Markets await year end movements at banks 29.12.2008

Author: David Whittaker Posted on: 29 December 2008

Many leading financial institutions with a 31 December Y/E will be adopting the well practised approach of hording cash on the Balance Sheet on the final day of the year.

In normal times they would unwind these positions in January and LIBOR and Bank Base would be closely matched by the month end. However with the prospect of another 1% or more Base Rate cut in January on the back of deepening economic gloom the opening meeting of the MPC (announcing on Thursday 8 Jan 2009) could boost the premium even further in the short term.

However this will lead to further reductions in SWAP rates and lenders will start to roll-out new domestic and Buy to Let products in the coming weeks. The issue may well be that "demand exceeds supply" so letting your broker know what you want by way of pricing should present disappointment if lenders come to market only with limited tranches. We can then notify you when funds are launched that suit your purpose.

2009 will be an interesting year with some good opportunities - the NAEA are predicting a property spike already as there could be a shortage of stock with very few new homes coming out of the ground.