Even lower base rates.
Discussion
Most mortgages are not that closely coupled to the BOEBR so as to mean a quarter or half percent increase in the BR will affect them.
The truth must be that the BOE wants to devalue GBP, and in doing so is creating import inflation. But that's ok because it makes paying back THEIR borrowing cheaper. And it also saves the banks from having to mark to market (and also furnishes them with cheap money).
That's the whole point of QE and low BR. And whilst inflation is going crazy, most people are more worried about their mortgage payments. If the BOEBR rises, perhaps inflation *might* be brought back in line.
I think we'll see 5-10 years of this stagflation, whilst the government debases towards cheaper repayment and banks rebuild balance sheets (aka house price inflation).
The truth must be that the BOE wants to devalue GBP, and in doing so is creating import inflation. But that's ok because it makes paying back THEIR borrowing cheaper. And it also saves the banks from having to mark to market (and also furnishes them with cheap money).
That's the whole point of QE and low BR. And whilst inflation is going crazy, most people are more worried about their mortgage payments. If the BOEBR rises, perhaps inflation *might* be brought back in line.
I think we'll see 5-10 years of this stagflation, whilst the government debases towards cheaper repayment and banks rebuild balance sheets (aka house price inflation).
toppstuff said:
Art0ir said:
toppstuff said:
But it's much bigger than this. Businesses are struggling to get access to finance. Making it more expensive to get when they are successful, is hardly a recipe for growth.
If businesses cannot survive with the interest rates as defined by the market, they are not viable.Cost of money rises, prices rise. Inflation grows. A fragile economy doesn't need this.
There are times in the economic cycle when rates should be higher. This is not now. Economics basics.
Extended low interest rates keep unsustainable, low return businesses going. In times like these, investors seek low risk ventures which often return little. The artificially low rates increase the short term viability of low value businesses in operation.
This slows down the decline in unemployment, which is great for headlines, but means when the rates adjust (they will have to) more people will be affected and more damage done to the economy.
It also has the effect of starving high value activity of capital by allowing investors to keep the unsustainable activity running for longer than it should, when a true free market would have forced them to change already.
Some wishy washy socialist dream of a business never failing is lovely, but goes completely against the fundamentals of capitalism. More often than not, government intervention in the markets does great harm to long term stability. Sadly long term stability doesn't seem to be of importance to most, PH being no exception.
As for mondeomans contribution regarding Tescos? Er, thanks for that.
I'm reminded of a bon mot by my GCSE Economics teacher, who was actually a very inspirational and interesting bloke.
He said "We have this hue machine, the economy. And at any one time all the many and various parts of it are grinding, churning and shifting. No one knows how it is built, and no-one knows what is linked to what inside, or even if they are linked at all. And on the front panel of this machine is a big wheel marked Interest Rates +/-". Cranking that wheel is the only mechanism we have to control that machine. And we're not even sure if it does anything"
That's always stayed with me when people discuss interest rate fluctuations and their effect on the economy. Does anyone really know? Do things just happen because people say they do?
He said "We have this hue machine, the economy. And at any one time all the many and various parts of it are grinding, churning and shifting. No one knows how it is built, and no-one knows what is linked to what inside, or even if they are linked at all. And on the front panel of this machine is a big wheel marked Interest Rates +/-". Cranking that wheel is the only mechanism we have to control that machine. And we're not even sure if it does anything"
That's always stayed with me when people discuss interest rate fluctuations and their effect on the economy. Does anyone really know? Do things just happen because people say they do?
WeirdNeville said:
I'm reminded of a bon mot by my GCSE Economics teacher, who was actually a very inspirational and interesting bloke.
He said "We have this hue machine, the economy. And at any one time all the many and various parts of it are grinding, churning and shifting. No one knows how it is built, and no-one knows what is linked to what inside, or even if they are linked at all. And on the front panel of this machine is a big wheel marked Interest Rates +/-". Cranking that wheel is the only mechanism we have to control that machine. And we're not even sure if it does anything"
That's always stayed with me when people discuss interest rate fluctuations and their effect on the economy. Does anyone really know? Do things just happen because people say they do?
Low rates bring inflation. Inflation will require equally unnatural rates to combat it.He said "We have this hue machine, the economy. And at any one time all the many and various parts of it are grinding, churning and shifting. No one knows how it is built, and no-one knows what is linked to what inside, or even if they are linked at all. And on the front panel of this machine is a big wheel marked Interest Rates +/-". Cranking that wheel is the only mechanism we have to control that machine. And we're not even sure if it does anything"
That's always stayed with me when people discuss interest rate fluctuations and their effect on the economy. Does anyone really know? Do things just happen because people say they do?
There are no free lunches here, for every ounce of illusionary gain there will be an ounce of pain to face when it can no longer go on.
Recession is just a part of the boom bust economic cycle. However the natural cycle is not being allowed to complete. A fall in asset prices (mainly housing) can offset the lower wages in a downturn. So those who have seen a reduction in income are now completely priced out of the housing market because of some stupid illusion that people shouldn't lose money on their homes and now the rental market is inflating.
All this will do is delay the inevitable, and the more that is piled on to resist the markets, the harder the snap back will be. The sooner banks and building societies are forced to deal with their losses and come to some arrangements with houseowners (liquidity swaps, debt forgiveness, etc), the sooner we might see some stability again.
WeirdNeville said:
"We have this huge machine, the economy. No one knows how it is built, and no-one knows what is linked to what inside, or even if they are linked at all. And on the front panel of this machine is a big wheel marked Interest Rates +/-". Cranking that wheel is the only mechanism we have to control that machine. And we're not even sure if it does anything"
Excellent description.IMO the rate needs to start moving up again, if only to give some credibility to "the value of money".
Lotusevoraboy said:
Willy Nilly said:
It does annoy me somewhat. We cannot possibly have people loosing money on their speculation on the property market. It's fine for people to loose money on any other financial gamble, but not their house. They must make money on their house, it's written in law, somewhere.
But it's fine, savers don't mind being paid half of f
k all so people can buy a "property" (what a stupid word, it's "a house" not "a property") they can only afford if they get subsidy in the form of low interest rates.
All low interest rates do is keep individuals in houses they can't really afford and it keeps businesses going that should have gone to the wall. Interest rates might as well increase ten fold when lenders aren't lending at any rates, at least it would be worth saving.
If the UK economy is so dependant on people making a paper profit on a house then we really should have a rethink on how the country is run. Here you are treated like a second class citizen if you don't own (the mortgage lender actually owns it) your own house.
It's all bks.
Lose not loose...loose is what your backside is after a curry.But it's fine, savers don't mind being paid half of f
k all so people can buy a "property" (what a stupid word, it's "a house" not "a property") they can only afford if they get subsidy in the form of low interest rates. All low interest rates do is keep individuals in houses they can't really afford and it keeps businesses going that should have gone to the wall. Interest rates might as well increase ten fold when lenders aren't lending at any rates, at least it would be worth saving.
If the UK economy is so dependant on people making a paper profit on a house then we really should have a rethink on how the country is run. Here you are treated like a second class citizen if you don't own (the mortgage lender actually owns it) your own house.
It's all b
ks. If you have enough in the bank to be massively effected by low interest rates then you don't need to worry about money...it makes far more sense to keep housing affordable than it does to ensure those with tens or hundreds of thousands in the bank get 3% instead of 2% interest! The whole point of low interest rates is to encourage savers to spend, or invest in enterprises for a better rate of return, thus helping the economy as well instead of sitting on a wad of cash like a lazy ass and raking in the interest. Buy some houses, rent them out, get a 10% return on your capital, if you don't like what the bank gives you.
anonymous said:
[redacted]
Even these sensible people are being subsidised by artificially low rates. TBH I do wonder what the result will be when the B.O.E. decided to start raising the raising, as must happen eventually. (perhaps a few years down the road)The point is more to do with the lack of attraction for savers to bother with cash saving at all. Its not a good situation for the U.K. economy looked at from that perspective.
crankedup said:
Those with pensions adversely affected with low returns, the senior citizen Joe Public who has saved diligently throughout a life time of work now finding that subsidising those that have managed to over burden themselves with a hefty mortgage and reliant on the current low interest rates.
You are just unfortunate enough to be living your retirement years in a period in the economic cycle when interest rates are low. It is as simple as that.Interest rates are low for a variety of interdependent reasons. Your view that they are low because you are "subsidising those who have over burdened themselves" is overly simplistic and naive.
Maybe you have a new shiny hospital near you, or some new schools, perhaps a neat new road bypass built over the last 10 years you like to use? Financed using PFI and the ( at the time ) availability of cheap money at low rates. Probably would never have been built if the cost of money was higher.
crankedup said:
It sounds reasonable but bypasses people such as me, moderate cash investment for a rainy day and readily accessible. Those with pensions adversely affected with low returns, the senior citizen Joe Public who has saved diligently throughout a life time of work now finding that subsidising those that have managed to over burden themselves with a hefty mortgage and reliant on the current low interest rates.
You only "saved diligently" because your cost of living did not exceed your income, in fact your cost of living was less than your income. Be thankful.How much was of your lovely situation was because the house prices were lower and the bills lower when you hopped on the ladder ?
I am not having a dig by the way, I am just making sure that you know that luck is as much to do with being financially secure as any other variable you can think of.
toppstuff said:
crankedup said:
Those with pensions adversely affected with low returns, the senior citizen Joe Public who has saved diligently throughout a life time of work now finding that subsidising those that have managed to over burden themselves with a hefty mortgage and reliant on the current low interest rates.
You are just unfortunate enough to be living your retirement years in a period in the economic cycle when interest rates are low. It is as simple as that.Interest rates are low for a variety of interdependent reasons. Your view that they are low because you are "subsidising those who have over burdened themselves" is overly simplistic and naive.
Maybe you have a new shiny hospital near you, or some new schools, perhaps a neat new road bypass built over the last 10 years you like to use? Financed using PFI and the ( at the time ) availability of cheap money at low rates. Probably would never have been built if the cost of money was higher.
Yes our monetary system is complex - agreed.
My retirement years are unfortunately coinciding with the worst financial European and American crash in history - true.
Previous Government spent unwisely - true.
Those fools that took on huge mortgages prior to the financial crash with mortgage multiples of epic proportions are now being subsidised by cash saver such as me. I am justified in being hacked off for having to bailout these idiots, for that is what it amounts to.
crankedup said:
Those fools that took on huge mortgages prior to the financial crash with mortgage multiples of epic proportions are now being subsidised by cash saver such as me. I am justified in being hacked off for having to bailout these idiots, for that is what it amounts to.
It is a consequence of the economic climate but not the main reason for it. You should be blaming the last government for a fiscal policy specifically designed and intended to pump out cheap money to the public to make them feel richer than they were, supported by a systematic and planned strategy to loosen financial regulation and get the banks to send out this money to anyone and everyone who wanted it.
The banks are just the instruments of delivering credit. Government policy creates debt through the central banking system while the commercial banks distribute it. This is how it works globally. The only country in the west I can think of that did'nt get so involved in this nonsense was Canada, but thats another story.
Don't blame everything on the distributor. Don't forget the manufacturer.
Ed Balls would have the door slammed in his face if he turned up at my house.
crankedup said:
Those fools that took on huge mortgages prior to the financial crash with mortgage multiples of epic proportions are now being subsidised by cash saver such as me.
Is that true? Do private savers and mortgage borrowers form significant parts of the overall deposit and borrowing markets?Deva Link said:
crankedup said:
Those fools that took on huge mortgages prior to the financial crash with mortgage multiples of epic proportions are now being subsidised by cash saver such as me.
Is that true? Do private savers and mortgage borrowers form significant parts of the overall deposit and borrowing markets?Opening the markets and relaxing the lending criteria has led to temptation for people to over borrow. In turn this led to chronic inflation within the housing market.
I will admit that I took advantage of the demutualisation of Building Societies for the free and easy money. So I must carry a % of blame, its a greed thing. Those that didn't were either unable, ethically and morally pure, couldn't be bothered.
None of this could have happened without the political interference within what was a strong and effective system.
In truth my cribbing over the interest rate for savers is a minor irritation in the grand scheme of the problems we all face. However, it brings forward some interesting POV facts and stat's..
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