Ok, so the Bank of England have shocked everyone by slashing the interest rate by 1.5% today. What are the chances of these cuts being passed onto all of us with mortgages by the main high street banks?

Last months 0.5% cut wasn't passed on by my mortgage lender. And if nothing changes this month it will mean they are trousering even more of my hard earned cash every month. I estimate that a 2% cut over the two months would equate to the best part of £150 to £200 per month off my mortgage payments. Arctic Frost TDV6 SE. Aspen Leather, Cherry Wood, Privacy Glass, PTI, Tow Pack, Mudflaps, Tasmods, a new Fuelflap, a RRSport.co.uk umbrella in the boot & a RRSport.co.uk sticker on the rear glass.
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My fixed rate ends in Jan 2009 so this could be very good news for me. I'm currently on 4.99% so I hope to match or even better this when it's time to renew. 2005 Zambezi TDV6 - Gone but not forgotten
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Its not like they have been given £50 Billion of tax payer money to make life easier for them.

Government should be telling the banks to pass the cuts on or forget the £50 billion.

Lloyds TSB & Abbey(the 2 banks not in the ) have said they will pass on the full cut as of 1st December, what the BOE have done is to give the banks that are in the the chance to make some money back quick. Speed Limits! not where I live!

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Last edited by Steve in germany on Thu Nov 06 2008 8:35pm. Edited 1 time in total

Abbey will pass on a rate saving in December , how generous!

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VA mortgage rates are usually based on wholesale rates not base rate - it might not unless you have a base rate tracker. Porsche Cayenne S Diesel 66 Plate

I'm getting confused by the banks saying they are not passing on the rate reduction

I have a tracker mortgage that tracks the B of E rate + X%

So if this reduction is not passed onto me, isn't my bank defaulting on its part of the contract

Pelyma - yes I know but the hope is that the inter bank lending rate will fall. The expectation is for a further cut in the base rate in the next few months. 2005 Zambezi TDV6 - Gone but not forgotten
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npinks wrote:

I'm getting confused by the banks saying they are not passing on the rate reduction

I have a tracker mortgage that tracks the B of E rate + X%

So if this reduction is not passed onto me, isn't my bank defaulting on its part of the contract

Tomorrow 11.45 am inter bank rate will be announced, you will catch it on sky news Speed Limits! not where I live!

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I spent this morning at a seminar where an Economist ( ) lectured us on how the whole cause of the credit crisis was that way too much credit had been pumped indiscriminately into world markets, increasing demand for various assets (like property and stocks) which then became unsustainably over priced. And how the consumer boom was all funded by cheap credit that the lemming public was happy to borrow from the irresponsible Banks. Public had an almost insatiable desire for credit because they still felt rich as they thought their houses would keep going up in value, which also meant they felt they didn't need to save up at all, even for their pension, as their house's value would look after all of that in due course.

The only way to "fix" such a situation was to incease the cost of credit and reward saving such that consumers got the incentive to reduce debt and then start saving.

The Economist then went on to say that he thought a 0.5% reduction in interest rates would be the politically acceptable thing to do as the economies of the West have become so addicted to demand from credit crazed consumers that any reduction in such demand would accelerate the speed we went into a full blown recession.

So the surprise 1.5% reduction in Interest rates now feels like a very dangerous thing to do. Is the Bank of England saying we should all now borrow more, racking up even greater levels of unsustainable debt. And why would anyone take the risk of saving money deposited in any UK Bank right now, if the very small amount of interest you earn on credit balances doesn't provide adequate compensation for the risk the Bank defaults.

The problem recently hasn't so much been the cost of credit, but the availability of credit. Surely if you reduce the price of something you increase the demand but reduce the supply.

One other point is that when Interest rates fall so low, the interest rate mechanism stops working - look at Japan where interest rates were zero for quite some time but people still wouldn't borrow, and their savings went under the mattrass rather than into the Bank.

Maybe the interest rate reduction is designed to reduce the Government's cost of the massive amount of borrowing they have been taking on (ironically to bail out Banks).

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bunch of muppets imho

So as a nation we are more in debt than we have ever been before - so what do our 'leaders' do - try to make it easier to borrow more

Clearly they also don't understand how mortgage rates work either - or basic demand/supply economics either

I don't think this is aimed at mortgage debt, more at the cost of business debt which will be needed to reduce the effect of the economic down turn. LIBOR could still stay high as banks are still wary of each other hence the fact that savings rates are still high. Porsche Cayenne S Diesel 66 Plate

Just now the cost of business debt is very high 'cos the Banks are charging exorbitant arrangement fees, monitoring fees, getting up in the morning fees, I just feel like it fees, plus Interest at x% above LIBOR and we might just want our money back tomorrow anyway, and don't you dare ask for any more money, oh and by the way we might just think up some more fee fees.

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this thread shows exactly the problem - it seems WE all know the problems, however those in 'control' are clueless