Three-month sterling LIBOR, the interest rate off which our mortgages and most other loans are priced, has risen to 6%, its highest level since December 28.
It shows that banks are still hoarding cash, still refusing to lend to each other, because of their concern that money is perilously tight for all banks.
The fundamental cause of this stress in the banking system hasn’t changed in months: it’s that the banks remain unable – as Mervyn King told the Treasury Select Committee this morning – to raise funds in the way they had been doing by selling off mortgages or other assets in the form of bonds.
What does it mean?
Well the cost of credit for all of us is still on the rise. That’s true for those with mortgages. It’s true for companies needing to borrow.
And it means that bankers will remain anxious about the stability of the financial system.
They will however breathe a sigh of relief that Mr King confirmed what I disclosed in my BBC blog last week, that the Bank of England is examining how it might allow banks to exchange mortgages and other illiquid assets for loans from the Bank of England, to compensate for the closure of asset-backed bond markets.
He outlined two sensible conditions for the provision of these funds:
• The Bank of England’s money should not be used by banks to fund future incremental lending, but only to allow them to meet their pressing current financial commitments
• And the banks should retain 100% liability for any potential future losses from the assets they may pledge to the Bank of England in exchange for liquid funds
Or to put it another way, Mr King is still insisting that taxpayers should not pick up the bill, if the economy turns down so sharply that banks start to suffer serious losses on their mortgage lending.