BoE Drop UK Interest Rates to 2%

Discussion in 'Current Events' started by edesignuk, Dec 4, 2008.

  1. Moderator emeritus

    edesignuk

    Joined:
    Mar 25, 2002
    Location:
    London, England
    #1
    A month ago: BoE Drop UK Interest Rates to 3%

    ...and now...
    BBC.

    The Government had better make sure those bastard banks pass on the savings to their customers.
     
  2. macrumors 68000

    Shaun.P

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    #2
    Is this why my Cash ISA interest rate with ING Direct has plummeted to 2.75% AER?
     
  3. Moderator emeritus

    robbieduncan

    Joined:
    Jul 24, 2002
    Location:
    London
    #3
    Whilst I agree with this somewhat if the customer wanted a guarantee of any drops being passed on to them they could have chosen a product that offers that (a tracker mortgage tracking the BoE base rate, like my new mortgage :D). But most people did not. So that's their own fault.

    It's not like the banks can actually borrow money at BoE base to fund the mortgages of their customers. You can't exactly go to the BoE and say "Your base rate is 2%, I've got a customer who wants a £250000 mortgage, I'll be borrowing that off you at 2% for 25 years". The complexity of the system is massive, but the real rate that has an actual impact on the rate that mortgage lenders can finance their books is LIBOR.

    As we can see the various term LIBOR rates tend to be higher than the BoE base rate, sometimes much higher. As LIBOR is not set, rather is based of actual rates it is something the BoE has very little influence over. They could set the base rate to 0% and LIBOR could still be 10% (or any number really) if the banks viewed lending as a risk and needed to price that in.
     
  4. macrumors 6502a

    Joined:
    Apr 2, 2007
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    Leeds, UK
    #4
    Nice one. My mortgage has just been reduced by about 100 quid. Now I just have to hope I don't get made redundant :)
     
  5. macrumors 68000

    Shaun.P

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    #5
    Is that per month? That's a huge saving!
     
  6. thread starter Moderator emeritus

    edesignuk

    Joined:
    Mar 25, 2002
    Location:
    London, England
    #6
    It will be, I read that someone with a mortgage of £200,000 will be saving ~£130 (per month) I think it was...and that's on top of the big saving from a month ago when they dropped to 3%.
     
  7. macrumors 6502a

    Joined:
    Apr 2, 2007
    Location:
    Leeds, UK
    #7
    Yup. I'm glad we chose a BoE tracker mortgage. Once this further reduced interest rate kicks in, we'll have a mortgage that's at least £250 cheaper than it was when we re-mortgaged earlier this year.

    Although remortgaging in a year's time might be a bit tricky with the lack of products on the market
     
  8. Moderator emeritus

    robbieduncan

    Joined:
    Jul 24, 2002
    Location:
    London
    #8
    Maybe. It depends on the product. Most trackers have defined floors below which the rate will not fall, no matter how low the BoE rate goes. For example, iirc, the tracker I am re-mortgaging too will never go below 3% even if the BoE rate drops to 0...
     
  9. macrumors 6502a

    Joined:
    Apr 2, 2007
    Location:
    Leeds, UK
    #9
    Just got a letter through from the Co-Op stating that the SVR will be 4.74%. I just phoned them to confirm that our rate should be BOE+0.34%, and that is indeed the case.
    I was frantically check our mortgage agreement for any clause stipulates a minimum interest level, fortunately there is none. So our saving is around £200 and our property isn't anywhere near £200k.

    Even when our offer period finishes in just over a year's time, our rate will be BOE+0.69%, this is still cheaper than anything else out there at the moment. I can't believe how lucky we've been.
     
  10. macrumors 68000

    Shaun.P

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    #10
    What interest rate are we at now? .5%?

    My cash ISA has plummeted even further from 2.75% to something ridiculous. There is no motivation to save!
     
  11. thread starter Moderator emeritus

    edesignuk

    Joined:
    Mar 25, 2002
    Location:
    London, England
    #11
    Yup.
     
  12. macrumors 6502

    Joined:
    Mar 16, 2007
    #12
    I think that's the point, the Gov wants the banks to lend and you to spend :D

    Kinda makes you wonder if the Gov understands what caused this mess ...
     
  13. macrumors 68020

    Unspeaked

    Joined:
    Dec 29, 2003
    Location:
    West Coast
    #13
    What caused this mess was buying stuff with money you didn't have in the bank...
     
  14. macrumors G3

    Counterfit

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    #14
    Is it a bad thing if I saw "BoE drop" and thought this was a Warcraft thread? :eek:
     

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