Finance

2278 readers

4 users here now

Economic and financial news from around the world, including cryptocurrency and blockchain.

This community's icon was made by Aaron Schneider, under the CC-BY-NC-SA 4.0 license.

founded 2 years ago

MODERATORS

[email protected]

U.K. banks raising mortgage interest rates…cause inflation hasn’t fallen as much as expected. Can anyone do an ELI5 as to why? (lemm.ee)

submitted 6 months ago by [email protected] to c/[email protected]

13 comments fedilink hide all child comments

As the title says, numerous banks in the U.K., maybe across the world, are raising interest rates on mortgages, and the given reason is cause inflation hasn’t fallen as much as expected. Can anyone give me a basic inflation, other than greed, as to why they’d do this?

you are viewing a single comment's thread
view the rest of the comments

[–] [email protected] 4 points 6 months ago (3 children)

If it did work that way, it might be all right. But you're forgetting that the banks only have a like 5% reserve requirement. So for every thousand dollars they get in the bank from an account, they can lend out 950 more. And they can do this again and again until it hits zero, which is about 9 times. So you end up turning $1,000 into About 9,000.

[–] [email protected] 6 points 6 months ago (1 children)

The real world is far more complicated and fractional reserve is just one small part of it.

[–] [email protected] 1 points 6 months ago

Yes, but it's a large part when it comes to human psychology on the bankers' side

[–] [email protected] 2 points 6 months ago* (last edited 6 months ago)

not really relevant to money lent to them by the government. Fractional reserve is in reference to people who have deposited savings in a bank, they still have to have money to lend it out, they cannot print new money, only the government can do that.

[–] [email protected] 2 points 6 months ago (1 children)

Is it really 5% in the UK?? In the US the reserver is now 0 and has been for years

[–] [email protected] 2 points 6 months ago

I think I heard it went to zero in 2020, and from what I understand, it has not gone back up, so I think it's still a zero reserve requirement, which is crazy. Also, just to let you know, your account shows up as a bot. If you are not a bot, there's a thing in your profile where you can turn that off.