BOE Base = 2%

Dithering_Dad

Cannon_Fodder wrote: »

Yes.

That's why my "small retort" was preceeded by "quite right".

I thought that would signify agreement on its own.

I am happy to confirm, in the absence of clarity, that I do agee with you.

I know this must come as a shock....!

My god. *faints*

PasturesNew

I don't see how inflation can really be considered if you have savings for a house.

As the money is for the purpose of buying a house there is no inflation involved, you only need to compare that against the price of a house, which is in deflation.

If a house cost £100k one year and you have £100k saved, then a year later you buy it at £90k because it's gone down 10%, where's the inflation? It can only be seen in the spare £10k you have left over to buy "stuff" with for it. And the "stuff" is probably cheaper now too.

SGE1

PasturesNew wrote: »

I don't see how inflation can really be considered if you have savings for a house.

As the money is for the purpose of buying a house there is no inflation involved, you only need to compare that against the price of a house, which is in deflation.

If a house cost £100k one year and you have £100k saved, then a year later you buy it at £90k because it's gone down 10%, where's the inflation? It can only be seen in the spare £10k you have left over to buy "stuff" with for it. And the "stuff" is probably cheaper now too.

Interesting way of thinking about it.

I feel a lot more cheerful now. :beer:

harry_w

Cannon_Fodder wrote: »

http://www.bankofengland.co.uk/statistics/rates/baserate.pdf

1694 was 6%...

We fought the Napoleonic Wars at 5% it appears.

Wonder what crisis occured in 1844 for 2.5% to be reached?


Someone else can turn the figures into a graph.

The end of the Corn Laws (protecting agriculture in Britain) in depression, worsening conditions for workers in industry as food prices rose. Agitation for social, economic and political reform from the Chartists.

See http://en.wikipedia.org/wiki/Corn_laws

Really2

Cannon_Fodder wrote: »

http://www.bankofengland.co.uk/statistics/rates/baserate.pdf

1694 was 6%...

We fought the Napoleonic Wars at 5% it appears.

Wonder what crisis occured in 1844 for 2.5% to be reached?


Someone else can turn the figures into a graph.

Also that link shows you that 5.5% is around normal.(although many tell you that is stupidly low:rolleyes: )
It shows that rates over the last 40 years have been at stupidly high levels.
Will we ever see double digit interest rates in our life time again? Perhaps not.

Jonbvn

tomstickland wrote: »

I was talking to someone at work who is on a BOE + 0.75% mortgage, so they're now paying 2.75%!

Snap!

At present there are still numerous savings accounts that easily beat this rate, so overpaying would not be a good idea ATM (for us anyway).

We consider ourselves fortunate that we also have quite a large sum at 7%+ fixed rate.

Jonbvn

PasturesNew wrote: »

I don't see how inflation can really be considered if you have savings for a house.

This is only holds true if you never dip into the savings to cover everyday eventualities.

Really2

Jonbvn wrote: »

Snap!

At present there are still numerous savings accounts that easily beat this rate, so overpaying would not be a good idea ATM (for us anyway).

We consider ourselves fortunate that we also have quite a large sum at 7%+ fixed rate.

How about .49 above base.:o

The other interesting part of the BOE historical figures if you look at times when rates have gone down to 2% look how long they have stayed low for.:eek:
Obviously low does not mean healthy economy but if history is anything to go by interests could remain very low for a very long time.

Cannon_Fodder

Dithering_Dad wrote: »

My god. *faints*

Dithering_Dad

PasturesNew wrote: »

I don't see how inflation can really be considered if you have savings for a house.

As the money is for the purpose of buying a house there is no inflation involved, you only need to compare that against the price of a house, which is in deflation.

If a house cost £100k one year and you have £100k saved, then a year later you buy it at £90k because it's gone down 10%, where's the inflation? It can only be seen in the spare £10k you have left over to buy "stuff" with for it. And the "stuff" is probably cheaper now too.

Your example is exactly what I was talking about when I said the HPC people are basing their calculations on just how much the house is falling by and not on all the other factors I mentioned.

If we take your example, if a house cost £100k one year and you have £100k saved. If you buy it that year then you will be mortgage free and have no financial outlay to put a roof over your head.

If instead you wait a year and rent a place for £850pm = 12 months x £850pm = £10,200. You are therefore £200 worse off by buying a year later, even though the house price has fallen.

Things get even more interesting if the house was £174,999 and bought during the stamp duty holiday, a low interest mortgage was arranged on it and it was renovated/decorated/carpeted by tradesmen desperate for work. Suddenly the imagined 20% HPC savings by buying 3 years later are eaten up by having to pay stamp duty, a higher mortgage rate and higher costs for tradesmen.

As far as inflation is concerned, if you had an STR pot of £100k, continue to STR for 5 years (with an average inflation figure of 5%) and use all of your interest for living costs, your STR pot will be worth £78,353 in real terms. So if a £100k house is falling by 10%pa for 5 years, the house will be worth £62092. You will have waited 5 years to buy a house and will have saved £16,261 - NOT £37908 (£100k original house value - £63092 HPC house value).

The £16,261 saving will be further eroded when you add in the cost of renting, any stamp duty payable, higher mortgage rates, etc.