Kinell.
Will they pass it on though.

We all doomed

ECB announcemnet in 45 mins i guess they will go 1% surely.

Incredible cut.

ECB were talking of 100bps earlier cannot see them going any higher.

Glad I have a tracker!

Were on earth did that come from?

People expected 0.5-0.75, some of the main hawks were hoping but not expecting 1.0 and no one had even contemplated it being 1.5, it's out of left field even if you thought they were aggressive as the Fed. More serious trouble ahead then.

I had a sneaking feeling they would cut 1% off, but this is a real shock.

My tracker mortgage is base rate + 1%

This cut has made me about £200 a month better off.

Get in

Right, need to $ to do some serious rising now against the £.

Me too.

you sitting on a big pile of dollars? Could be a good time to get em back into sterling.

Count me in

C&G announce will pass on full 1.5% to variable borrowers

You can spot the guys in the office on fixed rates a mile off

Yeah, totally hilarious!

This is a good opportunity to keep your mortgage payments the same but lop a big chunk off the capital by overpaying each month.

If you're on a tracker that is - apologies to any fixies out there.

Took out a fixed when we moved house a year ago as they looked steady at that time and it guarded against rises.

Since seen a string of 0.25% cuts and now this 1.5%!

I'm considering doing the calculations and looking at what kind of mortgage we could now get (mortgage is only 67% of house purchase price) and paying the early redemption penalties on our current one!

ECB CUTS JUST .5 FROM 3.75% TO 3.25%

Which means? -- laymans terms for me pls

I am .

I am 6 years into a 7 year capped mortgage at 5.19% which I took out to deal with the chance that rates would fall.

As I am with N/rock , their SVR when rates were 4.5% was 7.35%, so even if they pass the full cut on, their SVR will still be 5.85%, so no reduction for me.

This is almost mis-selling as when I took this mortgage out their SVR would have been much closer to base rates, and so a fall could have produced an upside. If their spread had been this large at the time I would have taken a cheaper fixed rate product. So really I have an almost useless cap. I am gonna sue .

European central Bank.

Basically Bank of England and European central bank meet First Thursday of each month and at midday normally a stg announcemnet is made of whether rates remain unchanged or are altered and likewise for the ECB at 12.45 London times.


Obviously with the fed having cut recently it was odds odd BOE and ECB were to follow but nobody really anticipated BOE being that high.

People with fixed mortgages can't complain when rates come down. They're paying for certainty and thats what they get, regardless of what the BoE does.

To me , its always made sense to have a tracker, beacsue you pay a premium for that certainty and, generally, the economy has been stable enough in recent years to believe that rates aren't going to go rocketing upwards.

Alternitively.

Eurozone rates lowered to 3.25%

Eurozone growth is expected to remain little changed in 2009
The European Central Bank has lowered its eurozone interest rates to 3.25% in an attempt to prevent a recession.

The bank has reduced rates by half a percentage point from 3.75% amid increasing signs of slowing growth.

The ECB joined other central banks in cutting rates last month but some have argued that it has not acted swiftly enough to stem the growing crisis.

Earlier the Bank of England unexpectedly cut UK rates from 4.5% to 3%, the biggest cut since 1981.

Some analysts had expected the ECB to make a sharper cut after the UK's dramatic reduction.

The last time ECB rates stood at 3.25% was in October 2006.

Slowdown

In July this year, the ECB had raised rates to try to put a lid on growing inflationary pressures, but since then these pressures have eased considerably largely thanks to a sharp fall in oil prices.

The ECB cut rates by half a percentage point in October this year, as central banks worldwide, including the US Federal Reserve and the Bank of England, did the same in light of the worsening financial crisis.

A series of economic data released this week has shown how economies across the eurozone are slowing.

On Wednesday, figures showed that retail spending across the eurozone dropped in September, as consumers tightened their belts.

Retail sales dropped 0.2% from August, and by 1.6% compared with September 2007.

And on Monday, the European Commission predicted that the 15-nation area would hardly grow in 2009, expanding 0.1%.

European indexes were lower in early afternoon trade following both the UK and ECB rate cuts.

The UK's FTSE 100 index was 1.9% lower, France's Cac 40 dropped 1.8% and Germany's Dax was down 2.1%.

Great news for Europeans with ECB linked mortgages

I've got to say that this news has made me very happy. The difference each month will pay for my lease car I've just got, and my mortgage company usually pass on the drop within a month or two.

Stunned it is so much, and delighted I dodged the bullet of getting another fixed rate 12 months ago.

Exactly! I've got a variable with Alliance & Leicester - they've done nothing since the .5% cut last month - they'd better bloody drop now

Dot

Isn't that using Demand side tools to solve Supply side inflation?


For those who don't have an Economics background:
Demand side inflation is too much money chasing too few goods whereas Supply side is based on prices increasing due to costs rising.

Yeah i think Halifax have a collar on trackers too.
Fortunately my tracker with Halifax finished couple years ago and i'm on a variable now as not alot to go.

Don't think they're trying to fight inflation. General expectations are that inflation will fall with easing of commodity prices and fall in the money supply. The deleveraging of the economy is restricting the money supply and pulling down demand pull inflation. Cost push inflation (supply side) is reducing as commodity prices fall.

It's basically putting more money into consumers hands to stimulate spending - a Keynesian type move, whilst also trying to stimulate the money supply by getting lending moving again (in Monetary policy terms increasing the velocity of money). It's (on the face of it) an inflationary move to counter the deflationary impact of the reduction in money supply, taking elements of Keynesian and Monetary policy.

thats the way I read it anyway, although I've not given it that much thought tbh.

Inflation is only really falling due to the fall in fuel costs.

Retailers etc were already being squeezed by their increased costs. However, they may now be able to pass on the drop in fuel re deliveries etc; also if the Interest Rate cuts are passed on to Businesses, then inflation may fall further and help stimulate demand.

That does ignore monetary policy theory to a large extent though doesn't it? Inflation would usually be countered by increasing interest rates and thus slowing growth in the money supply. Reducing interest rates will stimulate the money supply and usually increase inflation. It's usually used to stop falls in growth and avoid recession.
However, as the money supply is already reducing due to deleveraging the exceptional cut in rates must surely be designed to try to limit the fall in money supply. Or at least it means that the economy can be stimulated without causing runaway inflation.

You refer to supply side economics - I guess that you can argue that cutting interest rates in an economy that is highly leveraged (assuming that cut is passed onto businesses) will stimulate production and act as a supply side stimulus, whilst also increasing demand.

too many variables for my small brain to compute I'm afraid. All getting a bit too theoretical