Tuesday, October 7, 2008

Interest Rate takes a dive down under

Australia slashes interest rate

Looks like we're next

Posted by semi-detached-from-reality @ 08:06 AM (555 views)
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4 thoughts on “Interest Rate takes a dive down under

  • This news seems to have caused an upward blip this morning but I note that the downward trend quickly resumed.

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  • I’m not sure cutting UK bank rate will actually do any good.

    A rate cut would benefit those with tracker mortgages, but with both LIBOR and savings rates well above bank rate, this would result in the mortgage lenders losing money on these deals (they are probably losing money on most of them already)

    Whatever ones views on the mortgage lenders, kicking them when they’re down is not very wise.

    Anyone have any idea what proportion of the UK mortgage book is of the rate tracking variety?

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  • Any rate cut will only be partially passed on to the consumer – at best.

    LIBOR remains high, banks will not lend to each other, and a rate cut will only be used to recapitalise banks. The man in the street will still be made redundant, his company will suffer credit problems, his mortgage will still be hurting his pocket. It will do nothing to prevent a recession. Look at how effective it’s been in America.

    There is no way to stop the deleveraging of bad assets.Last week the press were shouting for the bailout – because it would help. Did it? No.

    Now they want a rate cut. Will it help? No.

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  • Uncle Tom

    I also have concerns about a rate cut. The general public see this as a good thing as it’s how they have been hypnotised after seeing huge house price growth every time it’s been done in the last 10 years.

    What they don’t realise is that it will make them poorer overnight with no upside.

    As you say virtually none of the cuts will be passed on.

    IMO it will simply reduce the value of sterling further importing even more inflation and add to the cost of everything.

    What will happen should be allowed to happen and interest rate cuts should be saved for a time when our currency and rate of inflation allows for it.

    It does rather feel like the prudent have the entire system working against them and makes you wonder at times if you shouldn’t just have partied with everyone else.

    Still, for the time being at least I’m more comfortable I guess with my money in the bank than a huge mortgage round my neck.

    But with interest rates heading down and inflation up …………….. ?

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