Down to  to 1%

Good grief - I guess OH can't argue wih me going on a spending spree then (I'm trying to see the bright side!).  Not much incentive to save :(

How many people does it really help though, I'm one of the lucky ones on a tracker mortgage that tracks about 1% above the base rate so I will get the .5% reduction.  Most people are on standard variable rates or fixed rates and will probably not get any benefit.  Using interest rates as a way of boosting the economy has probably gone as far as it can go and the govt will have to now print money.

Pros and cons alright. :-)  I am sure spending won't be too a hard punishment for you :-D :-D

" through time" Hopefully some good knock on affects could come from it.. bumpy road ahead though.

The big men always seem to gain benefits quicker than the little men though

The contracts I manage are all UK but my revenue is converted into Dollars as I work for a US company. It is crippling my profits the $ to £ just now. 

standard variable rates also go up and down unless it is a greedy bank..

Businesses will benefit , inturn employees will but it all takes time..    Printing money is very risky...

of course they don't actually call it printing money any more, its now called "quantitative easing".  Thing is will businesses actually benefit?  In theory the low interest rates should be great news as the cost of borrowing is so low, but are the banks passing on the low rates for new borrowing and are they actually lending the money anyway - there's no point in having low rates if the banks aren't lending.

but are the banks passing on the low rates for new borrowing and are they actually lending the money anyway

The banks will have more money from simple things like mortgages, if they are only paying small amounts of interest for the money they have borrowed to lend us they are making more money which frees up money to lend.

I have had no problem at all get money for my personal business deals and also my employment business deals.  Time is taking a bit longer perhaps but it is still available.

I think quantitative easing will happen, how much and whether it will be a success is another thing,  US are already doing it..  There seems to be a big divide in the success of Japan's efforts using it.

Er I don't understand, why would people want to borrow when they don't even know if they'll have a job?   so many have lost their jobs - they won't want to borrow, so just who is supposed to be doing all the borrowing?

Why should I keep my very modest savings in a savings account if they aren't earning any money? - I'd be better off keeping them under the bed :(

Er I don't understand, why would people want to borrow when they don't even know if they'll have a job?

  I am not personally talking about individual people benefits and borrowing I am talking about hopefully knock on effects from Businesses being able to borrow etc.  restricted cash flow for businesses is causing most of the problem at the moment.  Wages come from Cash flow.  Businesses use short term lending for cash flow to bridge income and outcome.    People are always the first to go when this happens.

We're on standard variable and from Jan last year to Jan this year are mortgage has dropped over £200, and even though this has been good for us it hasn't made me want to go out and spend. Even when they did the VAT reduction that didn't make me want to spend, we're hanging on to all of our spare pennies just incase one or the other of us finds that we're jobless in a few months. :( :(

>Blue wrote: The banks will have more money from simple things like mortgages, if they are only paying small amounts of interest for the money they have borrowed to lend us they are making more money which frees up money to lend.

The banks are actually paying higher rates than the base rate, the current LIBOR rate (the rate the banks in effect borrow money at) is about 2.2% so they are not making a lot of money from mortgages etc.  The other problem is that they are scared to lend money anyway because they are nervous about bad debts.

> Dill wrote: Er I don't understand, why would people want to borrow when they don't even know if they'll have a job?

There are still a lot of people who want to borrow money.  However I suspect the biggest borrowers are businesses who need to borrow to finance future work

> The other problem is that they are scared to lend money anyway because they are nervous about bad debts

Very true.  My daughter works in that sector and is finding that no matter how reliable a potential customer looks those who have the final say are running scared of taking on the majority of borrowers - of course the official hype is quite different from the reality :(

> The other problem is that they are scared to lend money anyway because they are nervous about bad debts.

This very fear is of course slowing things down, OH and I would like to move and can afford to move, but as new mortgages are as rare as hen's teeth we don't stand a chance in selling our current house, so stuck:(

I've worked out a simple solution.

More money should be printed.  This money should be handed out to each household who could then spend it as they see fit.  This would boost the economy, keep people in jobs and keep the cycle going.

I'm now off to pen my letter to Alistair Darling and Gordon Brown to let them know that I've solved the country's economic crisis.

:)

> I'm now off to pen my letter to Alistair Darling and Gordon Brown to let them know that I've solved the country's economic crisis

And I'm behind you all the way kiddo - purse open, where's my share :-D

Sorry its already been tried (see Germany c1930, Argentina 1980s and Zimbabwe), it has a nasty habit of leading to hyper inflation.  The govt are considering a slight variant on it called  "quantitative easing".  This is the next thing they are likely to try if the cutting of interest rates doesn't work.

If they do it and it leads to hyper inflation you'll need something a lot bigger than a purse to carry your cash in.

> the current LIBOR rate (the rate the banks in effect borrow money at) is about 2.2% so they are not making a lot of money from mortgages etc

Most banks who use the LIBOR rate however add massive margins on so they are still making a ton of money out of these type of mortgages, these also tend to be in the small but still there sub prime market e.g one deal i've done recently is a 0.5% discount rate for 2 years, but it's a discount off LIBOR  plus a margin of 4.5!!! not so good a deal for the customer anymore  :( :(but for the banks it makes big bucks!!! :rolls eyes:

Abbey's products for example however will be discounted off the BOE rate not LIBOR  so they're making much money at all! :(

The BOE reductions aren't doing anything anymore other than making a small portion of the country's mortgages a bit cheaper, it's time for a new plan, although I don't think printing more money is going to achieve anything! All we need is a few good credit rated banks to tentatively start actively lending again & we'll start to see the signs of recovery.  We're already starting to see small signs of this is the mortgage market, very very competitive deals for the generally low risk customers but we're also seeing purchase deals coming through to aid FTB's not 100% or anwhere near but it's all helping!

I personally (& I'm not economist ;)) think we're very very close to being at the bottom of the so called recession, I think the Summer will bring some positive signs of recovery & this time next year it will be a different story all together!! Ever the optimist! ;)

I'd like to read their reply ;)

This is of course an excellent idea, genius in it's simplicity, I'm next in the queue after Teri :):)

> Ever the optimist! ;-)

I like to see the best in things. One of my teachers years ago at school said that I looked at life through rose coloured glasses, unfortunately one day somebody will come along and break them ;0

The banks are actually paying higher rates than the base rate,  of course they are :-)   BUT they are making money if the BOE rate is so lowered.

BOE > Banks Lending rate > amount charge to customer.

If A reduces then the gap between B and C increases if C is on a fixed Rate or minimum rate. Need to check the % on Fixed rates just now but it is massive.

I am not as convinced as you they are scared to leaned money , they have NO or little money to lend so it is only those with fantastic credit rating or those prepared to pay very great costs that are getting quickly..

This very fear is of course slowing things down, OH and I would like to move and can afford to move, but as new mortgages are as rare as hen's teeth we don't stand a chance in selling our current house, so stuck:(  

If you have a good credit rating and a reasonable Loan to Value you will find good deals on the net today. I have done a couple in the last week.   some fees have reduced slightly also which is a positive sign.

Shadbolts wrote has probably gone as far as it can go and the govt will have to now print money 

Hi Shadbolts,  I think you confused people by using the terminology "print money" , You did confused me hence the reason I said it was  very very risky thing to do,

I see now by your post;
Sorry its already been tried (see Germany c1930, Argentina 1980s and Zimbabwe), it has a nasty habit of leading to hyper inflation.  The govt are considering a slight variant on it called  "quantitative easing".  This is the next thing they are likely to try if the cutting of interest rates doesn't work.
 

that you actually meant quantitative Easing.  This isn't something new or at least not recent , About 9-10 years ago Japan used this method but it is still being argued to this day if it was a success or not.  There has been lots of studies on it certainly.. Their culture is so different from ours which makes benchmarking difficult.  I do hope if they try it works. 

Our country look for quick fixes, then dont let the glue..

Most banks who use the LIBOR rate however add massive margins on so they are still making a ton of money out of these type of mortgages, these also tend to be in the small but still there sub prime market e.g one deal i've done recently is a 0.5% discount rate for 2 years, but it's a discount off LIBOR  plus a margin of 4.5!!! not so good a deal for the customer anymore   but for the banks it makes big bucks!!! :rolls eyes

Exactly Gembo :-) my point... this will however help cash flow for the banks and lending..

The rate cut won't help us as we're tied into a fixed rate mortgage. The recession is really starting to get to me and I find myself constantly worrying. We have our own business (motorbike shop) and what with the Great British winter, we are really quiet at the moment which is normal at this time of year -  We sell a few scooters and commuters throughout the winter months but summer is when we thrive. We're getting a lot of interest at the moment but not many sales - normally I wouldn't worry because summer usually compensates but this year we just don't know........Hubby and I were talking before and I told him how fed up I feel at the moment - the only way I can explain how I feel is suffocated - huge household bills, even bigger business bills and an ever decreasing contingency  :-( I know that there are families far worse off than us but its still so frightening.

sorry about that - I went a bit OT didn't I.

Dont apologise Hayley,

All this and gloom is getting to many of us but try to avoid 'buying into' the media hype.
Unless the financial crisis is directly affecting us, it would be best to try to keep positive and avoid getting into the spiral of non - spending, thus fuelling this down turn.

My OH is guilty of becoming seduced into thinking that the future is gloomy, we are somehow poorer and that we must spend less. In actual fact, our financial situation hasn't changed one bit. If everyone felt this way, it's easy to see how small businesses could suffer.

We have decided to keep much of our spending to our local traders where possible.

I try to avoid reading the depressing bits in the paper. 

I have a baby due in May so dont have much choice but to carry on spending ( knew I should have just opted for a puppy, wouldnt have had any set up costs !!) my maternity package will mean a pay decrease about September time, lucky for us the fixed rate on the mortgage finishes soon so we can switch onto variable, unlucky for us is that my OH is in sales so isnt making as much on commission.  

Its all ups and downs we just have to all manage the best we can and think positive.

Don't apologise for the way you feel, there's so much doom and gloom on the news and in the papers that it's enough to get anyone down.

I reckon that if this recession/depression hadn't actually have happened the media would have made sure it did by talking us into it.

Personally I'm not entirely sure that the media have talked us into it to an extent.

The media do seem to be determined to talk everything down eg you get huge headlines about the local corner shop laying off a saturday worker yet the fact that Morrisons are creating 2000 jobs gets hardly a mention (ok slight exageration but you get the point)

Couldn't agree with you more about the media, the BBC & the tabloids are the worst for it! :(

> Couldn't agree with you more about the media, the BBC & the tabloids are the worst for it! :-(

My sentiments exactly. I don't for one minute believe that this whole recession is down to the media but they have certainly helped it to progress to the extent that its at today - I don't think that a day has passed since the Northern Rock crisis came to light that the news hasn't been full of financial doom and gloom stories. I appreciate that we should all be made aware of the situation and kept up to date with affairs but wouldn't it help if the media reported on the need for us to keep plodding and spending to help get us out of this mess ASAP - they don't seem to do this. I feel if they reminded us every day of the need for us to carry on spending instead of frightening us all witless with negative stories that are reported over and over again, things would improve a bit faster.

Yip big new Sainsbury and Asda being built not too far from my house and they are full steam ahead.

I'm on a tracker mortgage and I cannot believe how little we now pay (they'll be paying us soon).  But what goes down must go up so we are trying to discipline ourselves into putting extra money aside but there is little incentive because interest rates for saving accounts are so low.  If no one saves then building societies and bank will not have the cash flow to lend for mortgages and there will be less and less products on offer.  I think I'll put the extra in Premium Bonds, at least there's a chance of a decent return - lol. 

Not a lot of point putting it in premium bonds http://news.bbc.co.uk/1/hi/business/7759110.stm.

We (along with a lot of others we know) are putting the money saved on interest towards paying back the capital on the mortgage.  As you say theres not a lot of point saving so you either have to spend it (what the govt wants) or pay off debts etc with it.  At the moment it seems like a good idea to try and pay off some of the mortgage as it will allow us to get rid of the mortgage quicker and hopefully save when the rates are better.

True Shadbolts and that is our ultimate solution, to pay a lump sum off annually and also do some improvements, but it might be nice to get a cheque in the post, even if for a small amount.  :-)

If you have a tracker mortgage that for example is 1% below the base rate and the base rate hits Less that 1% you would not receive money back :-)    This calculation is on an interest payment that YOU only pay.. if it ended up at Zero ( most banks have clauses now) that would be it..you can't go into -%  ( minus % interest rates)

If you are on a good tracker deal just now fix your payment so that the capital is being repaid this is the most sensible option.