UK Interest Rates Drop To All Time Low

| January 8, 2009 | 0 Comments

The Bank of England dropped interest rates by 0.5% to 1.5%, the lowest level ever.

This is unlikely to have much effect on the level of bank lending as banks will take the opportunity to wider the spread between the rate thay borrow at and the rate they lend at.

The 363 rule of banking, just got better: borrow at 3% , lend at 6%, golf course at 3 o’clock.

The pumping of government money into the banks has helped over the last 3 months as the spread between LIBOR and Bank of England rates has narrowed to 0.85% prior to yesterday moved.

I would expect LIBOR to creep down to about 2.5% and hence allow the bankers to be on the golf course by 14:30, which is very amiable given the dark winter evenings.

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Category: Banking

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