Nowhere is the chasm between official statements and the
real world wider than on the subject of interest rates.
The media never tire of telling how low interest rates are.
Official base rates may indeed be low, and, taking their cue
from that, the banks are paying their depositors rates of interest that make
one wonder why anyone should bother putting money in a bank.
However, to suggest to most borrowers that interest rates
are low would be laughable if it were not positively insulting.
Entrepreneurs should not be misled by the media but should
check their statements. The interest rate on many overdrafts and credit cards
is now the same as that charged in the era of higher-inflation, and seems to
have been creeping up even as official rates are going down.
Those who agreed fixed rate loans in happier times are still
better off, despite the decrease in base rates. So few new loans are being
approved that the banks feel that they can charge what they like on them.
It is basically the law of supply and demand: whatever the
official rate might be, it cannot alter the fact that ready cash is in short
supply and anyone who happens to have some can therefore command a high premium
to lend it out.