BOOM!!!! Financial Meltdown!

[VR46]

UK Interest Rate has been cut to 3%, a bigger drop than most were expecting/hoping.

http://news.bbc.co.uk/1/hi/business/7713006.stm

[EJG1980]

Bugger, when I get my money back from Icesave later in the month all the best fixed rate deals are going to have vanished. Still, if it helps the economy and ends up reducing the length / impact of recession then I suppose I can lose a bit of interest for the greater good!

[Spatial]

I'm getting a bit lost with where this is all going now.

Basically cutting rates means savers are going to be unhappy - is the idea that they'll then have a tits full of no returns on their hard earned cash and being prudent, instead of spending on the never-never like it's going out of fashion, and decided to splurge thus boosting the economy? That's a bit unlikely isn't it as people are sitting on their hands waiting to see how far this is going to go before it hits the bottom.

Car sales down 23-something % on this time last year.
Worldwide unemployment rising to levels not seen in the last 10-15 years
House prices down 13-something % this year so far
Stock market not buoyed by bank bailouts or cuts in interest rates

In the face of those sorts of this a 1.5% cut just does seem like it will do much. Dropping the rates much lower, much earlier didn't save the US economy / housing market from crumbling.

[NW2013]

Well, as has been noted in the press banks actually borrow money on the LIBOR inter-bank rates which are much higher than the base rate. I doubt the rate cut will have much impact on mortgage rates in the very near future.

[eastyy]

I have to say i find this all very puzzling dont understand myself.....can understand that alot of banks have been bailed out ......and i would have thought that should have improved things alot

Can anyone explain to me dumbed down what on earth is Going on ? Lol

Think its the stock market Stuff i have problems understanding

[saif]

UK in recession possibly.
Conservatives are blaming Labour government for it as it is their fault for spending too much money and now the UK is the only country in the world in recession. Except all the other ones (meaning maybe, just maybe, it was out of the control of the UK government).

Ignore the shares.
Banks lent people money to buy houses and so were owed billions. Many of these people never had the ability to pay so the debt were never able to be repaid. Banks lost money. As the banks lost money, they became more cautious and charged more to borrow money.

Interest going down discourages saving - that is the point. So, instead of saving, people spend more (no use sitting there!) and this is spent on [UK] businesses, thus kickstarting the economy. Businesses make money, employ people and people get paid. They then spoend more on business and the circle is complete.

[Garf]

Well, as has been noted in the press banks actually borrow money on the LIBOR inter-bank rates which are much higher than the base rate. I doubt the rate cut will have much impact on mortgage rates in the very near future.

Unless you have a tracker mortgage, of course.

Barclays will be passing the cut onto tracker customers as from 1st December

[EJG1980]

Hardly any of the banks are promising to pass the cut on in full to customers on variable mortgages though, which defeats the object of the cut! Only three have committed to pass on the full 1.5% according to The Mirror this morning. Some of the banks that haven't committed yet include banks that have taken nice chunks of Government (read taxpayer) bailout money too, which makes it even more insulting.

[neoboy259]

Its digusting if banks won't pass the cut on to their customers, after all, they're all too quick to pass the extra on when the rate goes up!

Plus it was the banks who got us into this mess, what with their reckless spending in the first place.

I think the cut is great news. I personally wont benefit as I'm on a fixed rate at the moment, and have relatively little savings. Those with large savings and no mortgages, they'll be hardest hit, but then they're probably best placed to weather any coming recession anyway so no sympathy from me!

[Spatial]

So, these new measures introduced by the Government today

http://news.bbc.co.uk/1/hi/uk_politics/7746188.stm

Is it me just being a lay-person or is this all a bit panic stricken and thrashing about in the dark now? In a time of major financial crisis across the world, instead of battening down the hatches we're actually (as a nation) going to be getting deeper in to debt thanks to the government borrowing more? Is it me or is that just crazy? Or is it just the price we pay for years of governments mortgaging our national future by crippling our manufacturing base?

Cutting VAT - all well and good but when I've read the estimated saving to the average family is around ?10 a week, that's not really much is it? Obviously for those people on the absolute breadline that might mean the difference between eating and not, but given that the government is going to have to raise taxes later to compensate for all this I can't say I'm too fussed.

Speaking of which the increase in National Insurance in 2011 is a bit of a piss take too. So once again, as someone who goes out and earns a living to give a substantial portion of it away each month to keep out crippled health service limping along (and pay for all those unnecessary directors to drive around in their Jag's and BMW's) or scallies in their dole money so they can pay for essentials like mobile phone ringtones and Sky+, I'm going to end up having to pay more?

I swear it really, really doesn't pay to work in this country any more.

But it did give me a laugh with this:

Major mortgage providers have agreed to wait three months after falling into arrears before initiating repossession proceedings.

Given that most people who fall into arrears have no chance of digging themselves out of a hole in that small time period I imagine this will make a big difference...

Token gestures all around everyone.

[/mini-rant]

[charlesr]

I can't see cutting VAT helping much and it's going to cock everyone's calculations up for a while

"VAT Chaos" (I can see the Daily Mail strap now).

[Spatial]

You can almost hear the frenzied tapping of a thousand Accountants calculators as they have to readjust everything.

[Anpanman]

Speaking of which the increase in National Insurance in 2011 is a bit of a piss take too. So once again, as someone who goes out and earns a living to give a substantial portion of it away each month to keep out crippled health service limping along (and pay for all those unnecessary directors to drive around in their Jag's and BMW's) or scallies in their dole money so they can pay for essentials like mobile phone ringtones and Sky+, I'm going to end up having to pay more?

I swear it really, really doesn't pay to work in this country any more.
[/mini-rant]

Mmm...the welfare state really makes my blood boil at times.

Can't seeing it making any difference at all, would have been better having an income tax holiday for a month or two.

[Nijo]

Plus it was the banks who got us into this mess, what with their reckless spending in the first place.

The home buyers were also greedy, don't forget that.

What goes around comes around.

[ChrisF]

I can't see cutting VAT helping much and it's going to cock everyone's calculations up for a while

"VAT Chaos" (I can see the Daily Mail strap now).

Yep. Absolutely. It's effective 1st December 2008. I now have to re-jig all my invoices, and start charging a different rate accordingly.

Also, 1st December is roughly mid-way in my financial year, which is gonna make my accounts a complete nightmare. Fortunately I have accountants to do that, but its muggings here that has to fill in spreadsheets for them with my incoming/outgoings, which will also no doubt have to change.

I'm also flat rate registered, so them "kick starting the economy" by lowering VAT, will mean I'm worse off as a consequence.