The Bank of England lowered interest rates by 0.25 per cent yesterday, dropping the rate to 5.5 per cent. Homeowners received a boost as two of Britain’s biggest mortgage lenders – Halifax and Nationwide – said they would pass on the reduction to borrowers. Halifax was preparing to reduce its standard variable mortgage rate to 7.5 pre cent, while Nationwide is cutting its to 6.99 per cent. Many other lenders are expected to follow suit, however not all borrowers will see a decrease as experts are seeing a change in the way some banks and building societies price fixed-rate home loans.
Over in America, President Bush announced a plan to bail out hundreds of thousands of US homeowners who are struggling to meet their mortgage repayments. The plan is to freeze interest rates on certain sub-prime loans for the next five years, which could affect as many as two million people. Other borrowers will be ‘fast-tracked’ towards refinancing packages. This comes as the Wall Street Journal reported that the New York attorney-general has issued further subpoenas against Wall Street firms including Merrill Lynch, Morgan Stanley and Deutsche Bank, along with Royal Bank of Scotland, seeking information about the packaging and selling of sub-prime mortgages.
Meanwhile, the Royal Bank of Scotland said it expected to deliver a pre-tax profit of more than £10 billion, despite taking a £1.5 billion loss against exposure to American sub-prime mortgages and loans.
Local government minister John Healey announced council funding for the next three years yesterday with councils in England receiving an £8.97 billion ‘boost’ in funding. However town halls are warning that cuts to the services and further council tax rises are needed after what they described as the ‘worst finding settlement for 10 years’. The Local Government Association said many councils, particularly those in shire districts and London would see their funding fall in real terms. Mr Healey maintained that keeping council tax under control was a priority for the goverment, and they expected the average price increase would be below 5 per cent.
A new report looking at how and why people borrow money has been released by the Personal Finance Research Centre. It shows that borrowers who rely on rising house prices or insolvency to get out of debt were risking ‘financial suicide’. Young adults are increasingly reliant on borrowing for day-to-day spending, and see debt consolidation or insolvency as a potential debt solution, while borrowers of all ages looked at property as the ultimate solution for their financial problems. As expectations increased about living standards and readily available credit few borrowers looked for alternatives.
And finally, we leave you with a joke from yesterday’s Mirror newspaper: what’s the difference between a pigeon and thousands of nurses, posties, firefighters, cooks and cleaners across the country? The pigeon is the only one still able to leave a deposit on a house.