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Interest rates will rise faster and higher than anyone expects
Comments
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Running_Horse wrote: »If your definition of carnage is less beer money, cheaper holidays, and not replacing the car for a year or two...then yes, I suppose there will be carnage.
!!!!!!!!!!!!!!
My version of the carnage that interest rates that high will cause auction houses full of banks trying desperately to offload all the property`s of all those who can not even afford the interest on their monthly payments.0 -
My version of the carnage that interest rates that high will cause auction houses full of banks trying desperately to offload all the property`s of all those who can not even afford the interest on their monthly payments.
Interest rates aren't going up soon. And even if they did and banks subsequently acquired a large inventory of repossessed homes, do you really think they would offload them all at once? The people that run banks aren't generally as stupid as some of the people on this board you know...0 -
What is your argument that rates are not going up soon?
Weak growth, government pursuing contractionary fiscal policies...Are you suggesting that banks would not sell repossessed houses but sit on them so as not to flood the market?
If you acquire a bunch of assets, would you assume that selling them all at once would achieve the best price?0 -
Running_Horse wrote: »If your definition of carnage is less beer money, cheaper holidays, and not replacing the car for a year or two...then yes, I suppose there will be carnage.
!!!!!!!!!!!!!!
my definition of carnage is 4 pints of lager, 3 pints of pimms, 2 bottles of veuve cliquot (rose obviously) followed up by an unquantifiable number of gin and tonics, and a weird strawberry and ginger cocktail that i really don't want to try ever again.0 -
Funny my reasons why rates have to go up sooner rather than later are run away inflation, weak economy government messing up contractionary fiscal policies...
Raising interest rates won't really alleviate cost push inflation. A lot of the inflation the UK is experiencing is from commodity price movements beyond our control. They certainly won't alleviate a weak economy or (planned) contracting public spending either.So you are really suggesting that banks can repossess and kick out all those losing their jobs and just sit on these empty houses? How long will they wait to sell them as numbers of repossessions increase?
Repossession is a last resort, not a first resort.Maybe you are suggesting the banks can keep all these houses off the market and reduce supply until prices have to go back up?
Come on, think about it. How could a bank repossess and then afford to not sell it but just sit on all this inventory???????
I'm not suggest they could sit on empty houses forever, they would have eventually crystallise losses but there won't simply be a flood of repossessed properties going onto the market all at once.0 -
The key point – and the one that investors should keep firmly in mind – is that the UK base rate at 0.5% is not normal. It was never this low in the 18th century, in the 19th century or indeed in the 20th century. Up until our recent crisis, the floor for rates was always 2%. It has also always hovered a couple of percent above inflation and that is, eventually, where it will return to.
When it starts to do so, mortgages will become less affordable, the forced selling will finally begin, and prices will fall. A report just out from Morgan Stanley has house prices down another 10% by the end of next year (so, 15-18% if you include inflation).0 -
The key point – and the one that investors should keep firmly in mind – is that the UK base rate at 0.5% is not normal. It was never this low in the 18th century, in the 19th century or indeed in the 20th century. Up until our recent crisis, the floor for rates was always 2%. It has also always hovered a couple of percent above inflation and that is, eventually, where it will return to.
When it starts to do so, mortgages will become less affordable, the forced selling will finally begin, and prices will fall. A report just out from Morgan Stanley has house prices down another 10% by the end of next year (so, 15-18% if you include inflation).
i agree, 18th century interest rates are ultra-relevant for today's investor.
whilst we're on the subject, i'd like to pass on a bit of advice:
(1) i have some inside knowledge about political instability in the thirteen colonies. i recommend that anyone who is heavily into virginian cotton plantations should quietly liquidate their investments;
(2) smallpox vaccines have great potential, look out for junior AIM stocks developing these to be the big winners over the next decade; and
(3) if you sound a bit posh, i would steer clear of france if i were you.0 -
chewmylegoff wrote: »i agree, 18th century interest rates are ultra-relevant for today's investor.
whilst we're on the subject, i'd like to pass on a bit of advice:
(1) i have some inside knowledge about political instability in the thirteen colonies. i recommend that anyone who is heavily into virginian cotton plantations should quietly liquidate their investments;
(2) smallpox vaccines have great potential, look out for junior AIM stocks developing these to be the big winners over the next decade; and
(3) if you sound a bit posh, i would steer clear of france if i were you.
Your argument is pathetic. Just because I mentioned from the 18th century until now you try and spin it to compare things back then. What has that got to do with anything?The key point – and the one that investors should keep firmly in mind – is that the UK base rate at 0.5% is not normal. It was never this low in the 18th century, in the 19th century or indeed in the 20th century. Up until our recent crisis, the floor for rates was always 2%. It has also always hovered a couple of percent above inflation and that is, eventually, where it will return to.
When it starts to do so, mortgages will become less affordable, the forced selling will finally begin, and prices will fall. A report just out from Morgan Stanley has house prices down another 10% by the end of next year (so, 15-18% if you include inflation).
So you think because things were very different in the 18th century this is proof this thread must be wrong, interest rates will go up higher and faster than most expect?
Would you say 2 years ago because things were different in the 18th century that interest rates could not fall faster and lower than anyone expected? :rotfl:0 -
Low interest rates have helped cause inflation by lowering the value of the pound making imports/commodities/fuel more expensive.
As inflation continues to run on and on with obvious end in site ineterst rates will have to go back up to improve the value of sterling and realign the cost of imports.
The 0.5% base rate is irrelevant anyway (except in politics). You can get 3% on 12 month saving easily and the rates here are increasing already to 3.3%/3.4%.
Short term borrowing rates haven't fallen that much for the average punter from their levels 3/4 years back.
There are a good many people out there on fixed incomes who depend on their saving income to supplement what they spend. Especially on "luxuries". So HMRC is also being hit as no tax on savings income and no VAT on purchases from this group.
The issues with UK plc are more fundamental than interest rates.
When China are launching the first of five mega Aircraft Carriers and we struggle to find 4 Apaches to launch of a commando Carrier its says it all. We can't afford to run one proper Carrrier to fight conflicts that we can't afford either.
"If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
Your argument is pathetic. Just because I mentioned from the 18th century until now you try and spin it to compare things back then. What has that got to do with anything?
So you think because things were very different in the 18th century this is proof this thread must be wrong, interest rates will go up higher and faster than most expect?
Would you say 2 years ago because things were different in the 18th century that interest rates could not fall faster and lower than anyone expected? :rotfl:
errr. oh dear.
my point, in case you couldn't understand it, is that past performance is not an indicator of future performance, and that 18th century, 19th century or 20th century interest rates are of no relevance today. the fact that the interest rate was at a certain level in 1754 is neither here nor there, and is not of any use as evidence to support any argument about anything (other than an argument about what the interest rate was in 1754).0
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