Thursday, Dec 03, 2009

Higher interest rates on their way

FT: UK bank borrowing costs to rise

"Barclays, Lloyds Banking Group and Royal Bank of Scotland, the UK banks, are facing £6bn ($10bn) in extra interest rate costs over the next four years as the Bank of England withdraws cheap emergency loans from the market. The cost of replacing this cheap funding combined with new liquidity rules, which will require banks to invest more of their reserves in risk-free government debt paying lower interest rates, will hit the UK institutions hard, according to research by Credit Suisse."
I guess the banks will have to raise their own interest rates irrespective of what Threadneedle Street does.

Posted by tpbeta @ 10:06 AM (1317 views)
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6 Comments

1. mark wadsworth said...

Quick people! Rush out and buy a house now and lock in a low interest rate!

(OK, you'd be sitting on a depreciating asset if interests were indeed to rise, which seems highly unlikely, but that's small print).

Thursday, December 3, 2009 11:44AM Report Comment
 

2. tpbeta said...

Just to clarify the point: It's highly unlikely the BoE will put up the overnight rate but much more likely the high street banks will put up their commercial rates.

Thursday, December 3, 2009 01:01PM Report Comment
 

3. refusetobuy said...

" UK banks, are facing £6bn ($10bn) in extra interest rate costs over the next four years as the Bank of England withdraws cheap emergency loans"

So over the past 2 years the taxpayer has lost £3bn by providing cheap emergency loans. That's real money lost, not a debt that will (possibly) be repaid.
This is the reason why other banks have done so well, because they can access the cheap funding just as easily as RBS or Lloyds.

Thursday, December 3, 2009 03:09PM Report Comment
 

4. timmy t said...

Oooooooh... returning to normal... where have I heard that before?

Thursday, December 3, 2009 04:24PM Report Comment
 

5. tenyearstogetmymoneyback said...

It is returning to normal --- circa 1995.

As for the interest rates for a while I have found it strange that many banks offer savings rates higher than their
mortgage rates.

Thursday, December 3, 2009 07:33PM Report Comment
 

6. Fallingbuzzard said...

I think returning to normal is the good old days of the 70s and 80s when the UK was up and down all the time but broadly down without the high levels of inflation to take the pain away.

Thursday, December 3, 2009 10:23PM Report Comment
 

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