What’s the alternative?
The problem we face now is not the cost of money but the availability of money. We need the interbank base rate to ease up to make it possible for banks to get money from the markets to allow them to lend again properly. The low interest rates at present do not allow the banks to attract savers to save money that they can in turn lend to borrowers. To get the banks to start lending again we need confidence and knowledge that the banks are sound.
The Banks need to come clean
The banks need to declare what losses they have had from impaired securities, private equity and subprime mortgages. They need to be open and honest so that people can gain confidence in the banking system. After all we the tax payers now own 63% of the Royal Bank of Scotland and 46% of Lloyds TSB and HBOS and it is taxpayer’s money that will once again be called for to help out the whole of banking institutes. So it would be nice if they were open and honest about their total loss so that we can all work together to resolve this crisis.
Buy and rent back option for repossessions
Another thought is that the government could buy and rent back the homes of people who are losing their homes through repossession. Homeowners would effectively sell their homes to the Government who would then rent their home back to the ex-homeowner for a fair rent. This would allow financially stricken families to remain in their homes and this could help prevent house prices from dropping further due to the flood of repossessed homes coming on the market. The government would have to re-house these people anyway at the taxpayers cost. The government could either sell the house to a housing association or to a private landlord in the future. It is thought that some 375,000+/- homes may be repossessed over the next five years. This solution is not inflationary to the economy in any way.
The Governments great Bank bailout has not worked yet and it might now be time to reverse the temporary 2 ½% Vat reduction announced late last year as that could well save us £10billion which would not increase further our national debt.
Bank of England should stop dropping the interest rates now!
We are in an extraordinary situation and we are currently facing the lowest interest rates ever seen. How much lower can interest rates really go before they achieve nothing? By lowering interest rates the government believe that this can encourage people to spend more and borrow more and it is thought that this will get the economy going again. During boom time the mechanism of increasing or reducing interest rates by the Bank of England works well, now it is having little effect. So the Bank of England and this government should stop dropping the interest rates as they are having no effect.
Your thoughts, experiences and comments are welcome. You can join this discussion below and leave your thoughts and experiences.