Great news / terrible news.

Cannon_Fodder

IveSeenTheLight wrote: »

The US interest rate has absolutely nothing to do with my personal finances.
I am not an economist, so I dont know the answer, however......

As I said in an earlier post, if you have debts i.e. mortgages etc, any lowering of the interest rate you pay on those debts is immediately good.

It means that everymonth the lendors want some cash off me, they want a little bit less

It means that if I maintain the same payments, I pay off more capital, meaning the lenders ask even less interest payments the following month.

If you do not have any debts and have savings, then you are obviusly not earning so much from the interest.
Crucial to this as well, is what the inflation figure is. Now I know it has been increasing in recent times, but with food and oil etc lowering, we can expect inflation to lower as well.

Hope this clarifies

I get castigated for using houses as evidence by one poster, then the next doesn't like an example of an economic factor from a country that is at least a year ahead of us in this whole debacle.

cynics might think they are never satisfied and just putting up obscure obstacles...



agree with your summation about the winners and losers from lowering IRs.

? - are there enough people in debt (the winners) to counteract the (losers) i.e. savers/pensioners/fixed incomes/those without access to credit(debt) ?

(Slight aside; shocking statistic, ok only a prediction, but the 7 million starting point is what? around 1 in 5 of the working population
http://www.poorcreditfinance.co.uk/content/denied.html)


i.e. enough boost to spending to counteract those having to tighten their belts?

I don't have complete stats picture to be sure either way.

IveSeenTheLight

I'm not being a cynic or puting in obstacles, I merely said from a personal point of view, as one with mortgage debt, that I stand to benefit from lower interest rates.

You may be right and lowering of interest rate might or might not stabalise the economy, while we await the findings of that, I'll happily take advantage of paying less interest on the mortgage debts.

It means I should be able to pay off a little quicker

WTF?_2

IveSeenTheLight wrote: »

Totally, agree, therefore paying less interest on your mortgage (BoE tracked, discounted or by beingpassed onto by banks) means that more people have more money each month to save, pay off more capital, reduce debts etc.

Therefore you'll agree that for a large number of people in the UK, lower interest rates will help this debt ridden society we live in

If we're at the stage where rates have to go below 4.5% to save the borrowers' bacon, they've clearly overextended themselves.

The bottom line here is that people have simply borrowed too much.

And high levels of debt - personal and national - are going to make getting out of recession a lot harder. Interest rates are already low ... not a lot further they can do go down realistically to make servicing debt much easier.

Don't imagine that interest rates can simply be kept low as a matter of course, either - watch out for the 'bond vigilantes'. With the amount of borrowing that the government is going to have to be doing in the next few years I wouldn't be at all surprised to see rates being forced back up irrespective of where the govt would like to see them at.

Realy

Cannon_Fodder wrote: »

Well, I rashly assumed that some housing related evidence might strike a chord on a House Price forum...

Of course, if we have to repeat ourselves constantly, about how the crunch was built on a housing bubble, how unemployment has been massively influenced by the housing downturn, how the allied trades are suffering from housing downturn, etc etc, then the forum is going to be full of a lot of repetition...


To the point; if low IRs are supposed to stimulate the economy, why after at least 10 months of low IRs has the US contruction industry not been stimulated?

Shouldn't it at least start to reduce the level of increases in unemployment?
http://www.ft.com/cms/s/0/c0ab7fe6-7b4b-11dd-b839-000077b07658.html


Answer; because there's more to it, its liquidity that is the problem. Until sufficient contraction of all economies has taken place, there can be no 'normality'.

Its time we stopped pretending there can be.

Cannon fodder I am begining to think you are a fruit cake.;)
To help me not belive that tell me how keeping interest rates the same or making them higher will improve the economy going in to a reccession.

As I said is it just houses? lowering rates will not stop unenployment but may slow it. It will take 18m+ to recover do you expect an instant recovery even though we have only just dipped our toe in recession?

PS contraction causes bad bebt somthing banks do not need at the moment if you think speeding it up this stage will help please explain

Realy

Cannon_Fodder wrote: »

? - are there enough people in debt (the winners) to counteract the (losers) i.e. savers/pensioners/fixed incomes/those without access to credit(debt) ?

Saver have already had the guarantee of not losing thier money, pensioners get a 5.2% increase in pension thanks to inflation (they use oct inflation for their next increase)
As for the other point?
Do you really think they are going to lower rates not thinking inflation is going to bomb possibly below 2%.
Deflation is nearly here have you not seen oil and comodities?
I faill to see what benefit high interest rates will benefit the country at the moment can anyone point them out?

Cannon_Fodder

Realy wrote: »

Cannon fodder I am begining to think you are a fruit cake.;)
To help me not belive that tell me how keeping interest rates the same or making them higher will improve the economy going in to a reccession.

As I said is it just houses? lowering rates will not stop unenployment but may slow it. It will take 18m+ to recover do you expect an instant recovery even though we have only just dipped our toe in recession?

PS contraction causes bad bebt somthing banks do not need at the moment if you think speeding it up this stage will help please explain

No, I'm a choccie cake fan, myself.

I have never said raise interest rates, in relation to the recession.

In my opinion IRs are pretty benign right now.

Into/Through/Exiting BOTH the previous recessions, we NEVER got interest rates as low as we have them today. Why should we need to now?

http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp?Travel=NIxIRx


The 0.5% may be plenty, IF liquidity can be improved too.

Yes, of course it will take time. I'm the one saying don't do quick, sharp drops to an historic low in IRs. Because it takes time to see the effects and we surely don't want to go all through this again in a year's time, after some sort of temporary "false dawn".

Cannon_Fodder

Realy wrote: »

Saver have already had the guarantee of not losing thier money, pensioners get a 5.2% increase in pension thanks to inflation (they use oct inflation for their next increase)
As for the other point?
Do you really think they are going to lower rates not thinking inflation is going to bomb possibly below 2%.
Deflation is nearly here have you not seen oil and comodities?
I faill to see what benefit high interest rates will benefit the country at the moment can anyone point them out?

I thought we were discussing IRs. Savings guarantees & pension increases takes us a bit OT.

IRs directly affect the income a Pensioner gets from their savings. Also a disabled person living off their medical pension/personal injury payout/allowances/benefits etc.

Its great timing that for once, OAPs get a nice fat 5.2%, but that will be totally ESSENTIAL to offset the loss of income they will have when 2% is lopped off their savings rates...

HIGH interest rates may well not benefit the country. I have not advocated them.

But as we have benign rates at the moment, that's not appropriate at this time.

http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp?Travel=NIxIRx


People got too used to 3.5% for a few months in 2003, and now think its an automatic right, that anything higher is unexpected and painful.

When in reality, its going back towards normal.

Realy

Cannon_Fodder wrote: »

I thought we were discussing IRs. Savings guarantees & pension increases takes us a bit OT.

IRs directly affect the income a Pensioner gets from their savings. Also a disabled person living off their medical pension/personal injury payout/allowances/benefits etc.

Its great timing that for once, OAPs get a nice fat 5.2%, but that will be totally ESSENTIAL to offset the loss of income they will have when 2% is lopped off their savings rates...

HIGH interest rates may well not benefit the country. I have not advocated them.

But as we have benign rates at the moment, that's not appropriate at this time.

http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp?Travel=NIxIRx


People got too used to 3.5% for a few months in 2003, and now think its an automatic right, that anything higher is unexpected and painful.

When in reality, its going back towards normal.

But now they are being for stability not because of bringing inflation inline.

If you think lots of pensioners have savings I think you may be wrong.
I think they would be more happy having lots of tax payers so they can still get a pension and front line services.
PS pensioners have children and grandchildren and they tend to want to help thier children in times like this so if you think pensioner would mind I think you are wrong again.
Anythin else is Victoria Sponge.;)

dopester

Realy wrote: »

Deflation is nearly here have you not seen oil and comodities?

Now it is upon us, I'm glad people are waking up to what has been increasingly obvious for a year. I'm so glad I'm not servicing debt... so so glad.

dopester

IveSeenTheLight wrote: »

You may be right and lowering of interest rate might or might not stabalise the economy, while we await the findings of that, I'll happily take advantage of paying less interest on the mortgage debts.

It means I should be able to pay off a little quicker

It doesn't work that way brainiac. Your debts will get heavier.

Asset values fall harder, and the purchasing/spending value of cash goes up.

And of course, unemployment up, and wages will have to fall.