Why does the Bank of England continue with a low base interest rate, giving home owners with mortgages a much easier time than those who may want to buy homes, but are curretly renting?
The only logical reason I can put this down to is that the low interest rates are not to help the home owners but to help another type of customer of the banks. This is business linked to the stock markets which includes the buyout business.
Many big businesses ( many of which have recently gone bust like the oil refinery company Petroplus ) are vastly affected by interest rates.
Vast privatised industry based businesses would have collapsed just like Petroplus recently, if it wasn't for the low interest rates. Many of these businesses were loaded up with debt by the banks in the build up to the financial crisis and there has been little change since then.
It looks like the home buying market has been near to sacrificed so this commercial buyout and stock market activity can thrive. Obviously, the low interest rates haven't saved all of the companies that have been loaded with debt. Some of the victims of this debt include National Health Trusts. Many are close to collapse even with the low interest rates. If these trusts do collapse, it won't be due to the excuses that will be given to the press and media by these businesses and the banks. It will be a pure matter of lacklustre banking practices.
Currently, house prices are still dropping in the U.K. We know that there is no shortage of demand for homes. Despite the ongoing recession and economic crisis lots of us still have jobs and could certainly afford the costs of buying a house. The continued falling prices is only increasing the affordability for a reasonable proportion of the population.
There have been a number of schemes from the government, but these would seem to have gone almost unnoticed by the banks.
But still, the banks continue to refuse to lend to would be home buyers.
If the banks' only source of income was the lending for home loans, this wouldn't be such a problem. But this is not all they do. The problem is that if the banks can not see much income from mortgages, they have the option of using the money to be gambled on the stock markets or big company buyouts. This isn't to say they can't make money from home loans. I am absolutely sure they still could. Its just that the stock markets are more profitable. For reasons explained on other posts, the buyout world is just a way for the banks to be drip fed by every one of us through the businesses they lend billions of dollars to !
The other influential factor is that banks are required to hold more money than they used to. This was a correct decision by the governments. But how have the banks dealt with this new requirement ? Well it's clear a sacrifice would have to be made whilst the banks re-accumulated cash on their balance sheets. The problem with the stock markets is that they are pumped up with cash that's invested from all kinds of sources. But for the stock markets to operate, the level of cash needs to be maintained at a high level. To reduce this cash by 5% could cause a catastrophic crash in the stock markets and this would affect the 'stock market' values and shares of companies.
I am fairly sure a sacrifice has been made to conserve the stock markets and its at the cost of the people's ability to buy their own home. As I mentioned earlier, if banks, like building societies used to in the past, only lent to the public without entering the stock markets, then the banks would be lending mortgages now. We wouldn't have the housing crisis and the the dropping prices. Banks would be earning profits from this business, though not as much as they do currently. What really matters is the economy would be in a lot healthier state. The stock markets would not look so good. But they really only serve the finance world whilst creating problems for everyone else.
It would be disturbing to think people are being deprived of their own homes in order to protect businesses which have been loaded to the hilt with, in the majority of cases pointless debt and also to protect the availabiliy of cash to be used by stock brokers in the stock markets. But if you try to find any other logical explanation for the policies of the Bank of England, you might be looking for some time. The idea that many people have is that for some reason, the government likes to help home owners. But the help given to home owners by the banks has absolutely no logic what so ever. Its not helping first time buyers get on the housing ladder. Yet politicians will pass this policy off as their way of helping home buyers. Its rubbish. It helps home owners but not new buyers.
Many home owners are paying far less than the cost that would be paid by a person renting the same home. Whilst this goes on, home prices are still falling in the U.K. Unbelievably rent is still rising ! There are no benefits to the housing market.
Big businesses have been collapsing not so much due to economic conditions but due to the debt they have been burdened with. If it wasn't for the low interest rates, many more businesses would have gone out of business.
The low interest rates are therefore hiding the real damage done to big businesses by the banks and the governments which have given the banks too much freedom. Without this cold tap that the Bank of England turns on and off, the economy in the business world would look a lot worse .... if they didn't have the policy to cool things off a bit. The problem is, this may cool things down, but it doesn't deal with the problem. These problems have not gone away, they are just being temporarily hidden. Lots of companies are in major debt and its there to stay,...atleast for some time.
-What is worse is that as you will see in the coming months in X-ECONOMICS is that the low interest rates are not just protecting businesses with existing debt from the build up to the financial crisis but is being taken advantage of by buyout companies, hedge funds and financial people currently who are generating new business due to the low interest rates. The low interest rates are actually encouraging the banks and the other financiers involved to continue to load debt onto major companies.......This debt will undoubtedly cause problems and prolong this recession as the costs of these companies are rising due to this debt..................Pay and bonuses will cotinue for the bankers involved.....and the people often referred to by the press as entrepeneurs, will also benefit with increased wealth....................Reward only for irresponsiblity, stupidity and greed !
The irritating aspect of this for would be home buyers is that it isn't that the banks are not lending. Banks are lending, but not to buy homes. They are lending for the corporate buyouts like the one that affected Robert Wiseman Dairies a few months ago( - and yes it looks like this has had a bearing on the farmer protests recently. See other posts) They also lent a fortune for the floatation of 'Face Book'. The banks use investors money to buy the company and then sell it off as individual shares. The banks over valued it but there was certainly was no holding back by them, even though every one seemed to think it was over-valued. Still, they won't have lost money as the price only crashed after the banks had parted with the shares ! The banks' biggest asset is probably the press and media who give this type of business too much free advertising. In the mean time if you want money to buy a house, your best bet is to set your self up an internet based e-mailing service and then sell it to the world with the help of the banks.They'll only be too glad to help.
-----------------------------------------------------------------------------------------------------------------------
(If you was to beleive the Prime Minister of the U.K. David Cameron you may beleive that there is now , as he put it,a fire wall between investment banking and retail banking. I have to say that if this really happened it would cause a crash in the stock markets. Once your money is in a deposit account, it can be borrowed for all kinds of investments, which include private equity, hedge funds, stock markets etc. If this division between investment banking and retail banking really did happen there would be a sudden surge in mortgages and a boost to the housing market. This would cause a total collapse of the stock markets.What has happened I beleive is the that the potential housing market's investment has been used to prop up the stock markets! This is partly a result of the banks having to hold on to a larger reserve of cash. A decision had to be made and they made the right decision for the banks but the wrong one for the people).
-------------------------------------------------------------------------------------------------------------------------
However, having said that, many companies of the type that were originally nationally owned industries are not so affected by their debt quite as much. This is because, if the debt is rising, the price charged to customers just keeps rising to cover the rising costs.
The really important point Im trying to get to is this. Rail travel providers, gas ,electricity, telephone and water companies are all constantly getting into debt due to new so called investment by new investors. Yet we are suffering increases in prices constantly by all of them even while the interest rates are at an all time low ! The economy is currently subsidizing these companies by reducing the interest they are having to pay on their debt !
If we are suffering price hikes of say 8% within one year, which are figures which have been quoted for price rises to both gas and rail travel for a couple of companies in the U.K. in 2012, then what the hell is going to happen when their costs go up even more when the interest rates go back up?
These business have got it easy at the moment due to the low interest rates. I can only see the situation getting worse atleast for the customer.......
There is a possibility banks take advantage of these companies due to the importance of them to all the people. Therefore they are more willing to lend for new buyouts or the purchase of a new contract , like the finance for 'First Plus' to buy the contract which Virgin did not bid high enough for in the past week. It is absolutely apalling that the government has handed this contract to the business which was willing to borrow the most money to buy the contract. They out bid Virgin who had been running it for 15 years. The only message this sends from the government is ; If you win one of these contracts, make sure you charge the customers enough so you have enough in reserve to win the next bid ! Therefore encouraging the operator to rip off the customers.
So much for the government's schemes to get people back to work. They seem more attracted to schemes to make sure they won't be able to afford to get to work !
It is of real concern that the British government's lack lustre policies just seem to encourage more of the same behaviour which, despite other excuses and explanations that may have been made, contributed to the economic crisis which we are now stuck with. And I emphasize the 'stuck' part because this 'recession' is going no where !
One of the 'problems' for the banks when lending to ordinary home buyers is that when the costs go up, the home buyers have little in reserve to find extra cash to cover the increased costs. ( For example when interest rates go back up). This means there will be the home reposessions which not only nobody wants, but it brings bad publicity to the banks.........
But if the banks lend to businesses we all depend on, there is more scope for the borrower to cover rising costs such as rising interest rates. The business just has to raise prices to cover the rising costs and tell the media and press that the rising prices are as a result of economic conditions. A companies demize may be blamed for the same reasons !
......but in this situation they use the press including the 'Financial Times' to manfacture excuses to divert attention away from the banks to other parties such as the recession or economic crisis.
Basically, the banks putting businesses out of business is an accepted part of the business world. But only because the bankers and the executives of these companies along with the press and media who religously listen to these executives and bankers have managed to cover up the real reasons for businesses to collapse, often without warning to those with investments in those companies.
The home buyer finance market is therefore suffering as a result of illusions that are being created in the business finance world. .....
....This will probably contine until the ordinary people with deposit accounts and pension funds choose to invest their money where they know how it will be invested...............
The only logical reason I can put this down to is that the low interest rates are not to help the home owners but to help another type of customer of the banks. This is business linked to the stock markets which includes the buyout business.
Many big businesses ( many of which have recently gone bust like the oil refinery company Petroplus ) are vastly affected by interest rates.Vast privatised industry based businesses would have collapsed just like Petroplus recently, if it wasn't for the low interest rates. Many of these businesses were loaded up with debt by the banks in the build up to the financial crisis and there has been little change since then.
It looks like the home buying market has been near to sacrificed so this commercial buyout and stock market activity can thrive. Obviously, the low interest rates haven't saved all of the companies that have been loaded with debt. Some of the victims of this debt include National Health Trusts. Many are close to collapse even with the low interest rates. If these trusts do collapse, it won't be due to the excuses that will be given to the press and media by these businesses and the banks. It will be a pure matter of lacklustre banking practices.
Currently, house prices are still dropping in the U.K. We know that there is no shortage of demand for homes. Despite the ongoing recession and economic crisis lots of us still have jobs and could certainly afford the costs of buying a house. The continued falling prices is only increasing the affordability for a reasonable proportion of the population.
There have been a number of schemes from the government, but these would seem to have gone almost unnoticed by the banks.
But still, the banks continue to refuse to lend to would be home buyers.
If the banks' only source of income was the lending for home loans, this wouldn't be such a problem. But this is not all they do. The problem is that if the banks can not see much income from mortgages, they have the option of using the money to be gambled on the stock markets or big company buyouts. This isn't to say they can't make money from home loans. I am absolutely sure they still could. Its just that the stock markets are more profitable. For reasons explained on other posts, the buyout world is just a way for the banks to be drip fed by every one of us through the businesses they lend billions of dollars to !
The other influential factor is that banks are required to hold more money than they used to. This was a correct decision by the governments. But how have the banks dealt with this new requirement ? Well it's clear a sacrifice would have to be made whilst the banks re-accumulated cash on their balance sheets. The problem with the stock markets is that they are pumped up with cash that's invested from all kinds of sources. But for the stock markets to operate, the level of cash needs to be maintained at a high level. To reduce this cash by 5% could cause a catastrophic crash in the stock markets and this would affect the 'stock market' values and shares of companies.
I am fairly sure a sacrifice has been made to conserve the stock markets and its at the cost of the people's ability to buy their own home. As I mentioned earlier, if banks, like building societies used to in the past, only lent to the public without entering the stock markets, then the banks would be lending mortgages now. We wouldn't have the housing crisis and the the dropping prices. Banks would be earning profits from this business, though not as much as they do currently. What really matters is the economy would be in a lot healthier state. The stock markets would not look so good. But they really only serve the finance world whilst creating problems for everyone else.
It would be disturbing to think people are being deprived of their own homes in order to protect businesses which have been loaded to the hilt with, in the majority of cases pointless debt and also to protect the availabiliy of cash to be used by stock brokers in the stock markets. But if you try to find any other logical explanation for the policies of the Bank of England, you might be looking for some time. The idea that many people have is that for some reason, the government likes to help home owners. But the help given to home owners by the banks has absolutely no logic what so ever. Its not helping first time buyers get on the housing ladder. Yet politicians will pass this policy off as their way of helping home buyers. Its rubbish. It helps home owners but not new buyers.
Many home owners are paying far less than the cost that would be paid by a person renting the same home. Whilst this goes on, home prices are still falling in the U.K. Unbelievably rent is still rising ! There are no benefits to the housing market.
Big businesses have been collapsing not so much due to economic conditions but due to the debt they have been burdened with. If it wasn't for the low interest rates, many more businesses would have gone out of business.
The low interest rates are therefore hiding the real damage done to big businesses by the banks and the governments which have given the banks too much freedom. Without this cold tap that the Bank of England turns on and off, the economy in the business world would look a lot worse .... if they didn't have the policy to cool things off a bit. The problem is, this may cool things down, but it doesn't deal with the problem. These problems have not gone away, they are just being temporarily hidden. Lots of companies are in major debt and its there to stay,...atleast for some time.
-What is worse is that as you will see in the coming months in X-ECONOMICS is that the low interest rates are not just protecting businesses with existing debt from the build up to the financial crisis but is being taken advantage of by buyout companies, hedge funds and financial people currently who are generating new business due to the low interest rates. The low interest rates are actually encouraging the banks and the other financiers involved to continue to load debt onto major companies.......This debt will undoubtedly cause problems and prolong this recession as the costs of these companies are rising due to this debt..................Pay and bonuses will cotinue for the bankers involved.....and the people often referred to by the press as entrepeneurs, will also benefit with increased wealth....................Reward only for irresponsiblity, stupidity and greed !
The irritating aspect of this for would be home buyers is that it isn't that the banks are not lending. Banks are lending, but not to buy homes. They are lending for the corporate buyouts like the one that affected Robert Wiseman Dairies a few months ago( - and yes it looks like this has had a bearing on the farmer protests recently. See other posts) They also lent a fortune for the floatation of 'Face Book'. The banks use investors money to buy the company and then sell it off as individual shares. The banks over valued it but there was certainly was no holding back by them, even though every one seemed to think it was over-valued. Still, they won't have lost money as the price only crashed after the banks had parted with the shares ! The banks' biggest asset is probably the press and media who give this type of business too much free advertising. In the mean time if you want money to buy a house, your best bet is to set your self up an internet based e-mailing service and then sell it to the world with the help of the banks.They'll only be too glad to help.
-----------------------------------------------------------------------------------------------------------------------
(If you was to beleive the Prime Minister of the U.K. David Cameron you may beleive that there is now , as he put it,a fire wall between investment banking and retail banking. I have to say that if this really happened it would cause a crash in the stock markets. Once your money is in a deposit account, it can be borrowed for all kinds of investments, which include private equity, hedge funds, stock markets etc. If this division between investment banking and retail banking really did happen there would be a sudden surge in mortgages and a boost to the housing market. This would cause a total collapse of the stock markets.What has happened I beleive is the that the potential housing market's investment has been used to prop up the stock markets! This is partly a result of the banks having to hold on to a larger reserve of cash. A decision had to be made and they made the right decision for the banks but the wrong one for the people).
-------------------------------------------------------------------------------------------------------------------------
However, having said that, many companies of the type that were originally nationally owned industries are not so affected by their debt quite as much. This is because, if the debt is rising, the price charged to customers just keeps rising to cover the rising costs.
The really important point Im trying to get to is this. Rail travel providers, gas ,electricity, telephone and water companies are all constantly getting into debt due to new so called investment by new investors. Yet we are suffering increases in prices constantly by all of them even while the interest rates are at an all time low ! The economy is currently subsidizing these companies by reducing the interest they are having to pay on their debt !
If we are suffering price hikes of say 8% within one year, which are figures which have been quoted for price rises to both gas and rail travel for a couple of companies in the U.K. in 2012, then what the hell is going to happen when their costs go up even more when the interest rates go back up?
These business have got it easy at the moment due to the low interest rates. I can only see the situation getting worse atleast for the customer.......
There is a possibility banks take advantage of these companies due to the importance of them to all the people. Therefore they are more willing to lend for new buyouts or the purchase of a new contract , like the finance for 'First Plus' to buy the contract which Virgin did not bid high enough for in the past week. It is absolutely apalling that the government has handed this contract to the business which was willing to borrow the most money to buy the contract. They out bid Virgin who had been running it for 15 years. The only message this sends from the government is ; If you win one of these contracts, make sure you charge the customers enough so you have enough in reserve to win the next bid ! Therefore encouraging the operator to rip off the customers.
So much for the government's schemes to get people back to work. They seem more attracted to schemes to make sure they won't be able to afford to get to work !
It is of real concern that the British government's lack lustre policies just seem to encourage more of the same behaviour which, despite other excuses and explanations that may have been made, contributed to the economic crisis which we are now stuck with. And I emphasize the 'stuck' part because this 'recession' is going no where !
One of the 'problems' for the banks when lending to ordinary home buyers is that when the costs go up, the home buyers have little in reserve to find extra cash to cover the increased costs. ( For example when interest rates go back up). This means there will be the home reposessions which not only nobody wants, but it brings bad publicity to the banks.........
But if the banks lend to businesses we all depend on, there is more scope for the borrower to cover rising costs such as rising interest rates. The business just has to raise prices to cover the rising costs and tell the media and press that the rising prices are as a result of economic conditions. A companies demize may be blamed for the same reasons !
......but in this situation they use the press including the 'Financial Times' to manfacture excuses to divert attention away from the banks to other parties such as the recession or economic crisis.
Basically, the banks putting businesses out of business is an accepted part of the business world. But only because the bankers and the executives of these companies along with the press and media who religously listen to these executives and bankers have managed to cover up the real reasons for businesses to collapse, often without warning to those with investments in those companies.
The home buyer finance market is therefore suffering as a result of illusions that are being created in the business finance world. .....
....This will probably contine until the ordinary people with deposit accounts and pension funds choose to invest their money where they know how it will be invested...............
