We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Debate House Prices
In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
The Forum now has a brand new text editor, adding a bunch of handy features to use when creating posts. Read more in our how-to guide
Have BoE Lost All Credibility Over IRs?
ILW
Posts: 18,333 Forumite
Currently base rate is 0.5%
Inflation is running at roughly twice the BoEs target.
Mortgages and loans are costing 5-6% upwards.
Savings accounts are now paying around 3%
Do the markets actually take any notice of the Bank any more?
Inflation is running at roughly twice the BoEs target.
Mortgages and loans are costing 5-6% upwards.
Savings accounts are now paying around 3%
Do the markets actually take any notice of the Bank any more?
0
Comments
-
Currently base rate is 0.5%
Inflation is running at roughly twice the BoEs target.
Mortgages and loans are costing 5-6% upwards.
Savings accounts are now paying around 3%
Do the markets actually take any notice of the Bank any more?
The Bank of England base rate is the rate at which the Bank of England will lend money to banks overnight using a form of borrowing called a 'repo' or repurchase agreement.
A repo is an agreement between 2 parties where one agrees to buy some bonds from the other and sell them back after a fixed period (often a day) at a set price. In effect, it is a way of borrowing money cheaply as the security demanded is usually highly rated Government bonds so if the other party defaults the collateral is unlikely to end up being sold at a loss.
Mortgage rates are set in mortgage markets, reflecting supply of and demand for mortgages, and don't really have much to do with the base rate. If you remove most of the competition in the banking market and hobble alternatives such as building societies (as the Labour Government did) then you'd expect the consumer to end up with a bad deal.0 -
So what is the point of them if they have little or no control over the markets. Why do we all listen to what they have to say?0
-
So what is the point of them if they have little or no control over the markets. Why do we all listen to what they have to say?
The Bank of England has ways of controlling or at least intervening in money markets but they don't intervene to set consumer rates.
In very broad terms, if the BoE increases the base rate, the cost of bank funding rises so mortgage and savings rates will rise. The converse is also true. The reality is much more complicated as rates will really be set by supply and demand for products, just like in any other market. Supply and demand will in turn have their own sub-determinants.
I guess changes in the base rate make a simple headline and readers and journalists alike think they understand what a change in the base rate means.0 -
Is this time for another of the annual explanations of what the Base Rate is and what it does ?'In nature, there are neither rewards nor punishments - there are Consequences.'0
-
-
“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
I know how base rate works, but was just commenting on the fact that Mervyn Kings role seems to be getting less relevant all the time. I wonder what the point of his job is.
The BOE's remit is clear.
1. To control inflation.
2. To support the governments economic policy.
There is no priority of one over the other however.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
I don't think they have lost credibility yet but their justifications are wearing somewhat thin.
It is true that most of our inflation is imported through the lower value of the pound and to the series of food supply shocks.
However what does seem to be in increasing doubt is the BoE's ability to forecast inflation. Their forecasts don't seem to be worth very much, and at some point a series of one off events (event if unrelated) becomes a trend that needs to be addressed.0 -
HAMISH_MCTAVISH wrote: »The BOE's remit is clear.
1. To control inflation.
2. To support the governments economic policy.
There is no priority of one over the other however.
That's the MPC's remit. The BoE's is far wider, much of which is very dull and to do with making sure that all the payments that go through the banking system each day can be honored.
In simple terms Mr King is The Boss of the BoE which also makes him Chairman of the MPC. That's only a small part of his job though. It is the bit that is reported on most however.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 354K Banking & Borrowing
- 254.3K Reduce Debt & Boost Income
- 455.3K Spending & Discounts
- 247K Work, Benefits & Business
- 603.6K Mortgages, Homes & Bills
- 178.3K Life & Family
- 261.2K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.7K Read-Only Boards