BOE 3rd November Rate Announcement
Discussion
Mr Whippy said:
Bailey's speech is irrelevant. He's saying what he needs to say to get the behaviour required.
The actions are all that are relevant in absolute terms, as that's what's "actually going to happen" after the emotional responses to his speech become history and the reality becomes the actions taken.
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Sorry, but that statement is wrong. Market behaviour is BOTH looking at action AND future behaviour intent. This is evidenced by Equity markets daily. That is a market relevent to people in the UK by very nature of how it is invested by salary drip in either funds or pension saving. Let alone people trading short end.The actions are all that are relevant in absolute terms, as that's what's "actually going to happen" after the emotional responses to his speech become history and the reality becomes the actions taken.
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By virtue of attempting to move markets (as does every central bank) it is NOT irrelevent. Its also forward guidance. It's actually pretty credible that the market has priced a higher terminal rate for GBP (but ignored rubbish fundamentals) and needs to rethink that. That's pretty important information for people with Mortgages or those thinking about it. Doubly so given how UK mortgage books are funded. Don't confuse forward guidance and the ability of the BoE to disappoint.
The $ terminal expectations needs to be revised up - as Powell is playing exactly the same game. Equities are getting pumped when the market thinks the Fed will pivot (or just slow), but Powell is saying No. Non-Farm pay rolls today added another 260k jobs there vs expected 200k - so Powell is guiding the market - which is NOT irrelevent.
This is not irrelevant it's critical market guidance. The absolute mountain of short term liquidity in the market created by massive global stimulus won't "term up" or make long term investments until the velocity of CB hikes slows. Or very simply, if you can get 3.5% risk free return overnight, why add duration risk for a few additional basis points - especially when curves are looking increasingly inverted.
There are multiple problems to manage here (Inc Brexit), but I'd argue excessive short term liquidity is one of the greatest. Why do you think the BoE has had to develop its own RRP facility - like the Fed? Monetary policy transmission could fail (low probability / high impact event).
Edited by jamiedimonBTClover on Friday 4th November 13:13
Sorry spelling bad, using mobile device....Edited by jamiedimonBTClover on Friday 4th November 13:15
Edited by jamiedimonBTClover on Friday 4th November 13:17
Mr Whippy said:
Wasn’t all this stress tested when people were getting mortgages?
“What if rates go up” affordability checks?
Didn’t people kinda imagine this might happen?
The changes in interest rates have been well telegraphed.
I have no sympathy.
And ultimately this is what the country needs.
Inflation will be back at 2% shortly, as spending shrinks back and people lose jobs.
It was stress tested but nobody has a going to like going from 1.something to 5%! That’s going to hurt. I have more sympathy as it could happen to anyone with a mortgage. “What if rates go up” affordability checks?
Didn’t people kinda imagine this might happen?
The changes in interest rates have been well telegraphed.
I have no sympathy.
And ultimately this is what the country needs.
Inflation will be back at 2% shortly, as spending shrinks back and people lose jobs.
Time to tighten the belts all round.
BoRED S2upid said:
Mr Whippy said:
Wasn’t all this stress tested when people were getting mortgages?
“What if rates go up” affordability checks?
Didn’t people kinda imagine this might happen?
The changes in interest rates have been well telegraphed.
I have no sympathy.
And ultimately this is what the country needs.
Inflation will be back at 2% shortly, as spending shrinks back and people lose jobs.
It was stress tested but nobody has a going to like going from 1.something to 5%! That’s going to hurt. I have more sympathy as it could happen to anyone with a mortgage. “What if rates go up” affordability checks?
Didn’t people kinda imagine this might happen?
The changes in interest rates have been well telegraphed.
I have no sympathy.
And ultimately this is what the country needs.
Inflation will be back at 2% shortly, as spending shrinks back and people lose jobs.
Time to tighten the belts all round.
BoRED S2upid said:
Mr Whippy said:
Wasn’t all this stress tested when people were getting mortgages?
“What if rates go up” affordability checks?
Didn’t people kinda imagine this might happen?
The changes in interest rates have been well telegraphed.
I have no sympathy.
And ultimately this is what the country needs.
Inflation will be back at 2% shortly, as spending shrinks back and people lose jobs.
It was stress tested but nobody has a going to like going from 1.something to 5%! That’s going to hurt. I have more sympathy as it could happen to anyone with a mortgage. “What if rates go up” affordability checks?
Didn’t people kinda imagine this might happen?
The changes in interest rates have been well telegraphed.
I have no sympathy.
And ultimately this is what the country needs.
Inflation will be back at 2% shortly, as spending shrinks back and people lose jobs.
Time to tighten the belts all round.
I am thankful I only borrowed at 2.8x my annual salary when I took out my mortgage.
Leicester Loyal said:
And I don't think the checks include inflation at above 10%, energy prices doubling to tripling and various other things, all in the space of 12 months.
I am thankful I only borrowed at 2.8x my annual salary when I took out my mortgage.
Probably a good example of why they need to nail inflation down to 2%... I am thankful I only borrowed at 2.8x my annual salary when I took out my mortgage.
And at somepoint create wage inflation. This period might have significant impact to longer term house price assumptions. Leaning on asset growth for stimulus may be proved faulty going forward.
mdavids said:
rossub said:
You were in the minority and you lost, get over it. All your moaning isn’t going to change anything.
Oh it will eventually, we just need the generation that enabled it, voted for it and are mostly shielded from it's economic impact to hurry up and die off. 
Leicester Loyal said:
https://www.yorkshirepost.co.uk/business/why-housi...
'Leeds Building Society said today’s average two-year fixed rate mortgage rate of 6.43 per cent may seem lower than the mortgage rates of 15 per cent in 1980, but surging house prices, driven by a lack of supply and historically low interest rates since the financial crisis of 2008, and the increase in household indebtedness, mean that the current mortgage rates are equivalent to a rate of 25.7 per cent in 1980.
In 1980, the average UK house price was around £21,000 and mortgage costs accounted for 11.3 per cent of disposable income. Today, those figures are around £292,000 and 45.1 per cent respectively.
In a statement, the mutual said: “Housing is now at its least affordable point since records began. The average home currently costs 9.1 times the average local wage compared to 3.5 in 1997 (Source ONS). This particularly impacts young people.'
Average mortgage costs 45.1% of household income ffs!
That’s absolutely grotesque when you see it like that. Surely this is the banks f'Leeds Building Society said today’s average two-year fixed rate mortgage rate of 6.43 per cent may seem lower than the mortgage rates of 15 per cent in 1980, but surging house prices, driven by a lack of supply and historically low interest rates since the financial crisis of 2008, and the increase in household indebtedness, mean that the current mortgage rates are equivalent to a rate of 25.7 per cent in 1980.
In 1980, the average UK house price was around £21,000 and mortgage costs accounted for 11.3 per cent of disposable income. Today, those figures are around £292,000 and 45.1 per cent respectively.
In a statement, the mutual said: “Housing is now at its least affordable point since records began. The average home currently costs 9.1 times the average local wage compared to 3.5 in 1997 (Source ONS). This particularly impacts young people.'
Average mortgage costs 45.1% of household income ffs!
k up once again allowing people to borrow way over what they should be lending. Stick to 4x annual single income plus 1x annual additional lender. Stick to that and house prices don’t spiral out of control and people don’t get caught with their pants down. How are people even stretch tested to 45% household income and approved?
Most I’ve ever borrowed is around 3x income.
Leicester Loyal said:
BoRED S2upid said:
Mr Whippy said:
Wasn’t all this stress tested when people were getting mortgages?
“What if rates go up” affordability checks?
Didn’t people kinda imagine this might happen?
The changes in interest rates have been well telegraphed.
I have no sympathy.
And ultimately this is what the country needs.
Inflation will be back at 2% shortly, as spending shrinks back and people lose jobs.
It was stress tested but nobody has a going to like going from 1.something to 5%! That’s going to hurt. I have more sympathy as it could happen to anyone with a mortgage. “What if rates go up” affordability checks?
Didn’t people kinda imagine this might happen?
The changes in interest rates have been well telegraphed.
I have no sympathy.
And ultimately this is what the country needs.
Inflation will be back at 2% shortly, as spending shrinks back and people lose jobs.
Time to tighten the belts all round.
I am thankful I only borrowed at 2.8x my annual salary when I took out my mortgage.
okgo said:
Pixelpeep 135 said:
Having an opinion is for every thread.
I don't agree.Irrespective of Brexit opinion, I don't think it's for a BoE / rate decision thread when individuals are making major financial decisions and might be canvassing opinion.
Where rates are now, and likely to be in the near term are the topic at hand (and perhaps subjectively how rubbish Bailey is at calling it).
Inflation needs to get down, partly for reasons of affordability mentioned by others. They just don't have the sky's the limit hiking ability of Paul Volcker in the 1980s. In my opinion.
I think outside the Eurozone, we will not see many 0.75 hikes going forward. Even the Fed may slow pace - but eventually runs out of room (they'll hike for longer but slower). If their housing market is anything to be believed. The UK economy won't take much more than 4.5% with the fiscal headache (opinion). But the fiscal funsters announce on the 17th.
Interesting that there were leaks from govt on Thursday morning. It's probably a good thing, the govts attempt to sow dissent amongst the MPC was ignored.
Edible Roadkill said:
That’s absolutely grotesque when you see it like that. Surely this is the banks fk up once again allowing people to borrow way over what they should be lending.
Stick to 4x annual single income plus 1x annual additional lender. Stick to that and house prices don’t spiral out of control and people don’t get caught with their pants down. How are people even stretch tested to 45% household income and approved?
Most I’ve ever borrowed is around 3x income.
Income ratios and percentage of net mean little really. Not really sure why they're used to commonly as a yardstick tbh.k up once again allowing people to borrow way over what they should be lending. Stick to 4x annual single income plus 1x annual additional lender. Stick to that and house prices don’t spiral out of control and people don’t get caught with their pants down. How are people even stretch tested to 45% household income and approved?
Most I’ve ever borrowed is around 3x income.
okgo said:
Income ratios and percentage of net mean little really. Not really sure why they're used to commonly as a yardstick tbh.
Because they are good at showing the change in affordability in general terms?You might be alluding to a household that earns £10K a month that the 45% won't impact them much ie they can easily afford it and other living costs? but if it's up from on average 35% then they are closer to not affording it that they were and so have less to spend/save.
So with a % of net increase everyone either saves less, has to give up other spending, has to eat beans and turn the heating off sell their body etc, to the worse case repossession.
Its just a broad bush, is pressure on mortgage holders increasing or decreasing?
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