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Home repossessions 'unlikely to rise sharply'
Really2
Posts: 12,397 Forumite
BOE Answer Back
But what about IR rates?
So the message seems to be that yes 0.5% may be unsustainable, but it is sustainable until GDP and employment pick up a fair bit.
An interest rate rise would not send home repossessions rocketing, a Bank of England official has said.
Professor David Miles said he was "not so pessimistic" about the extent that arrears and repossessions would rise.
Mr Miles acknowledged a rise in interest rates - which have been at a record low of 0.5% for more than two years - would have an impact, but that it would not unleash a massive wave of repossessions.
Speaking to MPs on the Treasury Committee, he said: "It's certainly true that the total amount of household debt relative to size of the economy is significantly larger than it was 20 years ago."
He added: "I'm not so pessimistic about the risk that arrears and repossessions move up sharply."
But what about IR rates?
The governor of the Bank of England, Sir Mervyn King, who was also in front of the Treasury Committee, said that the economy was not strong enough to introduce a rise at the moment.
"The reason we would raise interest rates would be in the context of a much stronger economy with unemployment falling rather than rising."
So the message seems to be that yes 0.5% may be unsustainable, but it is sustainable until GDP and employment pick up a fair bit.
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Comments
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"The reason we would raise interest rates would be in the context of a much stronger economy with unemployment falling rather than rising."
Well, there you have it.
Now we know when interest rates will rise...... When the economy can support it and not before.“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 -
Interestingly, David Miles also said that he was much more likely to vote for an extension of quantitative easing if the current downside risks, including those from the eurozone crisis, crystalised. So that's now him and Fisher, at least, 'sighting' QE again.There is a pleasure in the pathless woods, There is a rapture on the lonely shore, There is society, where none intrudes, By the deep sea, and music in its roar: I love not man the less, but Nature more...0
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More QE would be a good thing, but the reason it's been of limited efficacy the first time around is the delivery mechanism.
Better to find a more direct way of increasing liquidity rather than feeding it to the banks who hoard it instead of using it to boost the economy.“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 -
HAMISH_MCTAVISH wrote: »"The reason we would raise interest rates would be in the context of a much stronger economy with unemployment falling rather than rising."
Well, there you have it.
Now we know when interest rates will rise...... When the economy can support it and not before.
Oh if only the BOE stuck to what it said.
As for the article, fiar play. However, one person from the BOE is up against a lot of other voices disagreeing with him, includiong his own governor.0 -
Graham_Devon wrote: »Oh if only the BOE stuck to what it said.
As for the article, fiar play. However, one person from the BOE is up against a lot of other voices disagreeing with him, includiong his own governor.
It was Mervyn King who said it?0 -
It was Mervyn King who said it?
Wasn't Mervyn who said interest rate rises would not turn into reposessions.
As for what I meant with the "if only they stuck to what they said", heres King in 2008 warning the property industry that interest rates will not fall as far or as fast as they expect.
He went on and did the opposite.Mr King's comments followed a robust message to the City and property industry in which he said with inflationary pressure looming, interest rates will not fall as far or as fast as pundits have predicted.0 -
And heres Mervyn acknowledging repo's would soar with a return to "normal" interest rates.
Thats from today.Sir Mervyn, governor of the Bank of England, said he was aware many were concerned that if interest rates returned to closer to 5 per cent the amount of repossessions and mortgage arrears would soar.
But he said he was not greatly concerned by this and insisted while a movement in rates remained linked to inflation, the nation could expect rates to remain low until the economy started to show more signs that it was picking up.
As I say, one bloke from the BOE is up against a lot of voices with this one. But can understand that many will like this particular voice stating things won't be that bad.0 -
Graham_Devon wrote: »And heres Mervyn acknowledging repo's would soar with a return to "normal" interest rates.
Thats from today.
Did he use the word 'soar' or is that what was reported?0 -
Did he use the word 'soar' or is that what was reported?
He actually said arrears would soar. But the word soar is there.
Anyway, not here to argue it. Just stating it's just one bloke from the BOE, whom many disagree with.
Bit like the outgoing bloke who wanted interest rates to rise. Many disagreed with him and were glad to see him leave. Think this bloke is just the other end of the scale.
How anyone can state with any real belief that we could see homeowners taking on larger repayments and not see trouble is a bit beyond me. We've got enough trouble as it is, without rises in rates.0 -
Graham_Devon wrote: »Wasn't Mervyn who said interest rate rises would not turn into reposessions.
But you quoted the bit on the base rate rising saying his governor disagreed on that?
Hamish did not mention anything on reposessions?0
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