Bank Rate - Credit Crunch - House Price Crash - Lenders Fees

So base rate has been reduced and some commentators reckon Bank of England Base Rate could be as low as 4% by 2009 - we disagree on that but do see it 4.5% by this time next year, the end of 2008 but not falling in 2009

This crash, and crash it is, reflects the crash of '89 in that earlier in the 80's bank rate was falsely or perhaps rather, wrongly, low - we saw 3.5% this time round, and we have commented on this before

So a further .25% reduction is expected in February and May 2008 - well yes but we would not be surprised if it wasn't January March and May or June and a further quarter percent needing to come off after the summer

Inflation does need to be controlled - unless everyone and every business is going to cease buying or spending, then it doesn't matter - so, clearly inflation needs to be controlled and base rate is the primary way to curb spending, the other of course is VAT or purchase tax but will this Government dare do that as well as increase income tax, which they will have to!??

The Credit Crunch has frightened off banks from lending to each other - again we repeat ourselves, they need to accumulate some cash of their own, for reserves and for future lending and this leads us to the Daily Mail today page 20, the headline reads 'A new mortgage? That'll be £10,000'

Okay so the lenders are charging huge fees - maybe the Daily Comic ought to understand why and disclose its findings?

As interest rates increased from that false low of 3.5% there was certainly implied pressure, if not direct from Chancellor or Governor to keep mortgage rates and deals low, or as low as possible

And, all of the lenders want/wanted, to be high in the 'best buy' tables so, what they lose/lost in rate, they could recoup in charges - please, any reader hear, tell me you wouldn't do the same?

So, if as with a client of ours one wants a low or lowest monthly pay rate, fixed for 5 years, the Leeds Building Society are/were offering 4.99% - but the lenders arrangement fee is/was 3% of the loan and it can/could be added to the loan

Really these fee's hadn't ought to be added since interest on some £14,000 as was the case for our client is £698.60 per year during the five years fixed rate alone, another 10 years then at SVR is around another £1088 per year, just on the fee!

And, though the pay rate is much lower, shouldn't we all just own up and pay the going rate? If this product had been charged at SVR of say 7.75% then would have been no significant lenders fee, and so no discussion, but nor would be all that extra interest being charged

Like it or not (we don't) the lenders do have to charge these fees if they are to remain in profit or in business

No lenders fees means higher pay rates and no discounts or fixed rate deals - sorry but we cannot have it both ways, unless ....................... SVR become pegged at say 3% over base (it had always until now been between 1.5 & 2% over base) so that different lenders can price different products accordingly to tempt new business

Read tomorrow about the House Price Crash and Mortgage Queues