NEXT Thursday is crunch day on interest rates, with many hoping for a cut to ease the burden of their outgoings, especially when it comes to mortgage repayments.
Over the past few days, in light of further evidence of worsening credit conditions,
more commentators think a cut will come after the Bank of England's monetary policy committee meets next week.
According to Howard Archer, chief European and UK economist at Global Insight, tighter credit conditions, elevated market interest rates, evidence of slower activity in the service sector and the growing danger of a sharp housing market correction have shortened the odds of the Bank trimming interest rates by 0.25 per cent to 5 per cent on Thursday.
But, as always, a cut is not a certainty, especially when you look at inflation. And how much difference will a 25 basis point cut actually make? Following the last reduction, mortgage lenders continued to up their rates.
To make a real impact, more Bank of England base-rate cuts will probably have to follow.
AFTER a week of bad news for mortgage borrowers, Halifax, the UK's biggest lender, has come out with a mixed bag of changes that come into effect on Monday.
If you're able to come up with a relatively big deposit – at least 25 per cent – you get rewarded with a rate which is typically 0.1 per cent lower than those who have to borrow a higher proportion. And Halifax – along with Intelligent Finance and Bank of Scotland – is reducing its maximum loan-to-value to 97 per cent from 95 per cent.
Tough times, but on the right you can see how mortgages are still available, if you go about trying to find one in the right way.
LOOKING further afield now to Iceland, which is having liquidity problems of its own.
On Tuesday, credit ratings agencies expressed concern over funding of Iceland's highly leveraged banks.
Fitch Ratings lowered Iceland's sovereign rating outlook to "negative" from "stable". And Standard & Poor's placed Iceland on "credit watch with negative implications".
Fitch said "diminishing confidence in the sector has increased the risk of unanticipated calls on liquidity while severely restricting funding options".
"What has this got to do with the UK?" you may ask.
Well, quite a lot, as savers across the country have piled their money into Icelandic banks Icesave and Kaupthing Edge in the last few months to take advantage of the fact they are often at the top of the savings rates tables.
But UK savers are being advised not to panic about the Icelandic situation as their money has protection.
Icesave accounts are covered by the Icelandic Deposit Guarantees and Investor Compensation scheme. And Kaupthing Edge deposits are held by UK company Kaupthing Singer and Friedlander , so they are protected by the Financial Services Compensation Scheme.
However, following the Northern Rock debacle, any further blows to confidence in banks is something we don't need.
FINALLY – you hear talk of the credit crunch in the most unusual places.
While waiting for my appointment at an opticians in Edinburgh last week, I couldn't help overhearing the conversation between staff.
Apparently they've had fewer customers because of the credit crunch.
I personally found it hard to see the connection.
The full article contains 558 words and appears in The Scotsman newspaper.
