Libor continues to fall

by Gill Montia

Story link: Libor continues to fall

There are indications that the slight downward movement in interbank lending rates detected last week could be gaining pace.

Rates have remained stubbornly high since the collapse of Lehman Brothers in mid-September but following the UK’s £500 billion bail out of its High Street banks, the Bank of England, European Central Bank and the Swiss central bank have acted with the US Federal Reserve to provided unlimited dollar funds to the money markets.

Auctions for seven, 28 and 84 day money have since been held and this week the cost of borrowing dollars has continued to fall.

The three-month Libor rate for dollars has fallen by 0.585% since the end of last week, to 3.83375%.

Meanwhile, three-month sterling Libor is down to 6.085%, from 6.11625%, and the overnight sterling rate is down to 4.75%.

Leading UK mortgage lenders are tied into three-month Libor, which still remains well above the Bank of England’s base rate of 4.5%.

However, signs that the wholesale money markets are beginning to free up bodes well for the residential property market which has experienced an alarming decline in transactions.

Latest figures from HM Revenue & Customs show a 53% slump in house sales in September.