Stazjia’s Commentary

Posts Tagged ‘mortgages

Bank of England

Bank of England

Almost everybody in the UK knows that the Government has given the banks a huge bail-out package to help the British economy in general. Two days ago the Bank of England cut the interest rate by 1.5% – a move that astonished everybody, including the experts.

After the Bank’s announcement, the big question was, would the banks pass this cut on to their customers?

The Chancellor of the Exchequer, Alastair Darling, had a meeting yesterday with the heads of the major high street banks and told them in no uncertain terms that they were expected to pass the cut on to borrowers.

Recent interest rate cuts have not been passed on to customers so not helping to the slide into recession. It is said the Chancellor pointed out to the bank chiefs that people of the UK are not happy having to pay out of taxes to help the banks but still see the banks keeping interest rates on loans and mortgages high. He is said to have told them that any future government help would not be forthcoming if the banks were not prepared to co-operate.

HSBC and Barclays Banks side by side in a street in Devizes, Wiltshire, as well as in defying the government.

HSBC and Barclays Banks side by side in a street in Devizes, Wiltshire, as well as in defying the government.

Mortgages
This pep talk helped to some extent. Only Barclays and HSBC have not agreed to pass on the full interest rate cut to customers on standard variable mortgages (those whose repayments go up and down in line with bank interest rates but its at the bank’s discretion and may not reflect the increase or decrease).

Gordon Brown said, “Yesterday, we saw decisive action on interest rates from the Bank of England and the European Central Bank, and I welcome the fact that a number of British banks have now decided to pass on the interest rate cut to customers, to families and to businesses.”

The people who are happy are those on variable rate mortgages that literally track the rise and fall of the rate set by the Bank of England. Here’s the sting in the tail – most banks will no longer sell tracker mortgages as of yesterday. They have also stopped opening many new premium savings accounts

Behaviour of the Banks
For many years, people in this country have learned to hate banks. Their bank charges have been a scandal and many people have started legal proceedings against banks to recover excessive charges. Almost all of these have been settled out of court by the banks because they did not want a legal ruling (ie case law) on the subject in case it opened the flood gates to more people recovering charges.

In this current economic crisis they are withdrawing overdraft facilities from small businesses, calling in loans after maybe just one missed payment and foreclosing on mortgages much more quickly than they ever did in the past.

House for sale

House for sale

This has led to the closure of small businesses, an increase in bankruptcies and repossessions of homes. The latter is particularly hard to understand.

The housing market is currently in a very bad state. Mortgages are hard to get, prices have fallen and very little property is being sold. Repossessed homes are just going to stand empty while families have to be helped by local councils.

Giving people more time, maybe repayment holidays and trying to avoid repossession would appear more sensible. If the banks were prepared to help people get back on their feet, there is a chance that many of them would be able to pay their mortgages in the future. If not, and repossession has been delayed, at least the housing market might recover somewhat so houses that have to be repossessed might sell more quickly and at a better price.

It seems that the banks are determined to put their own interests above those of the country in general. They don’t seem to understand that a long term recession will hit them too.

Some years ago, a farmer was very upset with his bank so he took his muck spreader to the local branch of his bank in Chippenham, Wiltshire, and sprayed the front of the bank with muck. It was reported on the TV news and most people said “Good for him, serve them right.” Perhaps that’s what the banks deserve now.

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It’s raining again today – actually it’s bucketing down and there’s a severe weather warning. We’ve had so much rain over the last couple of weeks that the ground is sodden and can’t absorb any more. I took the dogs for a walk on the common at 7.45am today and it was like paddling because there was so much water lying on top of the grass. Just like Sunday, my top half was dry under my waterproof jacket and my jeans were so wet all the way up that I had to change them as soon as I got in.

Britain is just not a fun place right now. Apart from the rain, pundits are forecasting we are heading for a recession in just a few months. I wonder what gives them that idea. Could it be the bottom falling out of the property market, people not being able to get mortgages, nobody’s got any money to spend so businesses are having a hard time, rising oil prices, more people going bankrupt, etc, etc?

I think that the problem isn’t really in the Government’s power to fix. It all started with the home loans problems in the USA and the fact that British banks got hit because they had been underwriting some of those mortgages. That led to a shortage of mortgage funds here, people couldn’t get mortgages which led to home owners not able to sell their property at the expected price (or at all, in some cases), and then a lot of personal loans and borrowings have dried up. Most people are nervous now and just not prepared to spend money the way they have been doing with easy credit available. All of this against the background of rising fuel and food prices.

This is officially the first day of summer and here in England it’s raining again. Yesterday I had to give in and put on a sweater because it was chilly. It really isn’t at all summerlike here and from now on it’s downhill with nights getting shorter – oh joy! Of course Wimbledon Tennis starts on Monday and that’s the English equivalent of a rain dance.

Right now a lot of people here are having a tough time with the credit crunch. Banks aren’t lending money, people can’t get mortgages to buy a house and those people who took out fixed rate mortgages for a period of years and now have to renew them are in big trouble. Many properties have gone down in value so people can’t get the same value mortgage. They probably have no choice but to sell their houses. House repossessions are increasing and more people are going bankrupt. Inflation is increasing and pensions aren’t going as far as they used to especially when it comes to fuel and heating. Then today a government minister tells us to stop moaning because we are all so much better off than we used to be. Talk about being out of touch!