BoE base rate rise?
Discussion
Basil Hume said:
I have no expertise in these matters, but follow general fiscal and consumer finance patterns with interest (I was an advice service trustee for 10 years)...
Unless there is an unpredicted economic shock event, I really can't see Western central banks increasing rates much at all within the next 18-24 months, possibly a lot longer. There is too much debt of all varieties around, hence little leeway for interest rates to be used as a control and therefore too much of an incentive to inflate the "problem" away.
I expect the BoE intention is for a minor rate rise(s) to act a signal to restrain credit growth, but for other policies / tools to be used where traditionally interest rates would have sufficed.
On a personal level, I am using what I expect will (eventually) be seen as an extraordinarily low rates to over-pay and ultimately clear my mortgage and car-related debt.
I agree,I think there is fear around raising the rate and if they raise it .25% it's just a token gesture which won't really affect to many people badly but will give the impression that they are trying to stop inflation.Unless there is an unpredicted economic shock event, I really can't see Western central banks increasing rates much at all within the next 18-24 months, possibly a lot longer. There is too much debt of all varieties around, hence little leeway for interest rates to be used as a control and therefore too much of an incentive to inflate the "problem" away.
I expect the BoE intention is for a minor rate rise(s) to act a signal to restrain credit growth, but for other policies / tools to be used where traditionally interest rates would have sufficed.
On a personal level, I am using what I expect will (eventually) be seen as an extraordinarily low rates to over-pay and ultimately clear my mortgage and car-related debt.
Jon39 said:
It must be quite a conundrum for the BoE.
Raising base rates by the predicted amount, although it is a doubling, will remain at a very low historic level, therefore still encouraging more borrowing.
Raise rates too far, then presumably a huge number of people and businesses, will face problems meeting their debt servicing commitments.
Surely they must try to halt the rise in inflation and bring it back into line with what the government wants at below 2%.Raising base rates by the predicted amount, although it is a doubling, will remain at a very low historic level, therefore still encouraging more borrowing.
Raise rates too far, then presumably a huge number of people and businesses, will face problems meeting their debt servicing commitments.
Personally I would like to see base rate at 2% in 12 months and slowly heading to nearer 4%!
Interest rates have been at historic levels for nearly a decade to help the economy and all it has done is to increase personal debt at the detriment of savers.
If you were to believe the hysteria on the news about the devastating effect of a 0.25% rate rise which for most folk will be a few quid a week then the country is f
ked!
We have become totally reliant on cheap credit to fuel lifestyles that are unaffordable to many and that's the reason we will be stuck with this inflation greater than interest rates for many years to come.
I would be quite happy if the base interest rate and inflation were similar and at least then savings would at least not be eroded year on year!
ked!We have become totally reliant on cheap credit to fuel lifestyles that are unaffordable to many and that's the reason we will be stuck with this inflation greater than interest rates for many years to come.
I would be quite happy if the base interest rate and inflation were similar and at least then savings would at least not be eroded year on year!
boyse7en said:
It is only a few quid but that is exacerbated by the increasing rate of inflation and the lack of wage increases.
Fortunately my mortgage is my only debt, and that will go up by about £30 per month, which isn't a huge amount, but that means that there will be £30 less to go into savings/pension every month.
On top of that inflation means that my monthly bills are going up far quicker than my wages (which haven't gone up in years)
I won't be too badly affected, but families with bigger debt burdens (whether loans or mortgages) will be finding it far more tricky to balance the books.
People have had almost a decade to reduce their debt burden but that has not happened in fact the exact opposite has happened!Fortunately my mortgage is my only debt, and that will go up by about £30 per month, which isn't a huge amount, but that means that there will be £30 less to go into savings/pension every month.
On top of that inflation means that my monthly bills are going up far quicker than my wages (which haven't gone up in years)
I won't be too badly affected, but families with bigger debt burdens (whether loans or mortgages) will be finding it far more tricky to balance the books.
God help the country if we see 3% in the next few years.
Jon39 said:
With the enormous popularity of PCP (think said to be 80% of all new cars), regulation could effect future transactions, but what happens when people come to the end of their present contracts ?
I am told that the industry designed these schemes, so that many customers would not be able to afford the final 'balloon payment'.
They instead start all over again, with another new car. If new PCP is restricted, what will people do ? Surely after being used to regularly having new cars on their driveway, they won't want to hand back the keys and start travelling by bus.
How can lending with these schemes be restricted ?
If the government really wanted to regulate PCP then making the deposit 20% would be a start but by using smoke and mirrors they would just work round it!
Jon39 said:
With the enormous popularity of PCP (think said to be 80% of all new cars), regulation could effect future transactions, but what happens when people come to the end of their present contracts ?
I am told that the industry designed these schemes, so that many customers would not be able to afford the final 'balloon payment'.
They instead start all over again, with another new car. If new PCP is restricted, what will people do ? Surely after being used to regularly having new cars on their driveway, they won't want to hand back the keys and start travelling by bus.
How can lending with these schemes be restricted ?
If the government really wanted to regulate PCP then making the deposit 20% would be a start but by using smoke and mirrors they would just work round it!
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