expected 0.5% cut in interest rates won’t be enough to stop a deep and long recession….dubbed a bath tub shaped recession. Interest rates had been held steady until recently as the fear of inflation took precedence over the possibility of recession. Now, with inflation abating, the tools to fight recession are being wheeled out and look set to be used to their full force.

Policy makers and economists point to continued economic deterioration in many sectors of the economy including the behemoths of the UK economy, financial services and retailing. Output shrank by a larger than expected 0.5% between July and September and looks set to deteriorate further and more rapidly in the coming months.

A full 1% cut would be the largest since 1993 after black Wednesday when the UK was struggling to deal with the effects of the last recession.

CBI deputy director-general John Cridland said: “We have talked to businesses of all shapes and sizes across the UK, and the need for a further rate cut is clear.

With commodity prices falling across the world, food inflation has at last peaked out at 9.1% and is now a more manageable 7.5%. Oil prices have plummeted from their nosebleed highs during 2008. The outlook for inflation is more benign going forward, though still high today.

This gives the bank of England the necessary room to slash rates to stimulate the economy…but will it actually make any difference for many people? It won’t help to unfreeze the lending boycott by banks as they seek to shore up their own balance sheets. However, and thankfully, it will give some much needed breathing space for homeowners with mortgages as they head into Christmas as some banks pass on the rate decrease. That in turn could provide some temporary respite for retailers…so the chances of a happy Christmas on the high street haven’t totally vanished.

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