Comments on: Naughty, naughty, banks http://timworstall.com/2008/11/12/naughty-naughty-banks/ It is all obvious or trivial except... Fri, 25 May 2012 01:39:51 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: MARK T http://timworstall.com/2008/11/12/naughty-naughty-banks/comment-page-1/#comment-23701 MARK T Thu, 13 Nov 2008 16:55:52 +0000 http://timworstall.com/?p=4893#comment-23701 that's trackers not tarkers that’s trackers not tarkers

]]> By: MARK T http://timworstall.com/2008/11/12/naughty-naughty-banks/comment-page-1/#comment-23700 MARK T Thu, 13 Nov 2008 16:55:05 +0000 http://timworstall.com/?p=4893#comment-23700 It doesn't mean someone on a variable rate tarcker pays more, it means they don't pay less. Over the last 3 years around 70% of all new mortgages have been "fixed", while the rest have been tarckers - ususally base rate. You will probably find that the real reason for the 150bp cut was to avoid sticker shock for those coming off fixed rate. As I look, a 10year swap can be had for 4.3% so it should still be profitable to offer similar rates to even the best fixes of 2005 It doesn’t mean someone on a variable rate tarcker pays more, it means they don’t pay less. Over the last 3 years around 70% of all new mortgages have been “fixed”, while the rest have been tarckers – ususally base rate. You will probably find that the real reason for the 150bp cut was to avoid sticker shock for those coming off fixed rate. As I look, a 10year swap can be had for 4.3% so it should still be profitable to offer similar rates to even the best fixes of 2005

]]> By: Kay Tie http://timworstall.com/2008/11/12/naughty-naughty-banks/comment-page-1/#comment-23666 Kay Tie Wed, 12 Nov 2008 15:57:01 +0000 http://timworstall.com/?p=4893#comment-23666 Sorry, I meant 150 basis points, of course. Sorry, I meant 150 basis points, of course.

]]> By: Mark Wadsworth http://timworstall.com/2008/11/12/naughty-naughty-banks/comment-page-1/#comment-23657 Mark Wadsworth Wed, 12 Nov 2008 10:35:06 +0000 http://timworstall.com/?p=4893#comment-23657 That is a much better explanation. You have to bring opportunity costs into it for it to make sense. Re C and K's point, that's the beauty of it. The LIBOR minus BoE spread used to be teeny tiny, it had drifted up to about 100 bps (reflecting higher risk; conveniently in line with lender-of-last-resort rate of BoE base plus 1%) and since last week the spread is AFAIAA 1.5%. Seeing as the spread is a measure of how little banks trust each other, this suggests that they trust each other even less than before. Nice going, Nulabour! That is a much better explanation. You have to bring opportunity costs into it for it to make sense.

Re C and K’s point, that’s the beauty of it. The LIBOR minus BoE spread used to be teeny tiny, it had drifted up to about 100 bps (reflecting higher risk; conveniently in line with lender-of-last-resort rate of BoE base plus 1%) and since last week the spread is AFAIAA 1.5%.

Seeing as the spread is a measure of how little banks trust each other, this suggests that they trust each other even less than before.

Nice going, Nulabour!

]]> By: Kay Tie http://timworstall.com/2008/11/12/naughty-naughty-banks/comment-page-1/#comment-23655 Kay Tie Wed, 12 Nov 2008 10:06:32 +0000 http://timworstall.com/?p=4893#comment-23655 LIBOR did move down, just not by 1500 basis points. LIBOR did move down, just not by 1500 basis points.

]]> By: Cleanthes http://timworstall.com/2008/11/12/naughty-naughty-banks/comment-page-1/#comment-23654 Cleanthes Wed, 12 Nov 2008 09:52:26 +0000 http://timworstall.com/?p=4893#comment-23654 One quibble and one question. [Quibble] "Lloyds TSB yesterday released its new products and borrowers must now pay up to 2.09 per cent more than the Bank of England base rate for a mortgage." No it isn't. It's 2.09 percentage points. [/Quibble] Question is: why isn't LIBOR moving? As the cost of money falls (due to BoE rate drop), margins rise and there is volume/share to be grabbed by offering below your competitors. I can appreciate that the risk premium has risen, but for LIBOR not to move at all in response to a 150 pp cut in costs seems peverse. One quibble and one question.

[Quibble] “Lloyds TSB yesterday released its new products and borrowers must now pay up to 2.09 per cent more than the Bank of England base rate for a mortgage.”

No it isn’t. It’s 2.09 percentage points. [/Quibble]

Question is: why isn’t LIBOR moving? As the cost of money falls (due to BoE rate drop), margins rise and there is volume/share to be grabbed by offering below your competitors.

I can appreciate that the risk premium has risen, but for LIBOR not to move at all in response to a 150 pp cut in costs seems peverse.

]]> By: Letters From A Tory http://timworstall.com/2008/11/12/naughty-naughty-banks/comment-page-1/#comment-23653 Letters From A Tory Wed, 12 Nov 2008 09:51:55 +0000 http://timworstall.com/?p=4893#comment-23653 Unfortunately, the ignorance of socialists / the Guardian doesn't stop them from complaining. http://www.lettersfromatory.com Unfortunately, the ignorance of socialists / the Guardian doesn’t stop them from complaining.

http://www.lettersfromatory.com

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