Government Takes Controlling Stake In Lloyds Bank
The UK Government has now taken the controlling stake in Lloyds Bank, increasing the taxpayers holding of the company from 43% to 65%.
The Chancellor, Alistair Darling, has announced that the move is vital to help banks lend more to business and individuals. This increased share is supposed to restore confidence to the consumer & the banks themselves and to get the flow of credit moving again, to the tune of £28 billion over the next couple of years. This is considerably more than part government owned RBS and the nationalised bank Northern Rock.
The Conservative& Liberal Democrat party are not as sure this is a positive step as taxpayers will now be insuring £260 billion of toxic loans and may not give value for money.
UK Interest Rates Reach an All Time Low
As expected, The Bank of England decided to lower the base interest rate by half a percentage point to 0.5%. This is the lowest the UK base rate has ever been and is the sixth time interest rates have been lowered since October last year in a bid to try to contain the effects of the credit crunch.
This rate cut has already been criticised by economists and organisations like the Council of Mortgage lenders (CML). The CML says that the cut will put a lot more pressure on lenders who already have tight margins and will find it hard to offer entice savers with such small rates of interest, which in turn will mean they won’t be able to then lend savers money out as new mortgages. For the same reason the cuts been criticised by savers who are barely getting any money back from their savings already so will get even less now.
Why?
What people seem to be forgetting is what the rate cut is designed to do. That is to stop people from saving or hoarding cash as a ’safety buffer’ for the recession and to spend it instead thus stimulating the economy. Also it helps out most households too who have tracker mortgages as in interest payments in most cases to lenders are minimal and in some cases, lenders actually owe the borrower every month! This is taking pressure off a lot of families in the UK who are facing pay cuts or redundancies.