BAD CREDIT CASH LOANS AND FINANCING: Unique Content Article: Lowered Interest Rates

Lowered Interest Rates

by Susan Reynolds

Last week, the Bank of England dropped the base interest rate from 4.5% to 3%, a decision which came as a surprise to many. However, the bank's intent was clear: to initiate a reduction of interest rates in lending. In response, about 40 mortgage lenders removed their trackers rate products from the market so that they may review them. They say they hope to reintroduce them later this week. Banks reacted as well. By the end of last week, the London Interbank Offered Rate, or Libor, dropped over one percentage point, from 5.56% to 4.49%.

When lenders price their new products, it is not the base rate that they look at, but the three-month Libor rate. The Libor rate, unfortunately, hasn't fallen--it's still 1.49% higher than the Bank of England's base rate. In order for mortgage rates to start looking more like the base rate, the base rate and the Libor rate need to move closer together. Watch and see!

Rather amusingly, banks continue to play cynical with each other, keeping their Libor rates high instead of trusting and cooperating with the other banking institutions. They continue to insist on more overall stability in the market before they take the risk of lowering their bank to bank interest rates, which will be, as with many things in the marketplace, a gradual and drawn-out process. Ironically, the refusal of banks to play nice with each other is one of the contributing factors to instability in the first place. How can the public trust banks when banks don't trust each other, after all? Worse still, many banks are saving unnecessary amounts of funds to artificially inflate their annual financial reports. At least the government is attempting to nudge banks into lowering interest where investments using taxpayer cash are involved.

As mentioned earlier, the Bank of England's recent announcement caused many lenders to withdraw their mortgages. The intent of things like tracker rate mortgages is to be useful for borrowers if base rates get slashed. The base rate was trimmed down in the first place in an attempt to lower the financial burden of mortgages for borrowers, so that people would spend more during the holiday season and thus perk up the overall economy as a result. However, it's not a perfect solution. Not every homeowner is affected by the rate decreases, people on fixed rates have to wait for their penalty periods to expire, and borrows who are dipping their toes in for the first time still require a five percent bare minimum deposit to buy a home. First timers also labor under the additional difficulty of having only a single lender currently willing to offer out loans to them! It's not a pretty picture for those new to the scene.

But, in time (weeks or months), mortgage lenders will start to pass the lower rates onto borrowers. Consider that, and don't rush to take a quick deal, or a secured loan. Look at it this way: 1% saved on a ?100,000 remortgage is about ?83.33 less on your monthly payment, and back in your pocket. Search around, because the lower the interest rate, the higher your savings. There is more hope in the air, with the Bank of England and London Interbank Libor Rate lowering, and there is even talk of the government cutting taxes! - 41115

Susan Reynolds is the webmaster for a leading South African (http://www.bondcredit.co.za) bond origination portal. For more information visit: (http://www.bondcredit.co.za/) http://www.bondcredit.co.za/
---------------------------------
New Unique Article!

Title: Lowered Interest Rates
Author: Susan Reynolds
Email: uaw@justinharrison.com
Keywords: Mortgage,Finance,Money,Property,Real Estate,Loans,Credit,Personal Finance
Word Count: 545
Category: Finance:Credit
---------------------------------

---------------------------------------------------
You are receiving this because you signed up for it on 2010-08-22 from IP