Hands up anyone who honestly thought 12 months ago that we would enter 2009 with a Bank base rate (BBR) of 2%? Not only is BBR now at its lowest point for half a century, it is at its joint lowest point ever. Should the MPC cut rates even further next year – and it would take a brave person to bet against its doing just that – BBR will be at its lowest point since the Bank of England’s inception in 1694.
However, as has become only too obvious over the last few months, the MPC can do what it likes with BBR and it will not make a jot of difference to the mortgage market unless Libor continues to fall. At the risk of sounding like a broken record, it is only by getting banks to lend to each other again that the mortgage logjam which has afflicted the market will be cleared. The Lending Panel, announced in the Pre-Budget Report, is understood to have met for the first time last week, and it is likely that the CML will have made that particular point forcefully.
While the Crosby Report was an inevitable anti-climax, that does not detract from the simple fact that without the Government getting its hands dirty in the securitisation market, we will be stuck in this limbo for some time. We continue to live in the hope that the Chancellor and his team have just one last ace up their sleeve, and play it soon.
There should also be some sympathy – if only a little – for the balancing act which the major lenders now face in attracting vital retail deposits when they can offer only nominal rates of interest.
It is probably fair to say that this time last year, a lot of us – myself included – were in denial over the extent of the issues the market faced, with a definite line of thinking that Northern Rock was an isolated incident. If nothing else, as we enter 2009, we all have our eyes firmly open to the challenges we face. Hopefully, we will see you all on the other side. n
