Comments on: While Fed Cuts Rates the Banks Raise Them Even More! http://whatthefinance.com/global-economics/while-fed-cuts-rates-the-banks-raise-them-even-more-46 "Money makes the world go round"... all around the world. Fri, 03 Sep 2010 17:25:56 +0100 http://wordpress.org/?v=2.8.4 hourly 1 By: Reed http://whatthefinance.com/global-economics/while-fed-cuts-rates-the-banks-raise-them-even-more-46/comment-page-1#comment-31 Reed Thu, 17 Apr 2008 21:23:28 +0000 http://whatthefinance.com/global-economics/while-fed-cuts-rates-the-banks-raise-them-even-more-46#comment-31 I thank stumble for bringing me by this site. But what's annoying is "Dumb" comments! Credit cards are hardly linked to Fed Cuts. They are priced due to marketing considerations more than anything. That is they charge as much as they can without driving customers away in droves, a few losses are balanced with the increased profits of those that remain, etc. I thank stumble for bringing me by this site. But what’s annoying is “Dumb” comments! Credit cards are hardly linked to Fed Cuts. They are priced due to marketing considerations more than anything. That is they charge as much as they can without driving customers away in droves, a few losses are balanced with the increased profits of those that remain, etc.

]]> By: The What Girl http://whatthefinance.com/global-economics/while-fed-cuts-rates-the-banks-raise-them-even-more-46/comment-page-1#comment-30 The What Girl Sun, 13 Apr 2008 20:12:52 +0000 http://whatthefinance.com/global-economics/while-fed-cuts-rates-the-banks-raise-them-even-more-46#comment-30 Hi, Doug. Thanks for the comment. First of all, allow me to believe that you should be thanking Stumble for landing you on this page. At least now I have the chance to put things in order for you, since you seem to be a bit confused. It's been all over the news recently that even Chancellor Alistair Darling has urged mortgage lenders to pass recent interest rate cuts on to homeowners. The comments came after the Bank of England last week cut the base rate of lending from 5.25 to 5%. The chancellor has concluded the current credit crisis is "the biggest economic shock since the Great Depression". I hope it's clear by now that mortgages are expected to be more affordable. So, the question is why don't mortgage lenders pass on the rate cuts? And here's the reason why... Most of our mortgages and other loans are priced based on the 3-month LIBOR. The daily calculated London Interbank Offered Rate is the rate at which banks offer to lend money to each other. Sometimes, it is referred to as the interbank market rate. So, the question transforms into what has happened to the 3-month sterling LIBOR, the interest rate off which, as we explained above, most mortgages and other loans are priced? It has risen to 6%, the highest since Dec. 28. And this my friend Doug, means two things! First of all, banks do not trust to lend money to each other. The higher the risk of default the higher the rate they offer to lend their money. Secondly, banks cannot afford to lend money at a lower rate as there is obviously not enough liquidity. And thus, the promises from the central banks, etc........ Should I really go on and on forever? I hope my answer clears up things a bit. PS: You mentioned in your comment "credit cards" - I don't know where that came up from... Take care. Hi, Doug.
Thanks for the comment. First of all, allow me to believe that you should be thanking Stumble for landing you on this page. At least now I have the chance to put things in order for you, since you seem to be a bit confused.

It’s been all over the news recently that even Chancellor Alistair Darling has urged mortgage lenders to pass recent interest rate cuts on to homeowners. The comments came after the Bank of England last week cut the base rate of lending from 5.25 to 5%. The chancellor has concluded the current credit crisis is “the biggest economic shock since the Great Depression”.

I hope it’s clear by now that mortgages are expected to be more affordable. So, the question is why don’t mortgage lenders pass on the rate cuts? And here’s the reason why…

Most of our mortgages and other loans are priced based on the 3-month LIBOR. The daily calculated London Interbank Offered Rate is the rate at which banks offer to lend money to each other. Sometimes, it is referred to as the interbank market rate.

So, the question transforms into what has happened to the 3-month sterling LIBOR, the interest rate off which, as we explained above, most mortgages and other loans are priced? It has risen to 6%, the highest since Dec. 28. And this my friend Doug, means two things! First of all, banks do not trust to lend money to each other. The higher the risk of default the higher the rate they offer to lend their money. Secondly, banks cannot afford to lend money at a lower rate as there is obviously not enough liquidity. And thus, the promises from the central banks, etc…….. Should I really go on and on forever?
I hope my answer clears up things a bit.

PS: You mentioned in your comment “credit cards” – I don’t know where that came up from…

Take care.

]]> By: doug http://whatthefinance.com/global-economics/while-fed-cuts-rates-the-banks-raise-them-even-more-46/comment-page-1#comment-29 doug Tue, 08 Apr 2008 20:21:53 +0000 http://whatthefinance.com/global-economics/while-fed-cuts-rates-the-banks-raise-them-even-more-46#comment-29 i hate stumble sometimes. takes me to pages as dumb as this. fed cuts effect short term loansm things like credit cards. mortgage rates are long term. i hate stumble sometimes. takes me to pages as dumb as this.

fed cuts effect short term loansm things like credit cards. mortgage rates are long term.

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