Article(s) associated to this keyword
- Libor Unmoved by Government Rescue Package
- Bank Cuts Interest Rate a Day Early in Co-ordinated Move
- UK Government Rescue Plan for Banks
- Hopes Rise for a Rate Cut
- Markets Face Meltdown After Rescue Plan Rejection
- Bank Holds Interest Rate Again
- Stamp Duty Holiday Arrives
- Help Urged For First-Time Buyers
- Inflation Continues To Rise
- Stamp Duty Confusion Slows Housing Market
It is going to take time for the Government’s financial rescue package to have an effect on the markets. That much was evident after the FTSE continued to fall and Libor rate did not follow the base rate down.
Following the Government’s £50bn rescue plan for banks on Wednesday morning, the Bank of England cut the base rate by 0.5%, announcing the move a day early. The US Federal Reserve, the European Central Bank and other European central banks made similar moves. The Stock Market responded favourably.
The UK Government is to inject £50bn worth of capital into the banking system in an attempt to get the banking system moving again. In return the Government will receive preference shares. So far, eight banks are listed as taking part in the plan.
With fears for a recession now overtaking fears for inflation, expectations are rising in the City for a Bank of England base rate cut this week. Inflation is expected to peak soon, but the economy is in dire need of a boost. A rate cut should help variable mortgage rates.
The US bail-out plan for banks was rejected on Monday. As a result financial markets around the world went into free-fall. More banks went under, and others are expected to follow. President Bush will make another attempt at a rescue plan later in the week.
The Bank’s monetary policy committee has once again held the middle ground for the base rate, holding it at 5%, the rate since April. Despite calls for the rate to be reduced, the MPC has obviously decided that it could not add further risk to inflation.
The Government has announced that the starting threshold for stamp duty will be temporarily increased to £175,000. The measure comes into force on 4 September. It is said to be to help individual families in these difficult times.
The New Homes Marketing Board has asked the government to initiate a tax-free savings scheme with bonuses to help first-time buyers cover deposits, stamp duty, legal and removal fees. Such a scheme, it says, will help boost the mortgage market, and encourage people back into savings habits.
Last month inflation jumped from 3.8% to 4.4%, with food prices having gone up 13.7% in the last year. The MPC will not be able to reduce the base rate in such circumstances. The glimmer of good news is that oil prices have come down recently.
After the Government’s refusal last week to deny that a stamp duty holiday was being considered, buyers have been pulling out of housing deals in the hope of saving thousands of pounds in tax. The Government has come under fire for the confusion they have caused in an already struggling marketplace.
