Interest rates slashed by 1.5%

[kalniel]

Now that's a big cut!

Of course banks won't pass it on immediately to borrowers, saying 'the interbank loan rate is still high' - but they will pass it on immediately to savers no doubt, making a mockery of that statement...

[dave87]

Just goes to show how stuffed the UK economy is - last year they were worried about half a percent changes, let alone 1.5%!

[Zak33]

I STILL don't have the last rate cut off my mortgage, and that was over 1 month ago.

AND, surely to goodness a slightly more gentle cut back over the last few moths would have been preferable? It's not like the hard times were invisible, is it?

[DR]

Depends who your lender is - I thought they worked it out daily for the lions share of them?

[0iD]

I large proportion of lenders have already said they will not be passing on interest rate cuts to try & recoup some of their lost funds.

[Vroomparrot]

I'm so glad when I remortgaged a couple of years ago I got a tracker mortgage. Best of all it tracks 0.19% above the base rate I reckon I must have remortgaged at just the right time.

[DR]

http://www.guardian.co.uk/politics/2...interest-rates

[Zak33]

Mine, with Natwest, didn't budge. I have a standard variable and while rates are charged daily on it, the rates didn't move

Trackers are looking like they were the uber smart move back a few years ago now.

[Gerrard]

Great. My savings will be earning me even less now. Keep going at this rate, and people will withdraw their savings to invest it instead, which will leave the banks with no moeny!

[kalniel]

Great. My savings will be earning me even less now. Keep going at this rate, and people will withdraw their savings to invest it instead, which will leave the banks with no moeny!

Except a lot of investments tend to be in banks, which is what they're hoping for more of at the moment

This has peed me of a bit - I tried to hedge against this by taking out a fixed rate savings and all that happens is the bank goes bust and my money's in the aether. What little I have left is in variable accounts that have dropped like a stone. Meanwhile my rent hasn't gone down any, job pay has been cut in real terms and banks are even less likely to want to lend to me to afford a house. Greedy home owners/banks suck

[Lucio]

Here's the thing I don't get. Bank of England cuts interest rates, but banks don't change their one, so why on earth does the Bank of England set a rate at all?

[menthel]

I have a tracker, so I am quite pleased about the change. However, I wish I had Vroom's tracker!

[rox0r]

Our mortgage is with C&G and they are passing on the full 1.5%, already had the last 0.5% passed on. Our SVR is now cheaper than the lowest that our tracker we just came off ever reached

[Zak33]

apparently my Natwest OffSet mortgage was dropped by .5% on 3rd November.
http://www.easier.com/view/Finance/M...le-208447.html

But that's dated 8th October and Natwest haven't written to me to say that they've done it.

But Lloyds TSB did the right thing immediately ( as stated up there /\) and followed the cut immediately.

HOWEVER..... everyone with a TRACKER needs to find out if they have a COLLAR rate, ie a rate that the interest won't fall below...ever.

[arthurleung]

Saw the news today and I immediately put almost all my (poor student) money in a fixed term saving. Now I'm on Halifax 3-mo (6.88&#37, Halifax 6-mo (6.49%) and Nationwide 6-mo (6.35%).

While my variable saver dropped below my student loan interest rate :S

On the other hand I have to thank god Halifax had the fixed saving at 6.49. Otherwise I would have put my money in Icesave and stuck in the boat like kalniel.

[Saracen]

Here's the thing I don't get. Bank of England cuts interest rates, but banks don't change their one, so why on earth does the Bank of England set a rate at all?

Because, under normal conditions, the market for money is pretty competitive, so when the BofE cut their rate, commercial rates follow pretty swiftly.

The problem is, right now, the market is broken ... though a little less broken than it was a few weeks ago. And what actually determines the rates banks charge is the rate they pay on the money they borrow (if they can, right now) not the base rate.

So at the moment, there's a disconnect between the base rate and market rates like LIBOR. If the rest of the market is frozen, and what the banks have to pay doesn't change when the BofE change rates, then we can't really expect the rates the bank charge us to change. And that is the problem, it's what politicians and news reports have been going on about for a couple of months .... the usual market mechanisms either aren't working properly or, recently, were barely working at all.


As for the effect on mortgages, I have a standard variable rate mortgage and got the last rate cut passed on in full and it was announced that day, though the payment that it takes effect on is the November one. Still, if the savings rate does drop as a result of this (and it might not, because banks still want money from savers and they'll have to pay to get it) and mortgage rates don't, then it'll seriously disincentivise savings, at which point, I'll use some savings and pay the mortgage off. It's really nice being in a situation where the last new car I bought cost me about double the outstanding mortgage balance. And yes, I'm feeling pretty smug about that.