We'll all have to pay up - yet again
What should we make of Peter (“Lord”) Mandelson’s warning that the public will be “surprised and disappointed” if the banks fail to pass on cuts in interest rates to their customers?
Prepare ourselves for surprise and disappointment, I suppose.
Even if, as David Smith of Jaguar Land Rover wants, the Bank of England cuts a full percentage point off base rate tomorrow the chances of that becoming translated into a cut in the cost of retail borrowing large enough to get his customers back into the showrooms is slim.
After all, the banks have got some pretty wrecked balance sheets to repair. The fact that the damage is self-inflicted is neither here nor there.
The paying public is going to have to pay - in spades.
Both through the billions of pounds of our money that the Government is pouring into its banking bail-out and through continuing (comparatively) higher credit charges.
Don’t expect a banker to change his pinstripes just because the economy is teetering on the verge of an abyss.
These boys have got their emoluments to look after.
It’s why the repo man is likely to meet the postman coming up your drive with a fistful of mailshots inviting you to take out another loan.
At least some of them are open about it (not that it’s an easy scam to cover up). HSBC chief operating officer David Hodgkinson, for one, has been talking about “stickiness” in mortgage rates regardless of what the MPC does.
In fact, only 50 per cent of lenders have so far passed on the last half a point cut in base rate to their customers and one, Abbey, said yesterday it was actually jacking up its standard variable rate.
What this really goes to demonstrate - other than how it easy it is take cheap shots at bankers these days - is, of course, the relative impotence of governments and central banks in the face of a global shift in the financial tectonic plates.
Don’t forget, Japan has had zero, or near-zero, interest rates for the best of a decade without any appreciable impact on that country’s prolonged spell in the economic doldrums.
What’s really needed is the one thing no government can give - confidence. Confidence on the part of banks that they lend with relative safety and confidence on the part of borrowers that they can meet their repayments.
