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The Bank of England cut its key rate by half a percentage point to 1%. However, even with the move, the Monetary Policy Committee (MPC) said that there was still disruption in money markets and the rate cuts have not yet had their full impact.
The MPC cited the sharp drop in output in the fourth quarter of last year and a similar drop early this year.
Nationwide, the UK's largest building society announced that it reduced its base mortgage rate to 3% from 3.5%.The MPC pointed to the global nature of the current slowdown and stated that the supply of credit to households and businesses remained constrained.
The bank's data showed how significant the credit squeeze is on non financial companies. In the fourth quarter, deposits of these companies fell by 6.9 billion pounds while lending grew only 1/10 billion pounds.
Jane Milne, business director of the British Retail Consortium said that the key issue is the "availability" of credit. She said that the Bank of England is walking a fine line between a weakening sterling and the need to revive the economy.
Banks in both the U.S. and England have money to lend. Do you believe that they just don't want to lend it at these low rates?
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Reader Comments (Page 1 of 1)
2-05-2009 @ 11:37AM
BHarrison said...
The quandary seems to be "how does one get investors to invest in a highly risky market when the RoI is, for all practical intents and purposes, very minimal at best.
Why would any reasonable and prudent investor risk investing in anything where there is basically no significant RoI?
It just doesn't make sense to me. "They" (the government and corporations) are allowing the economy to be decimated by the financial frauds; CEOs and upper managment are STILL getting exorbitant and unwarranted horrific salaries and compensations; and yet, the investors are not being offered any significant RoI for investments . . . but the risks of loss are extremely high. That just doesn't pan out with the capitalistic concept that the potential RoI should be commensurate with the risks . . . and some will win and some lose even then.
In the current situation, how can there be any "winners" if no one is basically paid any significant dividens or RoI . . . less than 1% interests payments are NOTHING; and certainly not worth the risks of substantial losses to one's principle.
The government injection of tax payer "bailout" monies to subsidize the corporations merely exacerbates the situation. It is going to be a hard and long, drwn out process for all of this to eventually work out . . . that may take decades. (And at 64 y/o, I don't have the time to wait for all of this to "work out" . . . and there are lots of others in my situation also.)
It appears to be time to cash out and ride all of this out . . . nothing else appears to be working.
2-05-2009 @ 12:20PM
Iridium said...
Now when will US banks get on the ball and drop mortage rates down to 4% or lower.
The USA has some of the highest mortage rates in the developed world.
US mortages are legal extortion and that needs to change. If I walked up to someone and said that you need to pay me back $250 for loaning $100 I would be thrown in jail.