Inflation Inflation Inflation

B_Blank

pauljoecoe wrote: »

Raising the base rate would achieve nothing except make all of us with mortgages worse off. The inflationary pressures are not down to overspending therefore cannot be cured by putting us off spending by hitting us in our pockets.

Actually raising rates will boost the £, thus reducing inflation.

Also, I couldn't give a damn about people with mortgages. They have had it ridiculously good over the last 2 years. It is their own fault they are in debt/negative equity if they are.....any idiot could of seen that buying when house prices were at huge levels in 2006-2008 was stupid.

I am a young person, and attitudes like this make my blood boil. Nobody cares about us, just as long as their precious housing bubble and their cushy jobs and lavish lifestyle are protected at all cost then the 40+ generation are happy.

25% unemployment in young people - who cares they cry! No young person can buy a house because their prices are being artificially boosted by the gvn/BoE setting stupidly low interest rate. Inflation rising on all the things that hit young people most (food etc). Rent rising as people take advantage of our inability to get on the housing market by making us pay through the roof to put a roof over our heads.

Repossessions on a few properties will be a good thing long term, and might go someway to ending the neglect of young people in this country. To be honest, I am beyond caring, I intend to leave the UK asap.....I dont see why I should help this massive generation heading for pensions to have a comfortable retirement. And that is the ironic thing, in the end it will be you selfish 40-50 yr olds who suffer!

I dont see there being left and right politics, or correct or wrong economic policy decisions. I just see the constant battery of young people in favour of the 35-50 yr old generation who were stupid enough to over mortgage and take holidays every year!

edinburgher

Also, I couldn't give a damn about people with mortgages. They have had it ridiculously good over the last 2 years. It is their own fault they are in debt/negative equity if they are.....any idiot could of seen that buying when house prices were at huge levels in 2006-2008 was stupid.

I agree with you to a degree - anyone who hasn't taken advantage of record low rates to try and get their house in order is a bit of a muppet. My dad left his mortgage payments at the same rate as before he went onto a variable rate tracker and has brough his retirement forward by several years as a result

On the other hand - some people felt they needed a house because of family pressures, an urge to provide stability for their kids etc. - we can't all be perma-renters. I can't be judgemental about these sorts of people buying into an inflated market, as some of them had no choice. On the other hand, anyone who bought in because they watched too much 'property !!!!!!' on TV and thought themselves a wannabe property developer can get back to the gutter they came from...

B_Blank

edinburgher wrote: »

I agree with you to a degree - anyone who hasn't taken advantage of record low rates to try and get their house in order is a bit of a muppet. My dad left his mortgage payments at the same rate as before he went onto a variable rate tracker and has brough his retirement forward by several years as a result

On the other hand - some people felt they needed a house because of family pressures, an urge to provide stability for their kids etc. - we can't all be perma-renters. I can't be judgemental about these sorts of people buying into an inflated market, as some of them had no choice. On the other hand, anyone who bought in because they watched too much 'property !!!!!!' on TV and thought themselves a wannabe property developer can get back to the gutter they came from...

Well, we are already seeing buy to let is making a massive comeback due to:

1, Low interest rates make mortgage repayments low, and mean that if you have money investing in property is seeming more advantageous (as savings have a poor yield). Low mortgage repayments = high profits when you rent the place out.
2, High and rising rents - because no young people can get on the housing market they are forced to rent. This is driving up rental prices. The reason they cant get on the market is because prices are high (due to interest rates being low) and yet banks are still not lending. High rents = good returns for these people.


It is a vicious circle that the BoE and government are fuelling with their corrupt policy making. And shockingly it is us young people who are getting crushed by this! AGAIN! Because guess who can become buy to let magnets? Yes you guessed it - 35-50 year old people who can back their mortgages against the equity in their own house!

It is like we are heading back to Victorian times and the great work thatcher did to increase home ownership is being reversed now. A new landed class is now exploting those less fortunate. This time it isnt a class divide though, it is an age divide.

edinburgher

Well, speaking as a 27 year old who doesn't own a home, you're preaching to the converted (all bar the Thatcher reference, politicians all do their best to make life harder in my opinion )

I'm happy (not sure if this is the right expression) to continue renting a place that costs 16% of our monthly wage and keep saving. Despite being forced to rent there are still bargains to be had for folk who don't have too many delusions of grandeur and are willing to try and be patient.

Life is not just about owning a house, although it might be nice one day.

gordonc888

Low rates were meant to encourage people to spend but as the posts above show, most of us have simply moved our funds into stocks and shares and/or fixed rate bonds. We're just not spending money like the government wants us to. The irony is that if rates were to rise thereby generating a reasonable amount of disposible income I would be more willing to upgrade my plasma TV and maybe get an iPad.

Still ... anyone holding much hope to a rate rise this year? The News channels were all talking about a rate rise in the middle of the year as inevitable but I'm a lot more realistic and would be surprised if the BOE had the courage to raise the rate a quarter point at the end of the year.

ChiefGrasscutter

Sounds like we are becomeing Japanese.
In the early 1990's they had a mega recession and dropped the interest rates to next to nothing to encourage spending rather than hording of the cash.
The result - eveyone spent even less and horded even more as their supplementary income from savings dropped......and the economy has never really recovered from the experience. Stock market now around 15000 c.f 30000 at the peak.

Still it could be worse here in the UK
It could be like the mid 1970's when inflation peaked at 25% per year, savings rates were a joke and the stockmarket lost almost 90% of its value from its prior peak at one point............

If rates were increased in the UK the £ would rise so imports would get cheaper (eg oil), thereby reducing the imported inflationary pressures. Money would be enticed into the UK by the higher rates which would lead to more money being around for lending and hence just possibly lower actual lending rates. more savings income so more spending from a sector of the population.

Snag is the government couldn't afford the interest payments on the outstanding National Debt: which of course is increasing every day we have a budget defecit. We need to run a budget surplus to reduce this debt level

masonic

le_loup wrote: »

Excuse my ignorance.
If "inflation" is a measure of change, it would have gone down in January had VAT not been increased, as last January's effect dropped out. Now, because we have had a further increase in VAT, "inflation" goes up! Isn't that saying that inflation is an absolute measure rather than a measure of change.
Economists, statisticians, anybody?

They are comparing the inflation rate between Jan'10-Jan'11 with the inflation rate between Dec'09-Dec'10 when they say 'inflation has gone up'. You are completely correct in saying that there is a single 2.5% VAT increase included in both figures being compared. That's why blaming this months inflation figure on VAT is a red herring - other factors are in play. That's not to say the inflation rate wouldn't be lower if VAT was still at 17.5%, but it would be the result of the previous VAT increase skewing the earlier figures.

If you look more closely, this way of reporting the change in inflation doesn't make a great deal of sense. What happens when you compare the figure from Jan'10-Jan'11 with the figure from Dec'09-Dec'10? - It all cancels out except for the months of Jan'11 and Dec'09. So all the 'increase' in inflation really means is that inflation during the month of Jan 11 was higher than it was during the month of Dec'09. Well, that's fairly irrelevant.

le_loup

Thanks, I thought I was going mad especially when the reasons given by the ONS included VAT as a factor. Problem is, news organisations don't challenge such assertions because sums are too hard for then except when it involves the statistics of "celebrities".

lvader

Instead of raising rates we could unwind QE, that would also strengthen the pound.

Reaper

lvader wrote: »

Instead of raising rates we could unwind QE, that would also strengthen the pound.

They could, but that would mean buying back the QE money and destroying it. Whatever the theory I'm not sure any government would have the guts to do that regardless of what the economy was doing, and certainly not at the moment as it would mean even more cuts and taxation to pay for it which would be political suicide.

Besides they want a weak pound to encourage exports and discourage imports (which have unfortunately been booming lately)