Saturday, May 17, 2008
Endless ramping yes but of interest rates!
LIBOR Says It Isn’t Over
The Libor rate has increased by 0.08% over the last two days. Now with all that money from the BoE you would expect it to drop. However, it appears the banks want 90,000,000,000 and not the 50,000,000,000 that the BoE offered! When Libor goes up so do our IR. I wonder if we will soon see mortgage IR rates calculated using the old rule of thumb formula i.e. IR = BoE rate + Inflation + Bank's Profit. This will be eye watering!
Posted by who stole my pension? @ 06:40 AM (519 views)
One thought on “Endless ramping yes but of interest rates!”
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uncle tom says:
“old rule of thumb formula i.e. IR = BoE rate + Inflation + Bank’s Profit.”
– ??? – not in my book of thumbs!
My rule of thumb maintains that in the long term, the commercial cost of borrowing money (where there is negligible risk) averages inflation + 4%, and that when compounded, the real cost of borrowing a pound becomes two pounds after eighteen years.
Historically, building societies have managed to get away with paying too little interest to savers and being able to pass that saving on to mortgage borrowers. With the mortgage industry increasingly divorced from the savings industry, there is no certainty that will continue.