There's a great article in The Telegraph entitled "Borrowers taking out popular mortgages paying highest rates in seven years", which does pretty much what it says on the tin.
My favourite nuggets are these:
Lloyds TSB yesterday released its new products and borrowers must now pay up to 2.09 per cent more than the Bank of England base rate for a mortgage. Before last week's [1.5%] cut in the base rate, Lloyds was charging home owners 1.09 per cent above the official rate.
Abbey and Alliance & Leicester have also increased profit margins and now charge up to 2.04 per cent above the base rate. Mortgage experts say that until a month ago, the best deals allowed borrowers to pay just 0.5 percentage points more than the base rate, the average is now 2.34 percentage points above base rate.
To cut a long story, very few people will benefit from the base rate cut, and if they do, not by much. Whereas savers will no doubt be clobbered. Household spending power will henceforth be even lower.
H/t SoldOut at HPC.
About That Closet
3 hours ago
4 comments:
Mmmm we pretty much saw that one coming.
Similarly Brown's recent jetting around the World telling anyone who will listen what a great idea the bailouts are...
Wait till he needs to borrow some cash and discovers all the cheap money has gone. What a fool.
Unfortunately people seem to have forgotten that the Bank of England's interest rate is not what the banks are worried about - they are only concerned with LIBOR, which doesn't always change in line with the Bank of England's base rate.
I still reckon one of the prime reasons for the dramatic rate cut was for exactly this purpose. That is to allow the banks to increase the spread between borrowing and lending costs without giving borrowers more pain than they currently have. In truth with base rates rates at 4.5%mortgages are mostly manageable for 'prudent' borrowers - the vast majority.
But this policy requires a companion action if the Government wishes to boost the economy, and that is real tax cuts on business and taxpayers. This will genuinely put money back in our pockets. And whether we use it to pay down debt (hence helping the banks recapitalise) or spend it on goodies, it will help the economy far more quickly than any of these ludicrous state sponsored Capex schemes.
Mish has just posted another in his series arguing that even with the Fed rate at 1% we have positive real interest rates.
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