Saturday, April 4, 2009

Housing affordability improves.....

... but not by much.

I was a little surprised by housing affordability. I was expecting the improvement to be much greater. After all, the Bank of England reduced rates to zero. Interest payments on mortgages should have come crashing down.

Perhaps the banks are squeezing their borrowers, keeping mortgage rates high, and maximising spreads between loans and deposits. This is known as the "fat spread" strategy for recapitalizing banks. Good loans become more profitable, and banks redirect those extra earnings towards covering their bad loans.

It is just another way that the Bank of England has conspired with banks to make prudent savers pay for the mistakes of reckless speculators.

1 comment:

  1. Banks ripping off customers - no mystery there.