Here's A Though? What If Banks Dont Pass On Increase?

[teddyboy]

OK Im not saying that this is what I expect the banks to do but there is SOME logic in it.

We all know that MORGAGE RATES can fluctuate regardless of the BASE RATE. So surely the financial institutions DO NOT have to respond to this rise. If they decide to UP their mortgage rates this can be disasterous for a few reasons.

The existing mortgage holders will - in time - start to feel that extra £30 a month as this is on top of HIGH fuel prices that do not look like they are going to drop for a few years yet imho. This means rising energy bills also. So £30 dont sound like a lot but it can be. If we get more rises then there is going to be trouble. I believe that banks and BS will look at the asset value of their borrowers and PASS on the rise to the ones who have more than 30% TRUE EQUITY in their homes but the ones who only have a small amount 5-10% I think they will let off the hook. It is not within their best interest to tighten the purse strings on people that have an asset that is likely to depreciate in a tough market.

The new business will be a lot harder to get and the Banks/BS will have to be competitive to get the custom. So I think the BIG 4 will probably up the rates with no fear as they are the market leaders but I can see strong competition from the smaller ones. We have to factor in that we are PROBABLY at the peak of the market and if someones credit is good then they want to lend them as MUCH as possible to get the best returns themselves.

These are plausable scenario's - unlikely I know. But we need a few more small increases to destroy confidence. I think the rates decision yesterday was a good thing as it DID catch a few people out. What are they going to do next month????? They are now UNPREDICTABLE.

Would you take out a mortgage now???????

I think we are entering a bear market personally, there are a lot of bulls that have gained a lot over the past 5 years or so and they and I know that LONG TERM they should profit well. But have they got the BALLS or the FUNDS to weather this economic storm???? This will sort out the boys from the men. The Amateur BTL is leaving town imho...

TB

Edited August 4, 2006 by teddyboy

[Chriso]

I can see your thinking, but I don't think so. Effectively what your saying is that the lenders should pay this increase of their charge of borowing, for their customers.

Ultimately, due to the basic laws of economics, it won't happen

[Bingley Bloke]

Prior to fixing her mortgage at 4.55% for five years last year, my girlfriend found that her mortgage lender always responded pretty much instanly to rises and falls in the base rate. At the end of the day, they're banks. All they care about is getting your money.

[teddyboy]

Prior to fixing her mortgage at 4.55% for five years last year, my girlfriend found that her mortgage lender always responded pretty much instanly to rises and falls in the base rate. At the end of the day, they're banks. All they care about is getting your money.

Yes I agree but I just have this feeling that it may be better in the long term to get back the money by a softly-softly approach because the assets secured on them might DEPRECIATE rapidly. I can see that calling in debts is going to take a lot of MONEY and RESOURCES as the number of people who are likely to struggle is UNTHINKABLE!

They are parasites though, they would probably take a loss as long as they have every asset you have!

TB

[thunderbird900]

Teddyboy, don't hold your breath. Banks don't do softly, softly. You are talking like a normal compassionate person. The banks only see the bottom line, figures.