Sunday, September 9, 2007

Three cheers for the Credit Crunch!

Pressure to raise funds leads to attractive rates for savers

A pressing need by some banks and building societies to raise cash is fuelling fierce competition in the savings market. Turmoil in the wholesale lending market has increased the cost of financing for lenders making it increasingly economic for them to chase deposits from individual savers. Ron Stout, of Northern Rock, said: “We are pitching our funds at a good, competitive price and we are continuing to raise money.” However, there are warnings that what is good news for savers will probably lead to greater costs for borrowers. LOL!!! :)

Posted by tyrellcorporation @ 09:39 PM (912 views)
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7 thoughts on “Three cheers for the Credit Crunch!

  • Is the Northern Rock a really safe place to stash your cash, hmmmmm.

    Me thinks I’d rather stick it somewhere else but not Barclays or Bradford and Bingley.

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  • Do you really believe that you might fail to get your money back from a Bank such as Northern Rock? As I understand it a bank has lots of junior debt which it will default on before it will fail to repay depositors funds; it can stop paying dividends; there could be a rights issue (because the shareholders may think it is better to put up more money in the short term rather than have their existing shares become worthless); or another bank may buy it at a low price. It may have lots of distressed borrowers, but there are also a lot who are not distressed and will pay more if the variable rate for mortgages is increased and the credit climate means that they cannot easily move there mortgage elsewhere. Even if they do remortgage elsewhere, at least this means that there is money coming in to repay depositors, although the business would be contracting as a result.

    People have to put their money somewhere. Cautious investors will not be buying shares at the moment, nor spending it in the high street, so they will head for the banks. Unless of course, they head for the EA …

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  • I’m no expert but I cannot imagine circumstances under which the banking system/government etc could allow one of the big 4 banks to get into too much trouble. If that were to happen the ramifications for the economy, banking etc etc would be apocalyptic. Rumours alone would then be able to close smaller banks down in a day if people thought their money might be at risk. As I say I’m no expert but would be interested to know how others see this scenario.

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  • I think they are slightly confused about how to make a profit.

    borrow low and lend high isn’t it?

    the lend high will have to come.

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  • In 5 years time, this will be forgotten about. No “large” Bank will go under. Credit crunches have happened before and will happened again. I recall reports in the late-1990s (1998?) saying main Banks could go under – how many did?

    The credit crunch will affect many businesses and many people but, alas, not the Banks.

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  • tyrellcorporation says:

    @ paolo88888

    You’re brave if you’re thinking of stashing some cash at Northern Rock or any other sub-prime lender. I agree the big banks will be saved from collapse but who’d really give a monkies about Northern Rock?

    I anticipate they’ll offer some crazy rates to savers very soon as they see their cash reserves dwindle. I won’t be taking them up!

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  • I notice that the Nationwide BS are also offering savers 6.7% on a 1 year e-bond. I wonder if this indicates a desperate attempt to raise some cash quickly.

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