The Masked Tulip Posted May 28, 2012 Share Posted May 28, 2012 With all the excitement in Spain and Greece of late, it’s been easy to miss a rather big move in British interest rate expectations.Consider this chart of the November MPC SONIA index future. According to friends in sterling overnight markets, the pricing here suggests a roughly 45 per cent chance of a UK base rate cut, come November. http://ftalphaville.ft.com/blog/2012/05/28/1018831/sonia-says-uk-rates-are-possibly-coming-down/ Quote Link to comment Share on other sites More sharing options...
rantnrave Posted May 28, 2012 Share Posted May 28, 2012 http://ftalphaville....ly-coming-down/ Will the lenders pass it on though? To borrowers I think not. To savers, certainly. Quote Link to comment Share on other sites More sharing options...
thecrashingisles Posted May 28, 2012 Share Posted May 28, 2012 So that's what she's up to these days. Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted May 28, 2012 Share Posted May 28, 2012 Will the lenders pass it on though? To borrowers I think not. To savers, certainly. Savings accounts are currently paying way over the 0.5% base rate. It's easy to get 3%+ on savings. Quote Link to comment Share on other sites More sharing options...
Butthead Posted May 28, 2012 Share Posted May 28, 2012 That probably explains why the markets are slightly up, that or the potential for a "Euro-wide solution to the Spanish crisis" (i.e. muchos-printias). I have no idea why anyone would think a drop in interest rates would be significant, let alone fix any problems though. I guess markets respond in the way they've been conditioned to but in reality no-one is going to borrow at 0.25% what they wouldn't at 0.5%. If anything it makes TPTB look increasingly desperate and like they're out of ideas. Quote Link to comment Share on other sites More sharing options...
rantnrave Posted May 28, 2012 Share Posted May 28, 2012 Savings accounts are currently paying way over the 0.5% base rate. It's easy to get 3%+ on savings. BoE cuts rate to 0.25%. Savings account rates are cut by a corresponding amount. That 3% becomes 2.75% overnight. Not beyond the realms of impossibility, shirley? Quote Link to comment Share on other sites More sharing options...
Guest Posted May 28, 2012 Share Posted May 28, 2012 "House prices to soar as BOE slashes base rates in half" - Express (tba) Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted May 28, 2012 Share Posted May 28, 2012 BoE cuts rate to 0.25%. Savings account rates are cut by a corresponding amount. That 3% becomes 2.75% overnight. Not beyond the realms of impossibility, shirley? Could be, but it would depend on the competition for savers funds. Quote Link to comment Share on other sites More sharing options...
Guest Posted May 28, 2012 Share Posted May 28, 2012 (edited) That probably explains why the markets are slightly up, that or the potential for a "Euro-wide solution to the Spanish crisis" (i.e. muchos-printias). I have no idea why anyone would think a drop in interest rates would be significant, let alone fix any problems though. I guess markets respond in the way they've been conditioned to but in reality no-one is going to borrow at 0.25% what they wouldn't at 0.5%. If anything it makes TPTB look increasingly desperate and like they're out of ideas. +1, at 0.5% they are effectively on the floor, it matters not whether they are a very tiny bit above the floor, or a incy-wincy bit above the floor, they are still effectively on the floor", this will have absolutely no impact. The talking heads on the various investment channels however will note the significance of the historic move and demonstrate how this will add 1.08141281 - 1.08141291% (don't want be foolish an not allow for some wiggle room in the guestimate) to GDP. Edited May 28, 2012 by Guest Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted May 28, 2012 Share Posted May 28, 2012 When/if Greece (or maybe one of the other PIIS exit) there will be a massive and a mean massive central bank invention by the Fed/BoE/BoJ/ECB etc.. all cutting rates.... The BoE may slash interest rates half and go for 0.25%. For those already near the bottom I have no idea if they'll go negative or that they will just sit a 0% but I think this will be the plan of action. Once you are close to 0% there's not much more you can do other than go negative or printy printy. Quote Link to comment Share on other sites More sharing options...
rantnrave Posted May 28, 2012 Share Posted May 28, 2012 Which Bigwig was it who said that maintaining BoE IRs at the current level beyond 2012 would show that the UK's economy is in deep poo? So if they lower the rates than we must be saved... Quote Link to comment Share on other sites More sharing options...
rantnrave Posted May 28, 2012 Share Posted May 28, 2012 That probably explains why the markets are slightly up, that or the potential for a "Euro-wide solution to the Spanish crisis" (i.e. muchos-printias). I thought the boost was due to new polls in Greece that said a pro-austerity party was now in the lead (although nowhere near enough support to form a majority govt). FTSE is in negative territory now any way. Quote Link to comment Share on other sites More sharing options...
Butthead Posted May 28, 2012 Share Posted May 28, 2012 Which Bigwig was it who said that maintaining BoE IRs at the current level beyond 2012 would show that the UK's economy is in deep poo? So if they lower the rates than we must be saved... Well Jonathan Davis said something along the lines of "If they raise rates we're toast, and if they don't raise rates it's because we're toast". IIRC. Quote Link to comment Share on other sites More sharing options...
Pent Up Posted May 28, 2012 Share Posted May 28, 2012 It won't happen because it's pointless. It will be QE. Quote Link to comment Share on other sites More sharing options...
Nationalist Posted May 28, 2012 Share Posted May 28, 2012 Let's not forget there is such a thing as NIRP. I've been favouring irredeemable perpetual preference shares in major utilities recently. At the moment you can lock in a 6% to 7% yield, that might not last... Quote Link to comment Share on other sites More sharing options...
Georgia O'Keeffe Posted May 28, 2012 Share Posted May 28, 2012 (edited) When/if Greece (or maybe one of the other PIIS exit) there will be a massive and a mean massive central bank invention by the Fed/BoE/BoJ/ECB etc.. all cutting rates.... The BoE may slash interest rates half and go for 0.25%. For those already near the bottom I have no idea if they'll go negative or that they will just sit a 0% but I think this will be the plan of action. Once you are close to 0% there's not much more you can do other than go negative or printy printy. you missed out the SNB who like the Japs are already there, but as highlighted elsewhere Banco De Brasil are still offering a very reasonable 12% if you can find one of their passports down your sofa Edited May 28, 2012 by Georgia O'Keeffe Quote Link to comment Share on other sites More sharing options...
winkie Posted May 28, 2012 Share Posted May 28, 2012 Choices? High rates, no guarantee of return of capital. Low rates, better risk that most of the capital is returned, inflation not withstanding. Quote Link to comment Share on other sites More sharing options...
SEW247 Posted May 28, 2012 Share Posted May 28, 2012 Will the lenders pass it on though? To borrowers I think not. To savers, certainly. Well Halifax will have to pass it onto me as the 2% collar they tried to impose was deemed "unfair" (they missed it off the Key Facts document ) so looks like my £58 a month mortgage might get even cheaper What a mess this country is in! Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted May 28, 2012 Share Posted May 28, 2012 This is surely a sign of total desperation and the fact the market is about to collapse. Interest rates are already at 300 year low and have been for 3 years now. That simple fact tells you all you need to know about any recovery and about house prices and also about the people in control of our every day lives. Quote Link to comment Share on other sites More sharing options...
Lion Posted May 28, 2012 Share Posted May 28, 2012 (edited) Well Halifax will have to pass it onto me as the 2% collar they tried to impose was deemed "unfair" (they missed it off the Key Facts document ) so looks like my £58 a month mortgage might get even cheaper What a mess this country is in! I will save £155 in interest per month if rates go down to zero, and then only pay 0.63% interest on my mortgage. So bring it on, and leave it at Zero for 21 more years, then I will have repaid my mortgage almost interest free. Edited May 28, 2012 by Lion Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted May 28, 2012 Share Posted May 28, 2012 you missed out the SNB who like the Japs are already there, but as highlighted elsewhere Banco De Brasil are still offering a very reasonable 12% if you can find one of their passports down your sofa I'll see if I can find a Brazilian passport on the floor somewhere then... Quote Link to comment Share on other sites More sharing options...
The Masked Tulip Posted May 28, 2012 Author Share Posted May 28, 2012 I imagine in any Greek default, Greece leaving the Euro, etc, that the BOE will immediately drop the base rate to 0%. Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted May 28, 2012 Share Posted May 28, 2012 This is surely a sign of total desperation and the fact the market is about to collapse. Interest rates are already at 300 year low and have been for 3 years now. That simple fact tells you all you need to know about any recovery and about house prices and also about the people in control of our every day lives. They can still hit 0% and print more. Clearly the problem is they haven't been low enough and central banks haven't printed enough. In the new paradigm this will work, it has to its the new paradigm, it's modern economics where too big to fail can't fail. Rejoice in the new reality. Quote Link to comment Share on other sites More sharing options...
nohpc Posted May 28, 2012 Share Posted May 28, 2012 The lucky few with good jobs and BOE base rate tracker lifetime mortgages continue to benefit from the crashing economy. Once again this happens a few months after scare articles in the popular media about ditching your tracker mortgage now for a fix. I hope the sheeple didn't fall for it. I wonder what will happen to Evildodgybank BOE but not BOE rate tracker mortgages though. They are probably stuffed. Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted May 28, 2012 Share Posted May 28, 2012 I will save £155 in interest per month if rates go down to zero, and then only pay 0.63% interest on my mortgage. So bring it on, and leave it at Zero for 21 more years, then I will have repaid my mortgage almost interest free. Twenty one years before you pay off your mortgage? I'd get it paid off PDQ if I were you. Quote Link to comment Share on other sites More sharing options...
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