The poor banks?

From time to time every business suffers a set back and the banks appear to have suffered two major blows in recent months. Not only have they suffered from the "credit crunch" which is said to have started in the USA, but now they cannot borrow money to be able to lend on to us as mortgages.

The result is that mortgage rates are going up even when the Bank of England base rate is coming down.

There is, of course, another way of looking at this. We could look at the banks and say that they have brought this crisis on themselves. One recent comment suggests that this may well be the case. The comment was along the lines of "they need to increase rates to build their reserves back up again because recent business has not been profitable". If I have understood this correctly (and I may not have done) this suggests that mortgages were being offered at such a low rate that the bank were only covering the interest cost they were paying themselves rather than making much profit.

As Alan Sugar said to one of the apprentices, sometimes you need to turn down a sale because it is not good for the business as a whole. Higher turnover is not the only measure of success of a business.