Thursday, October 04, 2007

Help those poor banks

Just caught the end of a report on GMTV this morning, talking about people who are just coming off fixed-rate mortgages onto variable ones and the hassles they now face. A sofa interview with a bank boy started with the aggressive thrust of 'Isn't this your fault for loaning people 5, 6, 7 times their wage?' bank boy shunted the question aside by talking about interest rates, how they need to fall etc. needed to help the economy blah blah. Undaunted the next question was about Nothern Rock which bank boy foolish blamed on the Americans loaning money "irresponsibly"; 'aren't you doing that with the 5, 6, 7 times salary?' came the reply "You're talking about the extremes", 'well yes but aren't those what get us into trouble?' Bank boy blathered about all the safeguards etc. and got back to his main point about needing an interest rate cut.

First things first, banks etc. never used to lend money at this multiple so people simply lied (if you recall a report some time ago some workers in some banks seemed to actively suggest this course), safeguards mean they can't do this now so the banks simply upped the multiple - brilliant.

Next the interest cut isn't some altruistic 'help the economy' it's help the banks; a lower interest rate means more borrowers, means more money to the lenders. Restores confidence in the whole lending system, except perhaps we shouldn't be restoring said confidence because the system needs to have itself shaken up.

Bank boy stated that the odds were 80% that the interest rate would stay the same, but he'd hope it would fall; I'm going to go out on a limb and say I think they'll increase it. The previous increase seem to have simply not had the effect they wanted and they'll up it again. We'll all have to wait and see.