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  1. #1

    Talking Get your head round the Maradona effect on mortgages

    Leeds Building Society has launched a new online base rate tracker mortgage,which is currently at only 4.75%, allows unlimited capital repayments without penalty and there is no higher lending charge.

    There is also a fee free version for customers who require help with fees.

    But how can Diego Maradona, the man who destroyed England's World Cup hopes in Mexico twenty years ago, potentially have a positive influence on a tracker mortgage?

    Karen Wint, Head of Marketing & PR explains, "Mervyn King, the Governor of the Bank of England (B of E) referred to Diego Maradona's legendary second goal against England in the 1986 World Cup. King noted that Maradona ran virtually straight towards the goal and it was the England defenders' expectation that he would change direction, following a number of body swerves by Maradona, that allowed him to run in a straight line.

    "Apart from tracker mortgages, which are directly linked to the B of E Base Rate, mortgage products are priced based on market or 'swap' rates. These are the rates at which lenders secure funds in order to offer fixed rate mortgages to consumers and they are based on the market's expectation over a set period of time. It is this expectation of what will happen, similar to that of the England defenders, rather than what actually does happen thatinfluences the outcome, which in this case is mortgage products.

    "Therefore, if the B of E suggest that interest rates may have to rise to bring the economy off the boil, market expectations will increase swap rates, forcing lenders to increase their fixed rates and result in the consumer paying more for their mortgage. If the B of E then suggests an interest rate decrease, the market is likely to respond without the need to actually change the B of E rate at all. As a consequence, the end result is achieved by controlling expectation and without any real change in path,just as it was by Maradona in 1986.

    "The market does however expect the next B of E base rate change to be an increase and the Maradona effect can work in favour of tracker mortgages. If the expectation of a rise actually controls the economy and, as a result, there is no need to increase the B of E base rate, tracker customers will continue to pay a very low rate.


    For more information about Leeds mortgages, customers can visit the website at www.leedsbuildingsociety.co.uk/mortgages.

  2. #2
    Financial Journalist
    Join Date
    Mar 2003
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    London
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    5,021
    I hope they hadn't been smoking whatever Maradona was smoking when they wrote that.

    A definite contender for the "Most tenuous use of the World Cup to sell a financial product unconnected to football" award.

  3. #3

    Talking This was their award winning effort last year

    3rd June 2005: A lot can happen in a 100 days and Leeds & Holbeck Building Society hope the countdown to changing their name to Leeds Building Society runs smoother than Napoleon Bonaparte's 100 Day Waterloo campaign of 1815.

    There are a number of differences between the two, not least that the members of Leeds & Holbeck have voted to change the name of this successful independent building society. Napoleon, on the other hand, was at odds with many of his own countrymen, returning from exile on the island of Elba to begin his campaign. It seems incredible, however, that only 60 years after the Battle of Waterloo, Leeds & Holbeck Building Society was formed.

    History throws up many interesting "hundreds" in numerous fields, but especially in sport. Leeds was the scene of Yorkshire and England batsman Geoffrey Boycott's 100th hundred in the fourth Ashes Test against Australia in 1977. He also scored a century against the Australians in the Centenary Test at Lord's in 1980. What would every English cricket fan give for a performance like that in this year's Ashes series?

    Entertainment gives us Smokey Robinson and The Miracles at 100 in the "All Time Best Ever Singles" hit parade with Tracks of My Tears and Michael Douglas comes in at 100 in the "Greatest Movie Star" list. The Volkswagen Microbus is rated as the "100th Coolest Car" and it is a 100 years ago that American Mary Anderson patented the windshield wiper.

    Gary Brook, PR Manager at Leeds & Holbeck said, "As a Leeds lad it's fantastic to be changing our name to Leeds Building Society, which better represents exactly what we are - a Leeds based independent building society for our members. We want to take our success to more people and have a number of exciting initiatives planned between now and September. Our members can also look forward to a fantastic new product to mark the name change, so watch this space!"



    :rofl: :rofl: :rofl:

  4. #4
    Financial Services Professional
    Join Date
    Mar 2004
    Posts
    2,073
    That's a very long-winded explanation of why people should buy trackers rather than fixed rate products at the moment.

    Couldn't they have just said "trackers are loads cheaper than fixed at the moment, and base rates would have to increase by quite a lot for you to lose out by buying them"? Because that's what they mean, at the end of the day, without all the market expectations stuff which is over the heads of most readers.

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