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[Mr Skrunts]

They cant seem to find a balance that will work in all directions and create stability.  They just cant balnace the budgeting forcasts and then end up paniking to raise money, then we all suffer, then when it looks like they have problems they panic all over again.

History repeats itself, interest rates all slow the shopping down before christmas, but then shoppers all then say stuff it and because they have a depression before christmas then go out and spend even more money to cheer themselves up.

[Field Marshal Dr. Opti]

Forgive my ignorance on this subject, but was it not low interest rates that led to the problems in the first place.

Will this not just add to the problem ?

Mike

Not while things are stagnant Manta ........but if the economy starts to overheat again at a later date then...interest rates may have to go up again to cool things down again.

Please forgive me again, but it seems that they drop interest rates to encourage people to borrow, then when we do borrow they incresae interest rates to stop us borrowing because it's bad to have debt.

I really don't understand it all sorry

Mike

P.S. got headache now.

They want you to spent money to keep the economy moving and growing at a sustainable rate......this is not happening at the moment....hence the interest drop to get things going again.

But they do not want you to "overspend" on cheap credit...as this can lead to inflation.......boom and bust.

[Ken T]

Its like a badly controlled servo system. If it overshoots it takes so long to notice its wrong that the error is massive, so you apply a large correction which makes it overshoot in the other direction, etc.

IF they had noticed when the house prices started to go silly and raised rates then, this would have stopped all those silly people with interest only mortgauges, and cooled the whole thing. Fine control, not panic action.

Ken

[Markie]

Its like a badly controlled servo system. If it overshoots it takes so long to notice its wrong that the error is massive, so you apply a large correction which makes it overshoot in the other direction, etc.

IF they had noticed when the house prices started to go silly and raised rates then, this would have stopped all those silly people with interest only mortgauges, and cooled the whole thing. Fine control, not panic action.

Ken

Ive got one of those...

The diference for me between intrest only and repayment is about £250 pcm.

We stick 4 times that a month away as savings and blast it against the mortgage once a year.

Although its a dangerous game if you dont save somewhere...

[Field Marshal Dr. Opti]

Its like a badly controlled servo system. If it overshoots it takes so long to notice its wrong that the error is massive, so you apply a large correction which makes it overshoot in the other direction, etc.

IF they had noticed when the house prices started to go silly and raised rates then, this would have stopped all those silly people with interest only mortgauges, and cooled the whole thing. Fine control, not panic action.

Ken

Ive got one of those...

The diference for me between intrest only and repayment is about £250 pcm.

We stick 4 times that a month away as savings and blast it against the mortgage once a year.

Although its a dangerous game if you dont save somewhere...

One good thing about repayment mortgages is that the longer you pay them the more capital you pay off as opposed to interest.

Our mortgage has been around £900 per month for years....initially that was approx £600 interest ....£300 paid off.....now it is roughly  £200 interest ....£700 being paid off.

Try renting a nice detached house for £200 PCM.....If people can sit it out it will all be fine in a year or so.

[Kevin Wood]

Its like a badly controlled servo system. If it overshoots it takes so long to notice its wrong that the error is massive, so you apply a large correction which makes it overshoot in the other direction, etc.

IF they had noticed when the house prices started to go silly and raised rates then, this would have stopped all those silly people with interest only mortgauges, and cooled the whole thing. Fine control, not panic action.

Ken

Very good analogy

We can be thankful Gordon Brown was only the chancellor during the boom and not designing cruise control systems for GM.

It was plain to see several years ago that the binge of borrowing and spending was not sustainable and a little correction then might have helped. Problem is, he who makes the first move starts maiing less profits, earning smaller bonuses and risks egg in their face, etc.. etc..

It works on an international level as well as an inter-bank level. Why should we cool our economy when the US, China, etc.. will only overtake us?

I imaghine when things pick up again everyone will forget the lessons, regulation will become a dirty word and the cycle will repeat.

Kevin

[Ken T]

Its like a badly controlled servo system. If it overshoots it takes so long to notice its wrong that the error is massive, so you apply a large correction which makes it overshoot in the other direction, etc.

IF they had noticed when the house prices started to go silly and raised rates then, this would have stopped all those silly people with interest only mortgauges, and cooled the whole thing. Fine control, not panic action.

Ken

Ive got one of those...

The diference for me between intrest only and repayment is about £250 pcm.

We stick 4 times that a month away as savings and blast it against the mortgage once a year.

Although its a dangerous game if you dont save somewhere...

Yeah, sorry I was thinking of the buy to let market where people were taking on huge mortgauges relying on house prices rising to make a profit. You kind of forget that some people actually want to live in their house.

Ken

[Field Marshal Dr. Opti]

Its like a badly controlled servo system. If it overshoots it takes so long to notice its wrong that the error is massive, so you apply a large correction which makes it overshoot in the other direction, etc.

IF they had noticed when the house prices started to go silly and raised rates then, this would have stopped all those silly people with interest only mortgauges, and cooled the whole thing. Fine control, not panic action.

Ken

Very good analogy

We can be thankful Gordon Brown was only the chancellor during the boom and not designing cruise control systems for GM.

It was plain to see several years ago that the binge of borrowing and spending was not sustainable and a little correction then might have helped. Problem is, he who makes the first move starts maiing less profits, earning smaller bonuses and risks egg in their face, etc.. etc..

It works on an international level as well as an inter-bank level. Why should we cool our economy when the US, China, etc.. will only overtake us?

I imaghine when things pick up again everyone will forget the lessons, regulation will become a dirty word and the cycle will repeat.

Kevin

For sure....human nature will see to that. :-/

[yatesDELTA]

Question:
if they give the savers this new low interest rate, and inflation is like 5%?   dont htis mean savers are loosing value on their money?

[Mr Skrunts]

Question:
if they give the savers this new low interest rate, and inflation is like 5%?   dont htis mean savers are loosing value on their money?

Probably.   I have noticed the halfax rates have been plumeting for a while, and they havent even been informing me.  :-/

[albitz]

I would imagine that part of the reason for the interst rate cut is so that the banks will charge each other less interest on the money they lend to each other,which hopefully will stimulate much needed .liquidity in the industry

[Mr Skrunts]

Bradford and Bingley have droped thier saving rate .5% immediately on todays news.   :-/

[Welung666]

Following on from this interest rate cut today the London Stock Exchange has plummeted dramatically! Here comes another round of weak £ against the $ and Euro!

[Nickbat]

Following on from this interest rate cut today the London Stock Exchange has plummeted dramatically! Here comes another round of weak £ against the $ and Euro!

ALL global stock indices have fallen, not just here in the UK. Indeed, US stocks fell for the first time ever on news of the result of a  presidential election!

Oil is down to $57.

The pound may slip against other currencies - or it may not. Remember that the US Fed rate is now 1.5%, so the technical advantage lies with sterling.

The credit crunch was NOT caused by low interest rates, as such, but by the selling at highly-leveraged income/debt ratios at low introductory rates to people in the US who could not afford them. We imported the problem as our banks bought what they believed was Triple-A rated debt...only to find it was sub-prime. The situation was made worse by an EU mark-to-market ruling which forced banks to downvalue their assets. Note that this ruling was axed rather hurriedly a couple of weeks back.

The reason why the rate has been lowered is to increase the money velocity in the economy. It is a sensible thing to do economically.

[Vamps]

Bring it on My morgage will come down a decent chunk..did last time and this is 3 times as much.
fuel prices droping, food prices dropping, might be able to balance the budget.... and keep the whisky flowing.