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Tuesday, June 10, 2008

House Sales Slump

The Times reports that house sales have slumped to a 30 year low last month.

Chartered surveyors reported that an average of 17.4 transactions had been completed each month between March and May, down from 18.5 in the three months to April.

This is the lowest figure since records began in January 1978, according to the Royal Institution of Chartered Surveyors (RICS).

Given that the housing market in Britain has been made, rather unwisely, into the engine of the economy this news is not good for anyone (home owner or not).

One crucial factor that affects house sales is that of interest rates, and these in turn are set by Libor.

Libor is a benchmark supposed to represent the cost of borrowing in the London interbank market. However, Forbes reports that in recent months, empirical evidence and market rumors suggest that banks are manipulating the Libor setting process for their own ends.

Banks manipulating the market?

Surely not!

Ironically the British Bankers' Association (BBA), which represents 230 banks from around 60 countries that operate in Britain, said today that it will increase its scrutiny of banks that contribute to the setting of Libor.

Shutting the stable door firmly after the horse has bolted.

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