The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

[Rois]

I love the Bank of England.  They've just knocked about £350 a month off my mortgage payment.

[Main Street]

That's the theory.

[Rois]

Happened with the last cut - paid over £100 less this month.  Has happened with every other cut - no reason to suspect it won't happen again.

[orangeman]

I love the Bank of England.  They've just knocked about £350 a month off my mortgage payment.

That's some mortgage you have !

[Rois]

I know 

It's all interest...but at least the saving will go towards paying off the capital. 

[Main Street]

Rois, you are the one with the mortgage so you can talk about it.
I am just reflecting a level of skepticism of just how much of that % will be passed on to the mortgage holders and the types of mortgages effected.

http://www.guardian.co.uk/business/2008/nov/06/interestrates-interestrates2

"This reduction in the bank rate will provide some support to the housing market and especially borrowers on tracker rates. However, borrowers looking for new fixed rate deals or homeowners with mortgages linked to money market rates will not necessarily find their mortgage rate decreasing".

[Norf Tyrone]

My mortgage term is up in Feb too, so I need to start shopping around.

Today's announcement will help big style!

[Rois]

I am just reflecting a level of skepticism of just how much of that % will be passed on to the mortgage holders and the types of mortgages effected.

You're dead right Main Street, a friend of mine hasn't had any rate increases passed on, and she's on a standard variable rate.  New mortgage seekers won't see a difference till LIBOR comes down.

Just hope the First Trust continue their good work.  Might start to own my house instead of just paying a kind of extortionate rent.

[Tony Baloney]

Getting a fixed rate a few months ago was a good idea 

[orangeman]

Will this 2% reduction in the last 2 months have the desired effect ? It didn't in USA - so why should it be any different here ?

[orangeman]

Proof of my last forecast above :



Who benefits from rate cut?
Robert Peston 6 Nov 08, 01:22 PM I've just had a call from an astonished individual who has several hundred million pounds that he puts on deposit in various banks.

As of 10 minutes ago, a leading British bank was offering to pay him almost 7% interest for his cash.

That was after the Bank of England's policy rate had been slashed by 1.5 percentage points to 3% - an unprecedented reduction in the history of the Bank's Monetary Policy Committee.

Why does it matter that this holder of squillions is still being offered almost 7%?

Well, if he's being paid almost 7%, what chance is there that small businesses will be able to borrow at less than 10, 12, 14% or more (with the actual rate depending on an assessment of their credit-worthiness)?

Those who most need a substantial cut in the interest they pay - hard-pressed businesses, cash-strapped households - are unlikely to enjoy more than a small reduction.

As I described in my note on Sunday ("Why interest rates are not falling") the transmission mechanism from the Bank of England's policy rate to the interest rates we pay has broken down.

Lenders have - understandably - concluded that the risk of lending has risen very sharply, and are therefore demanding much greater rewards for providing credit.

So at a time when all the indications are that we are in a fairly severe recession, and many companies and individuals are struggling to keep afloat, it's a serious worry that even the kind of evasive action attempted today by the Bank of England may provide only modest succour.

[Smokin Joe]

If your mortage rate tracks the BoE base rate you are in clover, if however your rate tracks the bank's SVR you should have known better.

[bcarrier]

RBS/ Natwest and presumably Ulster have now also cut their SVR by 1.5% . 3 Month £ LIBOR is at a five year low. Similar for EURIBOR. I also love the BoE.

In those areas where rental yields exceed cost of borrowing there should be a bottoming out of the property market now.

[passedit]

RBS/ Natwest and presumably Ulster have now also cut their SVR by 1.5% . 3 Month £ LIBOR is at a five year low. Similar for EURIBOR. I also love the BoE.

In those areas where rental yields exceed cost of borrowing there should be a bottoming out of the property market now.

You're some optimist BC, Whatever rate the banks are lending at, their lending criteria have tightened so much the rates are as near irrelevant as can be. Still a long way to fall especially in NI.

More good news from Santander today (I was kinda expecting this when they put a £10,000 per day spending limit on my business debit card a month ago for 'security reasons', yeah the fact they had none)

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/3418229/Santander-stuns-the-markets-with-7.2bn-rights-issue.html

Santander stuns the markets with €7.2bn rights issue
Banco Santander is to raise €7.2bn (£5.8bn) in fresh capital and foreswear further expansion in a shock move that raises fresh questions about the underlying health of the Spanish financial system


By Ambrose Evans-Pritchard
Last Updated: 6:49AM GMT 11 Nov 2008
Emilio Botin, Santander's chief executive
Emilio Botin, Santander's chief executive

The rights issue comes a week after the bank – which owns Abbey in the UK – signalled that it had no need for fresh capital.

"This is very surprising: they had given no indication of this," said Silvia Verde, an analyst at Inverseguros in Madrid. There is no pressing need to roll over debts. The dividend will be maintained.

Emilio Botin, Santander's chief executive, said the move was aimed at boosting the bank's core capital ratio to 7pc to meet its own "self-imposed" guidelines after a wave of acquisitions in Britain, Latin America, and the US.

"Banco Santander has always had a very clear approach to capital strength. This is a magnificent opportunity for shareholders," he said. The bank said it had shelved a series of planned asset sales until prices recovered to "acceptable levels".

The rights issue comes as the economic outlook in Spain continues to darken. Housing minister Beatriz Corredor said yesterday that property prices had fallen "at least 15pc" over the last year. "It is a reality that we cannot deny," she said.

Spain's premier, Jose Luis Zapatero, called in the heads Santander, BBVA, and the country's leading "Caja" lenders on Monday to frame a response to the crisis following the government's pledge to guarantee €100bn guarantee of bank debt.

Santander has been Europe's rising star, dodging fallout from the sub-prime debacle in the US. Now the Continent's most valuable bank, it has seemed impervious to the crisis despite its high-risk adventures in the UK mortgage market, taking over Abbey, Alliance & Leicester, and now Sovereign Bancorp in the US as well.

Analysts said Santander is almost certainly battening down the hatches, expecting trouble in its core markets – including a sudden downturn in Latin America as investors pull their money out of emerging markets.

Fitch Ratings began to downgrade a clutch of Santander mortgage securities worth more than €4bn earlier this summer, warning that the bank's internal analysis points to a 35pc crash in Spanish house prices. A large bloc of the securities is still stuck on Santander's books.

Fitch said the securities had been "sliced and diced" in the same way as US sub-prime bonds. They were based on mortgages that often exceeded 95pc or even 100pc of the house value. The arrears rate on the more recent vintages have reached 7pc to 8pc.

Optimists note that Santander still has no trouble raising fresh capital in the market place. That is no mean feat at a time when a large number of banks in the Western world are being supported by taxpayers.
 

[passedit]

Ken Clarke warns Britain is on the brink of 'meltdown'

Kenneth Clarke, the former Conservative Chancellor, has warned the economy is on the brink of "meltdown" and unemployment could reach three million.


By Rupert Neate and Robert Miller
Last Updated: 3:44PM GMT 12 Nov 2008
http://link.brightcove.com/services/link/bcpid1529573275/bctid1915453605 http://www.brightcove.com/channel.jsp?channel=1139053637

Mr Clarke, 68, said the British economy is headed for a "catastrophic crisis" that will be "far worse than anything that has occurred in my lifetime".

"There will be a very serious recession next year," he said in an interview with Telegraph TV. "I think the big problem in 2009 will be the catastrophic fall in consumer spending demand, spending in shops will get worse."

Mr Clarke, who as Chancellor of the Exchequer between 1993 and 1997 led Britain's recovery from Black Wednesday, called for a temporary cut in VAT to boost spending.

Speaking as the Office of National Statistics revealed unemployment has reached an 11-year high of 1.82m, Mr Clarke said the number of jobless could soon reach three million.

"It is going to go up a long way... whether we will get back to three million again is one of those slightly morbid questions I really don't know the answer to. But it could get pretty big," he said. Rising unemployment will have a "devastating effect" on families and lead to more people being unable to pay their mortgages, he said.

The former Chancellor said Gordon Brown has received undue credit for his role in attempting to shore up the global economy. "The idea that Gordon has saved the world is not true," he said. "We still have a major, major crisis in this country and... public finances are in a terrible mess".

Mr Clarke said the larger than expected 1.5 percentage point cut in the base rate was a good move, but cautioned that it would not end the crisis. "We had a big cut in interest rates, about which there was a wholly exaggerated expectation, in the short term it will have modest effects, if any. Long-term it will begin to have effects.

"We are not yet in a state where we can be absolutely certain we are not going to have something close to meltdown next year", he said. "You do have to see what can be done with taxes."

He cautioned that Britain has "mounting debt, which is unsustainable" but said policymakers should bear in mind the effect a "full-blown depression will have on public finances". Looking forward to the Pre-Budget Report he said any fiscal stimulus package would have to work in both the national interest and contribute to worldwide efforts to stabilise the global economy.

Mr Clarke said the public can see the Prime Minister has got more "confident" in his economic judgement, but said he imagines the Treasury is being "driven crazy by the wild way" in which he and his advisers spark speculation about the way the Government intends to combat the financial crisis.

According to Mr Clarke, public respect for banks, which are "hated institutions" at the best of times, has collapsed. He was also "very concerned" that the Government could make the crisis worse by forcing banks into "lending that they cannot afford".

"When I hear these stories of the Chancellor being presumably ordered by the Prime Minister to get the banks in and waving newspaper headlines at them I think that is no way of making policy," he said.