95% of all the money in existence is DEBT, created merely based on the promise of borrowers to repay the amount borrowed, plus interest.
As the US/UK housing markets are now in free fall, and people are foreclosing on their mortgages, so the money created OUT OF THIN AIR is now vanishing.

Andrew , Keighley, UK

What is the running total that the BofE has dished out to these crocked banks and what is the average rating of the securities accepted by the Government as collateral?
Any one out there got the figures???

AWilliams, Cradley Heath,

John, the bechmark rate is 3 months. The 5.07167% that you quote is the overnight rate. No-one would fund a 20 plus year mortgage based upon such a volatile price. Some might say using 3months for such a long period is inappropriate (passim NR) but that is the key liquidity and funding base for bank

Colin , West Wickham, England

The banks only put down rates for savers. They increased mortgage rates. This means they are charging ALL of us more. Isn't it time that the government had the balls to be constructive for a change. Look at the ailing sterling exchange. That itself will destroy our finances.

Neil Brown, Maidstone,

The BOE is not allowed to make cheap money available to Northern Rock. It is a breach of EC competition rules. Northern Rock has provided an undertaking that it will not be in any best buy tables to avoid unfair competition since it is 'risk free' and government backed.

Rahul, London,

Agree with David Leslie, Perth, Scotland

The banks are making buck out of a perceived crisis!
BOE base rate falls, banks won't pass it on, instead they increase their rates. If they can get away with it for at least a few months , they'll have made a few extra quid for the coffers.

Neil, Bathgate, Scotland

Misinformation.

3 month LIBOR is 5.07167% not 5.84%

See http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=141

John, London, UK

Basically, you'd be MAD to buy a house anytime soon
2010 sounds about right..........

amanda, oxford,

AGREE with CWW, rates have to go back up this year - the BoE cannot be swayed off course this time. Things are so very much worse than the spin. Mervyn King was right to warn everyone and I think the psychology is right....make people expect the worst and maybe it'll be not quite so bad in the end

george, aylesbury,

John, since when did the price of oil have any effect on the LIBOR?

LIBOR will only fall once the banks delverage and palm off their toxic debts to the BoE

RIP Brown's miricle econemy. It was built on fixing inflation statisics to keep IR's artifically low so we all borrowed and spent too much!

Richard, Ipswich,

I am a mortgage broker and am annoyed at some of the partisan comments here.

LIBOR rates are largely affected by confidence (or lack of it) in the money markets. Until the OPEC cartel sanction the release of more reserves and crude prices decrease, we will not see LIBOR anywhere near the BBR.

John, Lichfield, UK

If high street banks are swapping all this toxic debt for government bonds, will the BOE instruct them [High street Banks] to restrict or cancel dividends to their shareholders in return? I think not - I suppose the tax payer will 'carry the can' yet again'!

Neil, Burnley, Lancashire

House prices are over valued, in part caused by the media, now house prices are going down, do you expect the media not to report it !!! You can't have it both ways.

When house prices have fallen 20-30% they will be in a position to start going up aging.

Nick Robey, Reading,

Banks are still willing to lend but not on property; can you blame them!!!

john, milton keynes, uk

Do Economists ever fail in their "job"??? Seems to me that when they're wrong they simply revise their forecasts and everything is tickety boo for a while....until the next time etc etc

Bob Fanton, Fordingbridge, uk

Why do the media insist on this relentless downer on the property market. People still want and need to move, if you keep on telling everyone they are ill they will believe you. If you tell them they look well.........................!

paul reynolds, Cramlington, UK

Paul,
The baserate from BoE is still 1% above that from ECB
Only someone who invested his petrodollars in euros made a
nice profit in 2007/2008.
The same investment in Sterling wasnt that profitable.
Any FOREX is much more important when Derivates.
Also mortgage based ones.

Gottfried, Hemel Hempstead,

I don't see banks cutting rates given the extra risk that now exists in the marketplace, the economc uncertainty and the outlook for stagflation etc. After that massive credit expansion it is natural for banks to contract. The longer the credit expansion the deeper and longer te ensuing slump.

Peter Baker , Fareham , England

How can a rise of 4 basis points be described as 'soaring'? Commentators in the UK seem to have lost sight of some basic truths. Property prices needed to come down. In fact they have hardly fallen and even the most dire predictions simply offset the rise of the last year. Hysteria or what!

Colin Grant, Montreal, Canada

errrrrr HELLO!
Another 40 billion - how casually the bank's risk is unloaded without reference to the risk taker (you - me)
This is for a year-yes? And then what?
Any ideas?

Tom Taylor-Duxbury, Ludlow, UK

Fixed for term mortgages need to become the norm in the UK like in Europe. Why do we persist in the UK on gambling our homes on the state of the lending market when our 2-year deal ends??

Mr Brown do something with substance, ban variable rate home loans. (Fat chance with the banks in control!)

A Hariis, Kettering, UK

It amazes me that the so-called experts in your article are having to revise their forecasts because of the sudden jump in inflation - anyone who buys food/petrol/energy/etc. could have told them that, yes, prices are going up.Do these people earn so much that they don't notice?

Barry Deeks, Barnet, England/Herts

Has anybody told Gordon McSporran these easily predictable facts of life ? The poor old soul is in a state of denial so the facts won't get through I'm afraid.

Victor M., Chelmsford, Essex.,

Must be great to be a bank.

Everything goes well, make billions in profit, huge bonuses all round.

Everything goes bad, the irresponsible lending catches up with you and the tax-payer bails you out. Good times.

They now have a license to take high risk gambles all the time - they can't lose

Luke, London, UK

Failure to slash interest rates equals housing crash equals collapsing bank assets equals rocketing libor equals plunge in lending equals depression.

You have been warned.

Peter B, Lincoln,

Base rates down, the BofE lends £Billions to the banks, mortgage rates up! The mortgage lenders wouldn't be trying to make a quick buck on the back of a crisis would they?

David Leslie, Perth, Scotland

I haven't the faintest idea how the country's economy is run or should be run. But it would appear that nobody else does either!

Robbie Rohan, Great Chart, Kent, UK

The banks are just greedy. They made bad business decisions to line their own pockets. Now they want us to pay for those mistakes. Business people paid millions who couldn't run a roadside cafe. Government should get tough on these massive profits with a windfall tax.

Phil, Bradford,

Why do we get so excited about the official bank rate cut? It is is not directly linked to market rates for saving or borrowing. The actual rate paid/charged depends on availability of deposits and demand for credit. It is only a psychological, even toothless, tool! The market rules, OK?

R Lindsey, Chesterfield,

Why say LIBOR is 'soaring' because it increased by 0.04% yesterday? When Abbey National's decrease in mortgage rates by 0.05% is only 'token'? I honestly believe that this 'crisis' is much the worse due to sensational journalism.

Jenny Vanbergen, Sevenoaks, Kent

Tip for Brown:
Remove food and fuel from the basket and stick housing back in. Hey presto!

barry wiseman, bromley, east sussex

the goverment needs to stop giving cash to the banks, instead it should put all that cash in northern rock as cheap mortgaes and sell them at the lower rates them selfs, thus by passing the banks, the banks will be foreced to lower their rates or lose out, not they woudl care in this market.

MR W Jones, Liverpool, England

King admits himself, he brought the interest rates down from 5.75% to 5.0% otherwise the banks would have put up the mortgage rates up another 0.75% ON TOP of the increases they have already made.
A political disaster for Kings master, Gordon Brown.
King is Brown's puppet, without a doubt.

Sean Hamerton, York.,

The irony is that the BoE's base rate cuts, which are causing Sterling to fall and hence inflation to rise, are pushing the Libor rate to go up. So cutting the base rate again will push mortgage rates up again. Neat.

Paul, Coventry,

The BoE cannot tell savers where to place their savings. With inflation at its present level, interest rates would need to be about 10% gross to protect the real value of spare cash. So why save?

Mervyn King has made a coded admission that he cannot buck the market. I vote for UP next time.

Tony Peterson, Kendal,

Stephen - There is something in what you say, being in Singapore at the moment and being paid in pounds certainly makes that more appealing, however, if the banks suffer they pass it onto the consumer, so mortgage prices would increase a % point too I think. Really, the horse has bolted.

duncan, Wokingham,

Hate to spoil the fun here but am predicting the rate to go UP a notch or two before the year's out...

cww, suffolk,

They might as well increase rates by a full 1% next month.At least it will stop the pound falling and help keep prices down.Cutting rates benefits nobody but the banks.

stephen hulton, eure, france