Interest rates

ixwood

Low rates encourage borrowing and spending normally.

Mortgage rates coming down so fast (for a lot of people) has made a big difference and cuhioned the blow of the recession (and HPC) significantly. If there were more fire sales by forced sellers, prices would have fallen quicker.

Although that might just drag the whole thing out as sellers take years to eventually come to accept price drops.

It's not a given that rates will stay low until the economy picks up. It's not that easy. Interest rates also affect and are affected by currency rates. If (/probably when IMHO) we have a full blown sterling crisis, rates will rocket.

Icelands interest rate was 18% until recently. It's just been cut to 17%.

vivatifosi

Thanks Generali and happy anniversary.

Generali

mewbie wrote: »

Just a little reminder about Iceland interest rates currently 17%. That's the cost of the IMF. There is a possibility that Brown's plan won't work (stop laughing) and Britain will have to go to the IMF. They give us money and whack up interest rates.

I'm not saying it's going to happen, but if it did then 5% would be a distant dream.

Calling the IMF in doesn't necessarily mean higher interest rates although it usually does.

If the bond market were to go on strike in a month's time then the main thing the IMF would impose would be a big cut in Government spending. Effectively that would mean either an end to the NHS or most of the rest of the welfare state as those are the only places cuts can really be made. I guess there is also the choice to close down large parts of the educational system to keep funding the indolent but my guess is that would be politically unpopular.

vivatifosi wrote: »

Thanks Generali and happy anniversary.

Thanks vivatifosi. We had a wonderful time. It's easy to have a wonderful time in the company of Mrs Generali.

mewbie_2

Generali wrote: »

Calling the IMF in doesn't necessarily mean higher interest rates although it usually does.

You know me, Sun style reporting rather deep economic thinking, that's my method.

Congrats on your ten years btw. Still no chance of parole I guess?

Generali

mewbie wrote: »

You know me, Sun style reporting rather deep economic thinking, that's my method.

Congrats on your ten years btw. Still no chance of parole I guess?

I suppose I'd have got time off for bad behaviour.

TBH, I love her as much as I ever have. In some ways more. I certainly still find her incredibly sexy.

Blah.

Interest rates at 10% in 3 years to stay on topic.

Wookster

Generali wrote: »

Interest rates at 10% in 3 years to stay on topic.

It will be interesting to see where the Tories make spending cuts when they come into power at the next election.

Generali

Wookster wrote: »

It will be interesting to see where the Tories make spending cuts when they come into power at the next election.

The cuts need to be made. Labour won't do it so it'll fall to the Tories to be the Bad Guys once again.

Thatcher? Horrid person.

Wookster

Generali wrote: »

The cuts need to be made. Labour won't do it so it'll fall to the Tories to be the Bad Guys once again.

Meandering somewhat I personally hate the politics of the Tories, they are even more pro America than the Labour brady bunch and their unwavering support for Israel is morally bankrupt. Otherwise they are anti immigration, anti EU etc etc.

The only thing they have going for them is fiscal prudence.

a_rather_tall_man

Is this discussion about interest rates being used as a tool to try and influence economic growth? If so wouldn't it be better to discuss when credit actually becomes available again rather than the interest rate itself because isn't that the real problem right now? After all the price of something is irrelevant if its not even available in the first place.

Pobby

As another poster said, the only people really getting benefit from low IRs are those on a tracker mortgage. Seems to me that most borrowings are still way, way high. The banks must be raking it in.