Inter-bank rate falls, fixed-rate mortgages should follow

The inter-bank rate which is the rate that banks lend to each other overnight fell last night easing the pressure slightly off of the money markets.

According to the British Banker’s Association the inter-bank borrowing fell to 4.69 percent from 5.18 percent, making rate closer to the Bank of England Base rate of 4.5 percent.

Generally the overnight inter-bank rates should mirror the official Bank of England base rate. However, it comes as no real surprise that the rates are different with the recent activities in the financial institutions sparked off by the collapse of Lehman Brothers only a month ago.

The Bank of England on Thursday announced a plan to give a complete overhaul of its money markets, allowing banks more access to funds when in troubled market conditions.

The inter-bank rate is also the rate that fixed rate mortgages gauge themselves on, although they moved slightly lower from 6.18 percent to 6.16 percent this is still a long way off from the official base rate of 4.5 percent.

Source: ukpress.google