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5 "Tells" that the Stock Markets Are About to Reverse

Abbey Raises Rates by 0.5% ahead of Interest UK Rate Cut

Interest-Rates / UK Interest Rates Nov 05, 2008 - 12:17 PM GMT

By: Nadeem_Walayat

Interest-Rates Best Financial Markets Analysis ArticleThe Abbey in a slight of hand raised interest rates by 0.5% on its tracker range of mortgages in advance of Thursdays expected 0.5% UK base interest rate cut. This slight of hand of raising rates ahead of a rate cut then announcing cuts following the Bank of England rate cut is nothing new, for I first voiced this bad practice some 10 months ago in the article - UK Interest Rates Cuts Will Not Help the Housing Market. That the banks practice of quietly raising rates prior to interest rate cuts followed by loud announcements following the cuts thus little or no change in the mortgage rates.


This practice is widespread amongst all banks not just Abbey, what makes matters worse is that savers will experience a real cut in interest rates, whilst mortgage holders clearly will not. Barely a few minutes ago, the nationalised Northern Rock also announced a rate hike ahead of tomorrows rate cut.

The situation is worse still as the tax payer is funding the bankrupt banks to the tune of £500 billion so as the banks will reduce their interest rates to customers which is not happening!. The government is showing itself to naive and clearly hoodwinked into playing along with banking sector that has privatised the profits but nationalised the losses for the tax payer to pickup under the threat of a collapse of the financial system due to greedy bank staff having used faked valuations to book huge bonuses for themselves leaving the banks behind as hollow shells.

UK Interest Rate Cut of 1% ?

My analysis of 2nd November speculated that the Bank of England may be forced to cut interest rates by as much as 1%, I say forced to, for the MPC has been forced to abandon the targeting of inflation despite the fact that it has clean busted through the 3% upper limit to currently stand at an eye watering hyper inflationary rate of 5.2%.

The existing Market Oracle forecast made prior to Octobers 0.5% cut, was that UK interest rates would fall by 0.5% at Octobers meeting, with a further cut of 0.5% at Novembers meeting and a continuing down trend to 3.25% by September 2009. However the forecast was made at a time when the Bank of England was in charge of interest rates. A rate cut of more than 0.5% tomorrow will confirm that the Government is now firmly in charge of setting of UK interest rates and actually dictates the rate that the MPC will cur by at each meeting.

Current scheduled forecasts are for for UK inflation, GDP and the much in demand UK house prices following the crash of 2008. Subscribe to our always free newsletter to get the scheduled analysis in your inbox on the day of publication.

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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