Interest Rates drop 0.5% - Welcome News to Homeowners with Mortgages
Yesterday’s unprecedented announcement from the Prime Minister Gordon Brown that The Bank of England had cut the UK interest rate by 0.5% has been welcomed by everyone. The mortgage interest rate has fallen from 5% to 4.5% which is great news for everyone. Further news that the US and European central banks were following suit with their own interest rate cuts was a revelation.
This announcement is a global solution to a global problem. What was most remarkable was that all these countries came together with one voice and the same action plan to cut interest rates to help prevent a financial collapse within our global banking system and the deepening fear of a global recession turning into a global depression. They were desperate men seeking desperate solutions!
Today all the major banks, RBS, HBOS, Lloyds TSB and Barclays Bank, have announced they are cutting their interest rates. Let’s hope that these new interest rate cuts will find their way to the Mortgage Borrowers and credit card owners who hold large credit card debts. People like the first time buyers looking for their first mortgage, homeowners looking to remortgage for a better deal and the buy to let property owner looking to remortgage or purchase another property.
Over the last year there has been little or no correlation between the Bank of England base rate and the banks’ own lending rates. This had kept interest rates high as the banks did not want to lend money and were trying to ‘cherry pick’ the best clients with the least risk.
We will only know whether the banks have started to trust each other when we see the Libor Interest Rate start to drop. The Libor interest rate is the interest rate that banks use to lend money between themselves. When the Libor rate starts to drop between the lenders we will have some idea as to whether the £500 billion rescue package dreamed up by Chancellor Alistair Darling and his boss, the ex-chancellor and now Prime minister has actually worked.
The cost of their daring intervention into the banking system has cost each and every taxpayer approximately £20,000. We want to know if it was really worth it or did they just waste our money. I hope it has worked, as it would be a travesty if we all ended up further in debt due to their miscalculation. We may then need a debt relief package for the UK!
There are still further expectations by the City for the Bank of England to cut more off the interest rate in the forthcoming months. We wait with bated breath and wonder about our pensions and how they are stagnating! Your thoughts and comments are always very welcome. Just Click on the green coloured comments bar below and leave your thoughts and views.
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