3-month Sterling LIBOR has today been set at 4.49625pc. Before yesterday’s headline-shaking 150 basis point cut in the Base Rate 3-month LIBOR, the interbank lending rate most commonly used by banks, had been set at 5.56125pc. This means the rate is now 106.5 basis points lower than the pre-cut level yesterday.

Before the conclusion of yesterday’s two-day meeting of the Monetary Policy Committee LIBOR had already been drifting lower on the assumption of a minimum 50 basis point cut and had, in effect, priced in part of yesterday’s cut. Which makes any accusations of “not passing on the full cut” as nothing more than attempts to grab headlines. However,  Abbey and LTSB were quick yesterday to say they’d pass on the full cut to their Standard Variable Rate mortgagors, though that might be more about PR-induced protection.

Whilst the substantial drop in 3-month LIBOR is welcome, it is still just shy of 150bp more than the Base Rate. This compared to the 16bp before the Credit Crunch.

What is needed now is liquidity to ease up. In the short-term this may prove to be difficult given the continued global deleveraging and need to strengthen the balance sheets for the end of the year.

The continued contraction of the UK economy, per capita GDP has been contracting since Q2, will provide another stumbling block and increase the unwillingness to lend to consumers who have anything but pristine credit. Until the LTVs of mortgages are increased, the housing market will continue to struggle to find any volume.

For now the news on LIBOR is good and has the potential to provide a little pre-Christmas shot in the arm to the stockmarkets if nothing else. However, without the increased availability of credit yesterday’s Base Rate cut and today’s LIBOR fix are moot. After all, it doesn’t matter how low rates are if no one is lending.