[Archived] Global Recession Looming

[LeftWinger]

Sort of "on topic" - my two year fixed mortgage deal has just finished and on the hunt for a new deal. I did prefer the security of another fixed rate deal (most seem to be in the 5.5 to 6% bracket) but the mortgage broker I am using says I should seriously consider a tracker deal as he feels that interest rates will be falling over the next year/18 months.

Any financial gurus who could assist on this front?

I'm not a guru - but the rumours are that they are going to drop by at least another 0.25% shortly. The only thing putting them off dropping the interest rates is the belief that it will increase inflation (with food in particular of concern I believe).

They've just dropped their rates by 0.75% in the USA - so I'd be tempted to avoid a fixed rate. On the other hand - at least with a fixed rate you know exactly where you stand every month and don't have to worry about changes in the rates.

[Flopsy]

Northernrock will be a good bet

I heard Nationwide was very good, and its likely that the interest rates arent going to go up, but are likely to go down, so a capped or a tracker is probably your best bet

[thenodrog]

"In the second term of the Government, social spending accelerated plus military expenditure went berserk post 9/11 as well. Unfortunately, this State spending has not yielded solid results in terms of improved productivities or outcomes to anything like the extents desired in local government, health, education, social services or law and order but simply proved to be a massive drag on the economy. As a social liberal who believes in social expenditure, the failure to devise a system which drives 5% per annum improvements in effective delivery of social expenditure in line with the productivity gains typically delivered by private enterprise is a huge disappointment and this Labour Government has failed massively on its core project."

No doubt you know lots about all this Gunner, but imo the bit in bold is cos private enterprise is on it's arse and cannot be expected to continue carrying the ever increasing cost of the public sector..... millions of em all on early retirements etc. No wonder all the people in the real world of the private sector will have to carry on til 70 is it?

Have you not noticed that hardly anybody actually makes anything anymore? We might be about to find out how the much lauded service economy copes with recession.

Funny how when I was a kid we were always told to eat up because of starving kids in India and China! Now they appear to have us by the bolox. What goes around... comes around eh?

[Flopsy]

bet start being nice about them then hadnt you

[LeftWinger]

Northernrock will be a good bet

Maybe I've missed this - but is there any problem with having a mortgage at Northern Rock? I've got one - and I've not been in the least bit concerned by the goings on - believing that it will only really effect people with savings with them. I just thought that if the company went tits up - I'd just carry on paying the mortgage at the fixed rate I've got for 5 years - or at least thats the impression I got. Am I badly wrong?

[Flopsy]

if they go under, the administrator might well want their money back.

Although its more likely that they'll be moved to another bank, but your rate/mortgage may well ahve to change, so you might have to remortgage at a worse rate.

Is how I look at it.

[Paul]

Sort of "on topic" - my two year fixed mortgage deal has just finished and on the hunt for a new deal. I did prefer the security of another fixed rate deal (most seem to be in the 5.5 to 6% bracket) but the mortgage broker I am using says I should seriously consider a tracker deal as he feels that interest rates will be falling over the next year/18 months.

Any financial gurus who could assist on this front?

I'm no guru but for what it's worth. I have a 4.99% Fixed Rate for the life of the mortgage, until I retire in other words. Haven't paid more than this for perhaps 10-12 years. The great advantage, apart from the rate, is knowing the cost is fixed. I feel there is great advantage in knowing your monthly costs so a longterm fixed rate, provided you get it at a reasonable % rate is the way to go, as you know your outgoings for years ahead. I would never go back to variable rate or move to a tracker as you are badly exposed to other market fluctations. If you are offered a fixed rate at an acceptable % and affordable repayments take it. That said I agree rates will drop soon.

BTW I'm with Northern Rock, just hope they don't ask for their money back!!!!!

[Cheshireblue]

The downside risks to many growth stocks versus upside opportunity have reversed to the downside.

I deal with accountants / brokers / lawyers / bankers every day of my life. I have absolutely no idea what that means.

[Bazzanotsogreat]

Rogue trader mark 2?

[Flopsy]

I deal with accountants / brokers / lawyers / bankers every day of my life. I have absolutely no idea what that means.

neither does he. But to be fair - it sounds great. Needed to get synergy in there though

[Beta Ray Bill]

you're not looking for 29 year old highly qualified and educated people are you? (he asks keeping his options open )

I don't fit the age profile by nearly 10 years, but I have a degree in Economics (from a proper university - runs for cover opening that debate again), am a member of the Chartered Institute of Bankers and have worked in one of the country's leading financial institutions for 17 years. Can I have an opinion?

[broadsword]

neither does he. But to be fair - it sounds great. Needed to get synergy in there though

Synergenistic upward management helicopter view sidebar meeting???

[colin]

Synergenistic upward management helicopter view sidebar meeting???

You missed the over-arching strategy bit.

[American]

Wait until the Gold bubble bursts....

Looking the same as net stocks in the late 90s and mortgage investments a year ago. No real reason for the value to be so high except it is what people are buying.

[Flopsy]

I presume its because people see it and other precious metals as "safe".

Is this French bloke who managed to lose 3billion euro's anything to do with the whole instability? I keep hearing different opinions on the news

[Tris]

I presume its because people see it and other precious metals as "safe".

Is this French bloke who managed to lose 3billion euro's anything to do with the whole instability? I keep hearing different opinions on the news

He lost 7.1 billion euros Flops (3.7 billion quid) - but what's a billion or 4 between friends?

I'd like to label him an incompetent French twerp, but seeing as Gordon Brown's lost £50 billion of my income tax propping up the Bank of Geordie Nation it's clearly not just a French thing, it's a Scottish thing too.

[rover6]

Can someone tell me what the feasible government responses to the Northern Rock crisis were?

To let them crash and burn would have been terrible for the economy. There'd have been financial panic and the banks that have much safer financial models would've been inundated by people wanting to prop up their mattresses with notes.

Mervyn King got slated for not releasing the Bank of England safety-net loans to banks earlier than he did (and didn't he blame EU legislation?).

To me, as a relative financial ignoble, it seemed intervention was the only answer to a bad situation.

[Flopsy]

Im with you Rover, but in another way, the government has now lost 50bn for the forseable future, and the government were too obsessed with the non election to take action quick enough to minimise the damage

[Beta Ray Bill]

Can someone tell me what the feasible government responses to the Northern Rock crisis were?

To let them crash and burn would have been terrible for the economy. There'd have been financial panic and the banks that have much safer financial models would've been inundated by people wanting to prop up their mattresses with notes.

Mervyn King got slated for not releasing the Bank of England safety-net loans to banks earlier than he did (and didn't he blame EU legislation?).

To me, as a relative financial ignoble, it seemed intervention was the only answer to a bad situation.

The BoE has always (in the modern world) had a function as Lender of Last Resort - ie to avoid banks going under. The timing here was odd though, too quick or too slow depending on what you want to believe.

Curiously Building Societies used to have to bail each other out when there was a problem at one. This wasn't so much the law but the way the Building Societies Association operated. However, when a BS started to struggle it tended to be localised rather than a national issue. The last major failure was the South Downs about 30 years ago - the Leeds Perm ended up with 30 branches in and around hampshire - mor ethan they had in and around Leeds!

[Bazzanotsogreat]

The telegraph article (see link below), translates the cost of the Northern rock debacle into actual figures both as lost government revenue and the amount of tax each person will have to fork out.

Northern Rock rescue to cost us £1,800 each

57bn would pay for...

• The entire NHS for more than seven and a half months

• Britain's Armed Forces for 18 months

• A cut in VAT from 17.5 to 6.5 per cent for a year

• The removal of fuel duty for two years

• The suspension of corporation tax for a year

• 50 new state-of-the-art hospitals, each with 1,200 beds

•208 new academy schools

And yes the government did have other options, any one who has seen the report published today will see that the governments economic arm (financial services) has been heavily criticised along with the prime mister- who was told of this when he was chancellor over a year ago, yet failed to act.He seemed to pre-occupied in trying to overthrow his mate at the time

[broadsword]

Shouldn't the other banks have bailed out their own?

After all, what was at stake was teh prestige of the bankiing system, the banks' reputations were on the line.

I believe there was some sort of precedent in teh seventies for this.

But Mr Broon decided to bail them out instead, nothing to do with the North East being a labour heartland or anything.

[Beta Ray Bill]

Shouldn't the other banks have bailed out their own?

After all, what was at stake was teh prestige of the bankiing system, the banks' reputations were on the line.

I believe there was some sort of precedent in teh seventies for this.

But Mr Broon decided to bail them out instead, nothing to do with the North East being a labour heartland or anything.

Not sure the legality of that. The Bank of England (and the FSA) are the authorising agent and regulator of banks. They are the ultimate custodians of the banking system. Building Societies are regulated by the BSA which, like it's members is a mutual - and in theory - not for excess profit organisation. That's why they get BSs to bail out other BSs. It gives BSs certain protection, such as they cannot be the subject of a hostile takeover, whereas banks most certainly can.

Incidentally, banks in the UK don't need to be public listed, they could be mutually owned as BSs are but governed by the BoE instead of the BSA. However, no major bank has ever gone done this route especially not the demutalising BSs such as the Abbey, Halifax, B&B, Woolwich etc. It's claimed that it's because they wouldn't have the same access to the money markets and this would stunt growth and opportunities. However, if Northern Rock was a mutual bank, it wouldn't have been able to follow the business model it did and wouldn't have gone belly up.

[philipl]

Actually bazza, a great deal of that was taken from my e-mail a few pages back.

[Bazzanotsogreat]

Actually bazza, a great deal of that was taken from my e-mail a few pages back.

WTF are you on about? E-Mail?

[philipl]

post

Happy now?