Jump to content
House Price Crash Forum
Guest

Base rate irrelevant - 3 month USD Libor matters most

Recommended Posts

Guest

This was mentioned in another thread a while back, and was news to me.... basically when banks lend money to each other they don't base the IR on the BOE base rate, rather they use the USD 3 Month Libor. So whilst the BOE base rate has trundled up a tiny amount recently, the dollar libor has rocketed ...

gwl6fZn.png 

http://www.global-rates.com/interest-rates/libor/american-dollar/usd-libor-interest-rate-3-months.aspx

Will mortgage rates soon follow? I think so!

I thought it deserved its own thread to bring it to everyone's attention, and allow us to monitor the changes as it's surely a leading indicator of mortgage rate rises.

Edited by Guest

Share this post


Link to post
Share on other sites

 

Quote

 

3 month British pound sterling LIBOR interest rate

Charts GBP LIBOR interest rates - maturity 3 months

Chart last month

gr-libor-chart-4-36.jpg

Chart last year

gr-libor-chart-5-36.jpg

Chart full term

gr-libor-chart-6-36.jpg

The 3 month British pound sterling (GBP) LIBOR interest rate is the average interest rate at which a selection of banks in London are prepared to lend to one another in British pounds with a maturity of 3 months. Alongside the 3 month British pound sterling (GBP) LIBOR interest rate we also have a large number of other LIBOR interest rates for other maturities and/or in other currencies. See the links at the bottom of this page for a summary of all maturities, currencies and historic interest rates. The LIBOR interest rates are used by banks as the base rate in setting the level of their savings, mortgage and loan interest rates.

 

 

It's also going up shaprly - It does look to precede an expected rate rise, so will be interesting to see where it goes in the near future

Share this post


Link to post
Share on other sites
3 hours ago, TonyJ said:

I hope you are right, and I hope the BoE debt pushers are becoming increasingly irrelevant. 

They won't raise rates. They would have to pay savers another 0.25%. Mortgages could raise by the back door. Though there is no signs of that at the moment.

Share this post


Link to post
Share on other sites

LIBOR (USD and GBP) has been rising recently due to a series of short-term technical factors (including impact of IS tax reform) rather than changing rate expectations. See the increase in LIBOR-OIS spread. 

Mortgage rate pricing depends on the length of the fixed term (or 10 year rates if floating 25yr mortgage I believe) and is still dependent on BoE rate setting as well as other factors (term premium etc. ). 

Recent gilt weakness follows lower US Treasury bond pricing of late. 

Share this post


Link to post
Share on other sites
1 hour ago, LondonBound said:

LIBOR (USD and GBP) has been rising recently due to a series of short-term technical factors (including impact of IS tax reform) rather than changing rate expectations. See the increase in LIBOR-OIS spread. 

Mortgage rate pricing depends on the length of the fixed term (or 10 year rates if floating 25yr mortgage I believe) and is still dependent on BoE rate setting as well as other factors (term premium etc. ). 

Recent gilt weakness follows lower US Treasury bond pricing of late. 

Said with absolute conviction and hence I believe it. Your not in sales are you ? 😉

Share this post


Link to post
Share on other sites
Guest
10 hours ago, TonyJ said:

I hope you are right, and I hope the BoE debt pushers are becoming increasingly irrelevant. 

I was only thinking the other day where I could not imagine a scenario in these times where the Prime Minister sent out a clear message that the British people are borrowing too much and that it was becoming dangerous, I don't think there is an upper limit to what they would allow anyone to borrow.

But at the same time you get people like Carney who will do exactly the same as the PM and say nothing while sending a totally useless message that "people need to borrow wisely" which basically means borrow as much as you want and he or the government take no blame when things do finally go Pete Tong.

Share this post


Link to post
Share on other sites
11 minutes ago, inbruges said:

I was only thinking the other day where I could not imagine a scenario in these times where the Prime Minister sent out a clear message that the British people are borrowing too much and that it was becoming dangerous, I don't think there is an upper limit to what they would allow anyone to borrow.

But at the same time you get people like Carney who will do exactly the same as the PM and say nothing while sending a totally useless message that "people need to borrow wisely" which basically means borrow as much as you want and he or the government take no blame when things do finally go Pete Tong.

like this?

living beyond our means

Share this post


Link to post
Share on other sites

Sorry to piss on your parade but Libor is not a good predictor for IRs. A "soaring" Libor is indicative of stress in the banking system, and/or a fall in interbank lending. Interbank lending has fallen steadily since 2008. 

Share this post


Link to post
Share on other sites
1 minute ago, scepticus said:

Sorry to piss on your parade but Libor is not a good predictor for IRs. A "soaring" Libor is indicative of stress in the banking system

Stress in the banking system causes interest rates on lending to go up, which causes house prices to go down. No apology required, you're only pissing in the wind.

Share this post


Link to post
Share on other sites
Guest
54 minutes ago, hurlerontheditch said:

Wow, I just thought I would never live to see the day :)

But that is an Irish politician, and if he is anything like the people they always cut through the BS, I will never see a British politician send out the same message even if it's needed, what am I talking about, it is needed.

Share this post


Link to post
Share on other sites
2 minutes ago, inbruges said:

Wow, I just thought I would never live to see the day :)

But that is an Irish politician, and if he is anything like the people they always cut through the BS, I will never see a British politician send out the same message even if it's needed, what am I talking about, it is needed.

the ironic thing was he was taking back handers for business men for favours and was living the high life!

 

Share this post


Link to post
Share on other sites
40 minutes ago, scepticus said:

Sorry to piss on your parade but Libor is not a good predictor for IRs. A "soaring" Libor is indicative of stress in the banking system, and/or a fall in interbank lending. Interbank lending has fallen steadily since 2008. 

Well ...

Interbank bmk dropped in 2008 as they did not know who was bust or not. Clue- most were.

Interbank lending carried on dropping as national and regional regulators are looking at the complexity of resolving/unfuxing banks with assets spread across countries and saying 'Fux it. Too complex. We want a handful of medium sized banks, operating within our jurisdiction.'

Share this post


Link to post
Share on other sites
6 minutes ago, inbruges said:

Wow, I just thought I would never live to see the day :)

But that is an Irish politician, and if he is anything like the people they always cut through the BS, I will never see a British politician send out the same message even if it's needed, what am I talking about, it is needed.

No, they are not like the people

Ireland has the one of the most venal, bank corrupted political bodies going.

The broadcast was 79. Irlenad then spent spent spent and psent on housing.

Share this post


Link to post
Share on other sites
12 hours ago, Grab_Some_Popcorn said:

This was mentioned in another thread a while back, and was news to me.... basically when banks lend money to each other they don't base the IR on the BOE base rate, rather they use the USD 3 Month Libor. So whilst the BOE base rate has trundled up a tiny amount recently, the dollar libor has rocketed ...

gwl6fZn.png 

http://www.global-rates.com/interest-rates/libor/american-dollar/usd-libor-interest-rate-3-months.aspx

Will mortgage rates soon follow? I think so!

I thought it deserved its own thread to bring it to everyone's attention, and allow us to monitor the changes as it's surely a leading indicator of mortgage rate rises.

For short term lending - maybe.

For anything more than ~18 months, and for mortgages, look at 10Y gilts.

Share this post


Link to post
Share on other sites
Guest
4 minutes ago, TonyJ said:

The politicians are terrified people will vote against them if they tell the truth. I would say that is a damning indictment of British politicians' cynicism about people.

I have often wondered if a politician came along who dished out some tough love, rather than constantly avoid being all things to all people,  they told us off or even gave us some home truths about ourselves, I would personally love it. Everytime I listen to Teresa May she is telling us we are great, brave, hardworking or understanding, we are all ethnic, gay loving liberal people who have bags of tolerance and believe in "fair play" blah blah blah. Yet everyone of her actions gives Mr, Mrs Average the finger

Share this post


Link to post
Share on other sites
15 minutes ago, inbruges said:

I would personally love it

Right, but the politicians are not catering to you. They are catering to the largest group of people who will vote for them. If you disagree with the politicians, you know that the majority of people in the country do not see eye to eye with you.

Share this post


Link to post
Share on other sites
Guest
14 minutes ago, TonyJ said:

Our politicians are a reflection of our own dishonesty about ourselves. The whole country needs group psychotherapy.

They encourage endless gambling, but will never say it, they give us a country where if you go by the TV adds where they burst into a big smile at the thought of a 2000% APR pay day loan bailing us out for a few weeks. She goes into deprived/ depraved areas of the UK and patronises poor ethnic people where she should be telling themselves to buck their f*****g ideas up and educate and work their way out of problems while slapping their wayward murderous kids, and she should be making a country where that work ethic is rewarded, but her actions are the opposite of her rhetoric.

I am in a rush but I have just realised I could go on for ages at the endless BS we get from our politicians, I don't even mind our politicians failing, as long as they are 100% up front with how they are going to try to make things better and then see it through, but if they just tried.

Share this post


Link to post
Share on other sites
1 hour ago, spyguy said:

No, they are not like the people

Ireland has the one of the most venal, bank corrupted political bodies going.

The broadcast was 79. Irlenad then spent spent spent and psent on housing.

Rubbish!  Ireland has the best politicians that money can buy!

Share this post


Link to post
Share on other sites
2 hours ago, TonyJ said:

I think you have misunderstood what people are saying. Many loans are linked to the Libor rate, so if Libor goes up, the interest payments on those loans goes up, regardless of what the base rate is doing.

But not mortgages surely?  I have never heard of a mortgage linked to Libor.

Share this post


Link to post
Share on other sites
7 minutes ago, iamnumerate said:

But not mortgages surely?  I have never heard of a mortgage linked to Libor.

Last time I applied for a mortgage was middle of 2014 with a broker named L&C. The chap really sounded on the ball not just another of the commission-grabbing liar loan pushers which I have encountered in the past. One of the things that he explained to me was that mortgages lenders were indeed very dependent on whatever LIBOR was doing. 

Share this post


Link to post
Share on other sites
3 hours ago, inbruges said:

I have often wondered if a politician came along who dished out some tough love, rather than constantly avoid being all things to all people,  they told us off or even gave us some home truths about ourselves, I would personally love it. Everytime I listen to Teresa May she is telling us we are great, brave, hardworking or understanding, we are all ethnic, gay loving liberal people who have bags of tolerance and believe in "fair play" blah blah blah. Yet everyone of her actions gives Mr, Mrs Average the finger

Vote Monkfish

https://youtu.be/0VIyZ10vkps

 

 

Share this post


Link to post
Share on other sites
2 hours ago, Funn3r said:

Last time I applied for a mortgage was middle of 2014 with a broker named L&C. The chap really sounded on the ball not just another of the commission-grabbing liar loan pushers which I have encountered in the past. One of the things that he explained to me was that mortgages lenders were indeed very dependent on whatever LIBOR was doing. 

True but once you have a mortgage the rate is either fixed, varies according to base rate or if you are unlucky a SVR.

If it is varies according to base rate then Libor does not affect - the other two I can believe it does.

Share this post


Link to post
Share on other sites
8 hours ago, darkmarket said:

Stress in the banking system causes interest rates on lending to go up, which causes house prices to go down. No apology required, you're only pissing in the wind.

Nope, stress in the banking system causes interest rates to go down, or rate rises that were imminent to not appear, which is what happened with the GFC. It seems to me that we are due another recession before very long, which suggests rates stay pat or go down. Whether these libor movements are related to that I don't know. 

Don't waste your life waiting for that soaring interest rate which always just a year or two away. We'll need to look for other reasons for house prices to come down.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.