The liquidity crises goes from bad to worse

Posted on 18 September 2008 by Ray Boulger

No Comments

Despite today’s massive co-ordinated central bank action to pump dollars into the markets the continued extreme liquidity pressures deteriorated further. This is evidenced by another sharp rise in 3 month Libor, which increased today by 0.11% to 5.98%, making a rise of 0.28% so far this week.

Another key point from today's market movements is that although short dated gilt yields fell, the corresponding swap rates rose strongly, whereas in normal markets the two move broadly in line.

For example 2 year gilt yields fell by 8 basis points (0.08%), whereas 2 year swap rates increased by 0.11% to 5.47%. This demonstrates clearly the extremely severe liquidity problems and will result in more fixed rate mortgages being pulled over the next few days. With both 3 month Libor and swap rates shooting northwards I expect many lenders to withdraw or re-price upwards both fixed rate and tracker mortgages over the next week.

Anyone wanting a mortgage in the next few months needs to act quickly, preferably tomorrow.

The probability of reports of more mortgage gloom every day next week is not a good backdrop for next week's Labour Party Conference and so Gordon will be desperate to find something positive to announce on the mortgage or housing front!

 

 

Category: Interest rates, Mortgages, Property market

• Save to del.icio.us
• Digg this story