Bank of England Base Rate

[Notty]

Does anyone know how often the bank meet to decide on base rates? I am not sure if it is once a month or every three months'. Not sure if I should fix my mortgage or wait and see if it goes down. It has already gone up by £400 per month.

[dibble39]

we generally seem to follow u.s. rates and their rates have just been cut personally i wouldnt fix my rate because the general feeling is our rates will probably go down instead of up this is just a personal view.

[Bona]

The Bank of England or whoever meet once a month but most mortgages are decided on libor rate which can fluctulate at any time regardless of bak of england interestrates

[onlynameleft]

I've never come across a tracker tied to LIBOR, Bona, as LIBOR can change up to 4 times a day. I'm not saying you're wrong but I've never seen one.

SVR's do have a relationship with LIBOR but don't change as often. If you were to go for a base rate tracker then it would be tied to base rate and the long term prognosis for that is probably downwards.

However, where fixed rates are concerned, the fix level is dependent on the banks' view of how interest rates are going to go over the period of the fix - they are out out make money of course.

Its impossible to give a general view on which is best; fixes are great if you can't afford an upward swing. If you're more flexible then a tracker could save you money if you think the rate will be below whatever rate you can fix at for a large percentage of the fix/discount term.

At present my own view is that a two year discount tracker is more likely to be cheaper over the next couple of years than a two year fix.

However, you need to factor in arrangement fees etc.

Certainly in the prime market there are very few true 'bargains' to be had - the payments are just structured in a different way.

[Bona]

Sub prime lenders borrow on the libor market some of the time interest can change on a mortgage other than when the bank of england raises or lowers the rate if the libor market fluctuates in a critical way to when they borrowed the money this is what has been causeing problems with the sub prime market know one wants to lend to these guys so they dont have the money to service the accounts hence the hick in interest rates

[onlynameleft]

I don't disagree with any of that; I merely said I had never come across a LIBOR tracker, i.e. a mortgage product where the rate paid by the borrower moves with LIBOR.

There are any number of products that track base rate, some track the lender's own SVR. The SVR will have regard to LIBOR in many cases (or wherever else the mortgagee borrows its funds from) but isn't tied to it. I didn't say anywhere that LIBOR and base rate cannot move independently of one another; I'm not sure why you thought I did.

It all depends on the terms of the mortgage. If the rate is fixed/tied to base rate then the bank can't change the rate unless base rates change. If the rate is fixed to SVR then the bank can do what the hell it likes.

There are complex reasons behind the credit crunch mainly stemming from the sub prime crash on the US and debt parcels owned by a number of banks which are now worthless. The cause and effect of the interest rate hike isn't entirely straightforward as it is difficult ot spearate one from the other. Alot of it stems from distrust between the banks who don't know how much of this now worthless debt is being held by the other banks who want to borrow from them. They see the lending as more risky hence want a higher return to reflect that; its a vicious circle affecting the entire banking system. Rather like the old adage about an earthquake in California being caused by a butterfly flapping its wing in China.

[Bona]

My Mortgaged moved when base rate stayed the same I was told it was because of the libor it wasnt a traker so thats probely why and i agree with what you say I was just saying what I know

[onlynameleft]

Most of the banks have recently put their SVR's up; it's not directly due to LIBOR going up but they do tend to follow each other because both LIBOR and the rate the banks are prepared to lend at are dependent on the same things. Not all lenders borrow at LIBOR in any event.

My current mortgage is a base rate tracker. They are widely available and are unaffected by any changes in LIBOR or the bank's SVR. All I have to worry about is the Bank of England and, although I don't share the view that base rate will fall in the next few months, I'm fairly confident it won't rise and the medium term trend is definitely downwards.

If you're taking a tracker then make sure it tracks base rate and not the bank's own SVR because there is nothing to stop the bank putting up the SVR whenever it wants.

[Bona]

who are are you with