The Bank of England has just announced a Base Rate cut of 1.5% down to 3%. Mortgage lenders are already saying that they may not pass on all of the cut to their customers which makes you wonder how they can justify such a declaration, but we are well aware that they make up their own rules safe in the knowledge that the taxpayer will bail them out. The Chancellor Alistair Darling has gone on record to say that banks should pass on the benefit and Lloyds TSB has said that C&G mortages will drop by the full 1.5%, HSBC, Barclays and Nationwide have not yet confirmed a reduction but tracker mortgages will benefit immediately. In contrast the European Central Bank has reduced its base rate of interest by 0.5% to 3.25%.This size of this cut in the Bank of England Base rate (the rate at which it lends to other banks) is no doubt in response to the unexpectedly large drop (0.5%) in GDP just reported for the third quarter of 2008, as a 1% base rate cut was being mooted before the GDP figures were announced. The move will ease some pressure on industry and free up some cash to generate economic activity both on the commercial and the domestic front, but only if the mortgage companies allow borrowers to have a decent amount back instead of ring-fencing it to make good their dreadful howlers that got us into this situation in the first place.
The consensus is that the coming recession will be deep and prolonged with house sales already suffering, and a drop of nearly 25% being reported in vehicle sales last month, dropping the base rate to 3% leaves little room for future cuts of this magnitude.
Related posts:
UK reports GDP decline
Irish Republic in recession
Icelandic banks in trouble
Economic meltdown
CBI predicts 'shallow' recession
4 comments:
What blame would you say if any can be attached to the bank of England for the cedit crunch of current times
None, the BoE is not a commercial bank, the Crunch is a commercial crisis
Jay,
yes true but the BoE should of regulated effivently the commercial banks making sure they were taking account for systemic risk as is it not widley known that the great depression was prolonged due to the faliure of the Fed to act as lender of last resort?
I could be wrong. I am only a uni student doing an essay on BoE blame and credit crunch. I was thinking along the same lines as yourself. I belive it was a comercial problem originating from sub prime conditions in the US in 2007. But would your aguement to a question I adressed earlier really be none. Would you be willing to summarize in a brief nutshel why you would ague so
Kind regards
I think it is the role of the Financial Services Authority in the UK to regulate, not a job for the BoE since it is supposed to act independently of Govt.
I think that there was a failure to regulate, but that's kind of easy to see now!!!
Post a Comment