A fit and proper snowman

I was very impressed by the quality and inventiveness of
Cobalt\'s fine staff in the snowman competition we ran on Monday.

It shows that even in these tough times there is still fun to be had and it is important that we do not lose sight of that.

I know the cost of the snow in lost revenue to businesses was put at around the £1 billion mark, but hey, if you can’t enjoy a bit of snow in the middle of the deepest recession for a generation then when can you?

Speaking of frosty receptions, I see that the management of Iceland’s Kaupthing Bank were labeled “not fit and proper” to control a UK Bank by the former head of Singer & Freidlander, Tony Shearer.

In a stinging rebuke he said “These are not the sort of people I want to work with”. Ouch – I guess there are quite a few people in the financial industry who could say that at the moment.

But it is finally time to put the blame game aside and concentrate on the new future. The immediate question is whether we will see yet another rate cut this week, down to potentially a mere 1%. I think there is a strong chance we will, but then I think we should have a period of consolidation.

Rate cuts need time to filter through and as much as we got carried away on the upside, it is important not to over correct on the flip side. In fact the Building Societies Association has called on the Bank of England not to cut this week.

Its point that “this would have a severe impact on savers, and might choke off the supply of funds available to societies to lend as mortgages” is a sound argument.

Although it is nice for all of us on a tracker or variable rate mortgage or with expensive bank loans, we have to ask will further cuts actually do any more good?

Lenders are unlikely to pass on much more in terms of mortgage products and cheaper rates are not the reason why people are not borrowing. They would like to borrow, but the banks won’t lend above a certain LTV at the moment, with all of them only really interested in the 75% and below market.

Expect rates at this level to be highly competitive, in fact it looks like it will resemble a massive “bun-fight”, with unfortunately few lenders daring to look above this for the foreseeable future. Unless of course something changes – and change, as they say, is inevitable.