Thursday, Sep 13, 2007
Kiss goodbye to a Base Rate of 6%
Telegraph Online: Bank Governor hints at rate cut if crisis deepens
When the going gets tough, the tough get cutting! Oh dear.
Posted by talking rot @ 05:38 AM (1036 views) Add Comment
22 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. su said...
Didn't he also, not very long ago, hint that rates may still go up? I think he's just reminding people that nothing is written in stone, that he and his colleagues are keeping a watchful eye and are willing to do whatever they deem necessary - up or down.
2. Van Hoogstraten said...
Its out of his hands - supply and demand (the argument beloved of the house price bubble lovers) is determining the price of credit - its in short supply, so the price is going up.
3. Alan said...
I think he is covering his options. Fed may be forced to slash US rates by 0.5% or more in the next week. Ben's already had lots of university professors writing articles about making a big cut.
What then for US inflation?
Failure to follow a US lead will give a very high pound.... etc etc
4. Davethebox said...
How can this work when the banks and building societies are raising their rates?
5. planning4acrash said...
King is just admitting that neither he nor his colleagues know what's going on. Lets see what happens to the value of Sterling and imported inflation (particularly $80 oil) if the market bets on a cut.
6. harold said...
Sterling has been slipping badly over the past few days, and this is before the BoE has even lowered rates. Look what's happening to the $; if the BoE tries to massage the economy by lowering, the £ will plummet. Anyhow, isn't the MPC's remit solely to control inflation, NOT to look after idiots' property portfolios (or am I being a tad naive)?
7. Orwell said...
Economic indicators do tend to show that the rate should be higher though, from real inflation to LIBOR and the pound. If he cuts rates he would not necessarily be prudent. Perhaps as is more probable he has been TOLD tio cut them. There is of course an election that is necessary at some point.
The mess this crowd are going to leave the Tories....
8. Afrobaggie said...
Perhaps that is why the Tories are trying to make themselves unelectable with their non-policies. Not boding well for the future of Britain.
9. dohousescrashinthewoods said...
I have picked up some respect for Merv in this. Seems like he's at least trying to steer towards the right thing.
To stand up, limit the money-printing and tell te banks to buzz off and deal with their own mess is quite something. Partcularly when you compare it to the paid shills at the Fed who lie on cue, print money when asked to and inflate a given bubble under orders. "To serve and protect the rich, and provide lip-service to the poor".
At least Merv could hold, as real rates are rising for him, and justifiably not cut until things really get hairy. He may still get crushed, but he would be in the middle when it closes in, rather off down a yes-man Fed cow-tow trail.
10. Urine Trouble said...
I can't now believe there will ever be a significant drop in house prices, let alone a crash. In my area I coulld have bought a semi detached house with a deposit of about £5000.00 and now, to keep the mortgage repaymens the same, I would need a deposit of £70000.00. Which means I would be paying more in a deposit than the house was on the market for before some gypsies put some horrid marble render on it, cheap plastic windows and a gaudy white kitchen and bathroom that will probably take about £25000.00 to put right. Come on UK normal people on normal incomes need normal priced houses, I earn about £15000.00 ( a year ) we are not all David Beckham you know!
11. denzil said...
davethebox said:
>>How can this work when the banks and building societies are raising their rates?
It's down to short-term risk. The banks and building societies are rapidly looking for ways to offset their poor business practices in the short-term.
Long-term fixed mortgage deals have dropped recently which indicates the direction rates will take according to the guys who price these mortgage deals.
12. mrmickey said...
I assume by raising their rates they also encourage savers to save to bolster their reserves.
13. James said...
Indeed, mrmickey. And if an online saver's paying 6.3% vs your BTL pad paying 4% with huge transaction costs and no capital appreciation, wouldn't it make sense to switch? Hurrah!
14. dbnazz1 said...
I think in the short term pressure from all around will cause the BoE to lower rates. However this is a short term approach which will cause sterling to reduce resulting in imports becoming more expensive and fueling inflation. Inflation is already well and truly heading north without any help from the exchange rate!!! if BoE takes the approach of printing its way out of trouble, again this will just fuel inflation.
It is starting to look like we are in a position where whatever corrective action the UK takes we will just solve one problem only to fuel another economic problem elsewhere.
15. uncle tom said...
He's still wedded to the inflation target, and I don't see the present crisis as being very deflationary. Oil is hitting new highs, and the price of wheat is in orbit.
Companies with debt are going to have to pay more interest, which they will pass on in higher prices.
Even if political pressures did provoke a rate cut, only those with existing tracker mortgages would benefit - no-one else is going to cut rates at the moment.
16. fahrenheit451 said...
Please, please, please, read between the lines.
It should be crystal clear what is going on.
Read the text of the articles you can find, this is good.
Then read between the lines ...
17. dbnazz1 said...
fahrenheit451 said...
Not sure what you are saying here. Please could you clarify.
18. Lord D'arcy Pew said...
The Bank of England may cut interest rates, but this doesn't mean it will be passed on by the High Street banks. They can just use the greater differance in rates to help reduce their losses elsewere.
19. su said...
I thought some banks offered tracker style mortgages which were guaranteed to go up and down with the BoE rate. If that is the case, anyone know what percentage of borrowers would have this kind of mortgage?
20. Lord D'arcy Pew said...
Trackers do follow the BoE rate but these can still have a little added on top. Most will not go above 2% over the BoE rate but if they are currently 1.5% over now they can still increase by 0.5%. Some lenders have increased rates by 0.1% to 0.2% this week.
21. Jackiechan said...
Yet again the bank is going to do the sensible thing and protect the majority - people with houses. Personally I own 6 BTL properties, my private home and two holiday retreats, and an all but certain drop in IRs is very good news. There will never be a crash as the government will want re-election and so will pander to the majority of voters, they'll pressure the BoE to avoid any fall in HPs. Crashes are very rare anyway, the worst I exoect is a slowdown in HPI. Personally I think all that will happen is that the little guys and poor saps who couldn't or wouldn't buy, will get stuffed again. Its not fair but it is life, unfortunately. Personally, I look forward to many more happy years of bumper returns. Sorry guys!
22. Van Hoogstraten said...
Crashes are rare indeed.....soft landings even rarer