Vir Cantium

I'm right, you know …

Mortgage Rates for Dummies (or BBC Business Editors)

Why have quite a few mortgage lenders not been passing on the bank base rate cuts in full in recent times? Because the inter-bank market has been frozen up. Normally, base rate cuts filter down to mortgage borrowers fairly quickly because the rate at which banks lend to each other – the LIBOR rate – follows the BoE decision. Recently, of course, LIBOR has ignored the BoE and remained stubbornly high.

Today, however, LIBOR has started to move in response to the shock decision yesterday to cut the base rate by 1.5%. (Note – remember, the Bank of England is independent, so it had absolutely completely and utterly nothing to do with any by-elections.)

WIth LIBOR moving, the lenders have started to drop their rates.

As an aside, the government had huffed and puffed from within minutes of the BoE decision about expecting to see the cut passed on.

So, the BBC reports today that

The Libor rate at which banks lend to each other has also fallen since the cut.

In response the Nationwide is cutting its base mortgage rate by 1.5%, from 6.19% to 4.69%, while RBS/NatWest is cutting its standard variable rate (SVR) by the same amount, from from 6.69% to 5.19%

… except that the excerpt above is not exactly at the top of the piece. What is, is the headline and opening paragraph:

Lenders heed calls for rate cuts
The main mortgage lenders have started to respond to the government’s demand that they should cut their mortgage lending rates.

Of course, the BBC is impartial, blah blah blah. So it must be just an accident that the spin given to the piece sounds like one of those old Lib Dem FOCUS leaflets which claimed that your local road was being resurfaced “following action by your local FOCUS team”, when the “action” was just to get the previous leaflet out just before the scheduled works were undertaken. Chronologically it is correct, but that hardly equates to clear cause-and-effect.

Post hoc ergo propter hoc, I think is the relevant term. Do media studies student know any latin these days?


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