Interest rate Cut to...

[Matty]

...3%.

 

Will the banks pass it on to borrowers, obviously it will be passed on to savers soon enough.

[Paul Kennedy]

Worth noting that savers outnumber borrowers 6 to 1. So maybe savers with reduced income will spend even less. With regards to reduced borrowing costs, is the hope that people will spend more and borrow more....and isn't that how we got into this mess.

[inky pete]

Possibly true, but the total amount of money outstanding in borrowings far outweighs the total amount held in savings accounts. This can only help to take some of the pressure off people who find themselves struggling to meet their spiraling food and fuel bills on top of their mortgages.

 

Of course the banks need to prevent a return to the reckless lending of recent years, but maybe if people have a little more money in their pockets that money can get circulated through the economy and help to preserve a few jobs.

[Dizzy]

Like Matty says I suspect that savers will be hit pretty quickly by the lowering of the interest rate

 

Problem is that people are hearing the news and jumping to the conclusion that their mortgages will immediately reduced as will their debts on their credit cards etc etc.....

 

Gordon Brown's spokesmans reply to being asked whether banks should pass the rate cut on to customers was :

 

"We are not going to make specific comments about the specific pricing of individual mortgage products in every single bank. But we are clear that consumers should see the benefit of reduced interest rates.

 

"The Prime Minister supports the view that banks should pass on the cut. I think the public expects that when there is an interest rate cut of this magnitude, then they should see the benefit.

 

An answer that could mean anything depending on how you read it.

 

As WE are the ones who are suffering then surely they should see the benefit of the interest rate cut immediately !!! Or is it another bank bail out move

 

By the way will banks be reducing their 29% (ish) interest rate they charge to people who are forced to go over their overdraft limits ...

[wolfie]

Worth noting that savers outnumber borrowers 6 to 1. So maybe savers with reduced income will spend even less. quote]

 

Or perhaps they will think what is the point of saving, let's get the money spent

[inky pete]

The Government can't, and shouldn't, directly control how much a private enterprise such as a bank charges for it's products and services. They could, perhaps, introduce some sort of linkage between changes in savings rates and changes in mortgage rates. I'm not sure exactly how much power the FSA has in these matters, but I'd support limitations on changing savings rates in response to a base rate change without a corresponding change in lending rates.

 

We do have to also consider that if the Bank of England base rate drops much further, it'll become impossible for the lending banks to follow it all the way down. They're always going to need a certain amount of differential to meet their operating costs.

[Paul Kennedy]

Worth noting that savers outnumber borrowers 6 to 1. So maybe savers with reduced income will spend even less. quote]

 

Or perhaps they will think what is the point of saving, let's get the money spent

 

A valid point and maybe that is what the Government is hoping, but by definition savers are savers rather than spenders. Time will tell as they say.....and there is always the point that "you can't take it with you".

[Dizzy]

Ok so it the huge drop in interest rates a good thing or bad

 

Ooooh I'm getting confused again

 

Should savings (if any of us have any) be used to pay off a part of a mortgage as savings may start to struggle ?

 

or.... should any savings we may have be kept in the event that things get worse and we wont be able to borrow money or get credit for things other than mortgages if we ever need to ?

 

what about endowmnet mortgages.... with those you only pay the interest each month but with a drop in interest rates your endowmnet will start to fall further behind

[Dizzy]

news from YESTERDAY... 5 Nov... BEFORE Bank of England cut interest rates by 1.5% today

 

Some banks actually put up their mortgage rates yesterday ahead of the anticipated rate cut - apparently [/b]defying[/b] theGovernment calls for banks to pass on reductions to customers.

 

http://www.telegraph.co.uk/finance/economics/interestrates/3386111/Bank-of-England-pressed-to-cut-interest-rates-by-full-point.html

[observer]

It's frankly insane and surreal, that they want to return to the easy credit, that caused this mess in the first place. In the face of the "I want it, I want it NOW" generation, the banks, Government and parents need to learn to say "NO". I was gobsmacked to see a woman on the news, who'd borrowed ?1,500 from a door step lender, to be paid back at ?45per week for 12 months - how feckless can you get? She could have put the wedding back 12 months and saved at a rate of ?30 per week or is that being toooo prudent?!

[asperity]

I agree that it's insane. Now the interest rate is so much lower than inflation there is no point in saving because it's not saving but losing!! Come the revolution we're going to run out of lamposts and piano wire

[Adam]

As usual, the people who cause a crisis will be the ones to get help.

 

Cutting the interest rate hits the savers.

 

Everyone blames the banks and the city for causing the crisis and it is true they have contributed big-style.

 

But it is ordinary Joe Public who borrows, whether it be the easy way on his credit card or the slightly more difficult way of through a bank loan or mortgage. If he didn't borrow, the banks couldn't lend.

 

My Dad used to say to me, never spend ?5 until you've got ?10. But today's greedy, selfish generation won't wait.

[observer]

IF, they wish to increase spending to rejuvenate the economy, which is obviously in a worse state than they are telling us; they could reduce taxation to the low and middle income groups, whilst increasing it to the super-rich and large corporations. They could also embark on some meaningfull and much needed public works, to sustain employment. They could also abandon their nonesense spending on such things as ?5billion (and climbing) on ID cards.

[Matty]

I see a number of banks have decided to pass the rate cut on to borrowers as well!

[Dizzy]

Three did namely the Abbey, Lloyds TSB and Bradford & Bingley.

 

The others weren't so willing until they saw the headlines today and got a right slagging off..... AND SO THE SHOULD !

 

Seems like some oth 'these others' have now 'decided' to pass on the cut too

[observer]

Not sure your grasping the situation folks: we (the taxpayers) have invested ?billions in bailing out the banks; if we want to see that money returned, the banks need to make profits in order to pay us back - they also need to operate on proper prudent commercial lines, otherwise we'll be back where we started. As it stands, rate cuts are merely a means of passing that taxpayers money onto folk buying houses for THEMSELVES!

[byrdy]

they also need to operate on proper prudent commercial lines,

Pity they didn't do that in the first place.

[disgusted]

Not sure your grasping the situation folks: we (the taxpayers) have invested ?billions in bailing out the banks; if we want to see that money returned, the banks need to make profits in order to pay us back - they also need to operate on proper prudent commercial lines, otherwise we'll be back where we started. As it stands, rate cuts are merely a means of passing that taxpayers money onto folk buying houses for THEMSELVES!

I am sort of hoping taras_dad doesn't read this

[observer]

I'm frankly amazed folk can't see this obvious observation?!

[Dizzy]

Not sure your grasping the situation folks: we (the taxpayers) have invested ?billions in bailing out the banks; if we want to see that money returned, the banks need to make profits in order to pay us back - they also need to operate on proper prudent commercial lines, otherwise we'll be back where we started. As it stands, rate cuts are merely a means of passing that taxpayers money onto folk buying houses for THEMSELVES!

 

I do get what you are saying Obs as per my reply from last night..... which seems to have vanished Can't be bothered to put my brain and fingers into gear and type it all out again.... that's the 3rd time this week that's happened

 

Wonder what the banks would do if most of the people who are lucky enough to have some savings suddenly decided to withdraw THEIR money .... would the banks allow them all to

[Bazj]

Obs...

 

it is OK saying the banks have to make a profit to pay back OUR money but that money is the governments responsibility not mine. I personally want a rate cut so that less money goes out of my pocket every month.

 

The banks can pay back that money when we all still have employment to pay taxes in the first place. It is no point the banks owing billions of pounds to "me" if I am on the dole and homeless is it?

[observer]

Are you suggesting Baz: that net savers and tax-payers should be penalised to allow feckless borrowers to continue spending what they can't afford and will no doubt default on, thus taking us back to the nonesense that got us into this mess in the first place?!