Banks Already Factoring In Doubling Of Mortgage Rates

[Bloo Loo]

To paraphrase things differently to others, banks actually don't determine the absolute level of interest rates that they charge across the yield curve.

Banks are simply intermediaries and charge a variable margin above the level at which others are willing to lend to them.

I do agree that margins have widened out while banks try to rebuild their capital but a sharp rise in rates is going to come because the marginal lender is asking for a better return and not because banks are acting in isolation.

It is easy to be angry with banks. The reality is that we can only be angry with them about like for like margins across the yield curve and not the absolute level of rates.

If rates really rise sharply, it is going to be because the utlimate lenders want better returns. The ultimate lenders are savers who are individuals, pension funds, sovereign wealth funds, some central banks etc.

thats nice.....doesnt explain the lifetime BoE MINUS some idiots were doing, some without a collar.

Sterling Gilt Yields are already Higher than McD's bonds, and going up I beleive.....

[Bloo Loo]

I think we really are sailing into uncharted waters here.

A few years ago, nobody would have predicted that rates would be 0.5%, and stay there for so long.

Nobody could have forseen that the BOE would print so much money out of thin air. (How many people had even heard of QE before the crash?)

Fact is, nobody knows whats going to happen next regarding IR's. Because it's still to early to tell what effect the low IR and QE has really had.

Rates may well stay low for years, or they could just as easy hit 8%, or even more.

Can anyone really say that either of those options is 'not possible'?

If so, I wish I had your powers.

a rise to 8% is only a 60% rise from where we are. mortgages are already 5-6% for new borrowers.

[interestrateripoff]

the market decides IR's,CB's decide base rates.never say never.

some mortgage rates are already way hgiher courtesy of lower LTV requiremnets,ie forcing more capital up front.you never see them mention that on the BBC do you?but it is effectively a massive hike in debt servicing costs,jsut anpother way of doing it under the radar.

no BTL's now over 75% LTV.

obviously,higher IR's is bullish for stocks!!!!!buy buy buy!!!!!!!!!!

You think the market is crazy enough to crash the system? Mass bankruptcy will bring on TFH time.

I doubt many in the markets are stupid enough to try and seek out 9% returns in the current climate. As for those looking for inflation to kick off that itself causes the catch 22 and will destroy the economy.

There is no room to manoeuvre the entire ponzi global economy is being for what it is one huge scam.

[LuckyOne]

thats nice.....doesnt explain the lifetime BoE MINUS some idiots were doing, some without a collar.

Sterling Gilt Yields are already Higher than McD's bonds, and going up I beleive.....

BOE minus were all about growing market share and "cross selling" other business. Bying market share by pricing your goods or services below their cost is a recipe for disaster.

Gilt yields should be higher than McD bond yields. The risk is higher.

[Bloo Loo]

and if you have financed legitimate working capital to fund business and possibly your salary?

Try and think outside hpc please. And do you think the ISPs are going to send their new found wealth?

if your business cant support 10% on your loans, you should get into something else.

Or start smaller and grow out of your profits.

Its been done before....it can be done again.

Bear in mind, a blue chip like BP are currently yielding 6.4% to shareholders...a small business would expect to pay more than that.

Edited February 27, 2010 by Bloo Loo

[Bloo Loo]

BOE minus were all about growing market share and "cross selling" other business. Bying market share by pricing your goods or services below their cost is a recipe for disaster.

Gilt yields should be higher than McD bond yields. The risk is higher.

I apreciate that, but even in the US, where teasers and Option Arms were killers for borrowers unable to switch, giving a lifetime below BoE is just silly. And, according to some people posting here, those silly rates are transferable to a new place too.

as for Gilts....are your sure, they SHOULD be...Gilts are the safest AAA++++ investments....surely....yielding more than McDs must be a bad sign...I think thats what you were saying too.

[headrow]

Bear in mind, a blue chip like BP are currently yielding 6.4% to shareholders...a small business would expect to pay more than that.

Even more for the people who bought when they were nearer 400p. I'm a long way from what could be called a financial genius but i can spot an oversold share a mile off.

[LuckyOne]

I apreciate that, but even in the US, where teasers and Option Arms were killers for borrowers unable to switch, giving a lifetime below BoE is just silly. And, according to some people posting here, those silly rates are transferable to a new place too.

as for Gilts....are your sure, they SHOULD be...Gilts are the safest AAA++++ investments....surely....yielding more than McDs must be a bad sign...I think thats what you were saying too.

My language was a bit sloppy (and not for the first time) on the Gilts front. Gilts yields are higher than McD yields because Gilts are riskier. I agree with your conclusion about the consequences of this fact.

[winkie]

High rates now would be a show of desperation.....rates at this moment in time have to be kept low, we are all paying the cost of bad leadership, lax regulation and poor management.

[Bloo Loo]

You think the market is crazy enough to crash the system? Mass bankruptcy will bring on TFH time.

I doubt many in the markets are stupid enough to try and seek out 9% returns in the current climate. As for those looking for inflation to kick off that itself causes the catch 22 and will destroy the economy.

There is no room to manoeuvre the entire ponzi global economy is being for what it is one huge scam.

9% mortgage rates are already there for many with bad records and have to stay with their lenders.

30% for credit cards, and who knows how much for storecard.

OK, the housing market crashed because of increased rates.....thats good, for even at 9%, a house that needs half the funding will still cost less than half the current cost.

and dont forget, if you go on a mortgage support scheme, you are ALREADY recieving 6.x% benefits...regardless of the rate you are paying.

not every home owner would be overstretched @ 9%.

maybe those that bought in 2005-6 could be....dont forget, there are currently 60,000 sales going through ( December IIRC) and these are probably not overstretched in the least.

Its time for the pain....and borrowers are the ones that SHOULD be suffering....they took the risk...My Grandad didnt.

[Bloo Loo]

High rates now would be a show of desperation.....rates at this moment in time have to be kept low, we are all paying the cost of bad leadership, lax regulation and poor management.

Borrowers arent.

[winkie]

Borrowers arent.

..arent what?...borrowers choose to pay a high premium for saving what they have already spent.

[Bloo Loo]

..arent what?...borrowers choose to pay a high premium for saving what they have already spent.

borrowers arent paying the price for mismanagement in the economy...rates are kept very low to A: save them from overstretch and B: to encourage new loans.

savers, on the otherhand, are getting returns below inflation.

[winkie]

borrowers arent paying the price for mismanagement in the economy...rates are kept very low to A: save them from overstretch and B: to encourage new loans.

savers, on the otherhand, are getting returns below inflation.

Who are the biggest borrowers?....lenders will no longer lend irrespective of rate when there is a risk of no return, confidence is low, savers are few and high risk is costly.

[Where is my pen?]

I was thinking about this the other day - as a saver I am powerless to get the banks to give a higher IR. Yes, I can withdraw my savings and put it all under the mattress but millions of people are not going to do that - thieves would have a field day.

I can move it overseas but, again, millions of UK savers are not going to do that.

Ergo, we are powerless.

no. not powerless, naive. naive in believing that the currency you are using as money is the best option for preserving your wealth through what is going to be a torrential currency sh!t storm.

sell your paper, buy gold.

since 2006, our currency has already lost over 1/3 of its value. how much more will you lose before realising the game?

Edited February 27, 2010 by Where is my pen?

[Guest absolutezero]

If you actually think there is a market, you have been sadly mislead.

I have now realised that in essence we have a banking cartel and the cartel manages the system.

Correct. 100% guaranteed.

We have a cartel in all vital services, be they public or private sector.

[Cicero]

The doubling of mortgage rates will not happen, it would crash the entire financial system. Shouldn't the banks be more concerned about current borrowers? Can they afford interest rates at 9%?

You then have to consider the wider economic impact, rates at 9% would cause a collapse in aggregate demand leading to a massive collapse in GDP as consumer spending would stop.

This isn't going to happen.

You have a point, given that the UK economy is nothing more than a debt based, ponzi consumerfest.

[mooing]

I think the banks know what will happen hence the factoring in of double interest rates....In Eurozone, Bulgarians are paying a whopping 13% interest on mortgages but, they are getting 10% on savings....Market has well and truly crashed over there.

[Bloo Loo]

Who are the biggest borrowers?....lenders will no longer lend irrespective of rate when there is a risk of no return, confidence is low, savers are few and high risk is costly.

Im not sure we are on the same page.

[winkie]

Im not sure we are on the same page.

Don't know about you, but I'm on the last but one.....

[The Spaniard]

Absolutely 100% spot on.

The banks are literally parasites on the economy. The have a government license, and their job used to be to lend money to people who had good ideas and who could build a business or create real wealth. Sadly this has been perverted and we had and probably still have banks that purely aim to shift as many units of product (money) as possible, the result is that as more easy money flows in assets get inflate so every single person and business has to borrow more to pay more for those assets they need in the everyday course of life and business. The banks are quite literally parasites, drawing interest payments from anyone or thing that want to participate in the economy.

You can't avoid the parasites, as if you want to do absolutely anything you need capital, assets etc and these have been inflated and so you are forced to borrow. The only way out is to literally drop out, though I wouldn't recommend that, though perhaps another alternative is to become a bad debt, ie borrow too much and then poison the pest by not repaying.

+1

The whole rent-a-currency structure of the banking system ensures that almost all of our economy's means of exchange must be borrowed from the banks at interest. No borrowing -> no money in circulation -> no economy. Questions arise:

Why should that be so? Is there a better alternative?

Why are bankers, who themselves produce nothing, so rich and powerful? Do their services really enable the rest of us to be proportionately that more efficient and productive? Do they pay their way?

As a trading people why do we not, through a public authority, provide ourselves with a debt-free, permanently circulating adequate means of exchange at almost zero existential cost?

Why must we use the bankers' expensive money-numbers when collectively we could so easily and cheaply provide our own?

http://www.call4reform.org/coming-soon.html

[Bloo Loo]

snip

As a trading people why do we not, through a public authority, provide ourselves with a debt-free, permanently circulating adequate means of exchange at almost zero existential cost?

Why must we use the bankers' expensive money-numbers when collectively we could so easily and cheaply provide our own?

http://www.call4refo...oming-soon.html

Ill tell you why....we have a government that is wedded to the idea of deficit spending.

[ParticleMan]

This is essentially a repeat of the 1970s

If we've learnt one thing out of all this fiscal flim-flam it's that in order to understand this market we need to understand the actors in the market.

The fate of interest rates in the UK (indeed, globally) is twinned to the fate of the vast vats of capital which buy and sell the instruments sold in the gilt and money markets - we laughingly call the fine fellows who do so on our behalf "institutional investors", but perhaps "absent minded, thorougly myopic cretin" would be more appropriate.

Nothing more, less fewer, if, but or maybe.

That's it, it's as remarkably simple as a child's clockwork toy.

The problem is that quite unlike the 70's, the sock of cash investable in these markets is shrinking :-

1/ The rate of folk investing in the funds is slowing (the Japanese in particular are really starting to panic about this one, given how much of their own bad lending they habitually sell from the private back to the public sector)

2/ The amount of money being invested in the funds per person is falling (damn those demographics, curse their narrow eyes)

3/ The value of assets held by each fund is falling (oops)

4/ The natural yields acquired by each fund is at the mercy of asymmetric policy (reserve banks have been targetting price stability and devil take the consequences)

As if that wasn't bearish enough a view, consider :-

5/ People actually genuinely still think their promissed notional balance (in terms of some final figure which might be used to purchase an income stream at retirement) will in fact be there to rescue them from their individual over-enborrowed financial hell

The really neat thing is that the last point is a double whammy - the funds are in fact (after a generation's worth of escalating theivery by looters ever more educated in the art) front-loaded.

In other words, people now at the very head of the queue are expecting the most out of the sausage factory after a lifetime's worth of putting the least in.

It doesn't look good...

It really doesn't.

The 70's?

This is not your parent's recession.

Or your grandparent's depression.

It's something all over again.

[Cicero]

If we've learnt one thing out of all this fiscal flim-flam it's that in order to understand this market we need to understand the actors in the market.

The fate of interest rates in the UK (indeed, globally) is twinned to the fate of the vast vats of capital which buy and sell the instruments sold in the gilt and money markets - we laughingly call the fine fellows who do so on our behalf "institutional investors", but perhaps "absent minded, thorougly myopic cretin" would be more appropriate.

Nothing more, less fewer, if, but or maybe.

That's it, it's as remarkably simple as a child's clockwork toy.

The problem is that quite unlike the 70's, the sock of cash investable in these markets is shrinking :-

1/ The rate of folk investing in the funds is slowing (the Japanese in particular are really starting to panic about this one, given how much of their own bad lending they habitually sell from the private back to the public sector)

2/ The amount of money being invested in the funds per person is falling (damn those demographics, curse their narrow eyes)

3/ The value of assets held by each fund is falling (oops)

4/ The natural yields acquired by each fund is at the mercy of asymmetric policy (reserve banks have been targetting price stability and devil take the consequences)

As if that wasn't bearish enough a view, consider :-

5/ People actually genuinely still think their promissed notional balance (in terms of some final figure which might be used to purchase an income stream at retirement) will in fact be there to rescue them from their individual over-enborrowed financial hell

The really neat thing is that the last point is a double whammy - the funds are in fact (after a generation's worth of escalating theivery by looters ever more educated in the art) front-loaded.

In other words, people now at the very head of the queue are expecting the most out of the sausage factory after a lifetime's worth of putting the least in.

It doesn't look good...

It really doesn't.

The 70's?

This is not your parent's recession.

Or your grandparent's depression.

It's something all over again.

+1. Unchartered waters

[Bloo Loo]

+1. Unchartered waters

not uncharted....we know what happens when the well runs dry.

TPTB just dont want people to know...or take action that will cause themselves pain.