Resentment against SVR hikes grows, Economists call for BOE to drop rates to 0%

Emy1501

chucknorris wrote: »

That's your response :rotfl: That it's better to pay an extra 0.5% every year to give you time to cut down on your outgoings?

I hope your wife controls the purse strings in your household for the sake of your family's finances.

My finances are fine thank you. We will see what happens in few years time especially if rates are cut zero.

It bit like giving a drug addict more drugs to cure his habit.

HAMISH_MCTAVISH

chucknorris wrote: »

I find it astonishing that he would prefer to pay an extra 0.5% on his mortgage every year to give him time to cut down on his outgoings?

If I said to my wife:

'I think we should pay an extra £3,000 mortgage interest every year (so £15,000 in year 5) to give us a chance to find ways of saving money'

I would not be able to convince her that I was serious (or sober).

Yes, such bizarre statements only prove how very desperate they are to make any case which in their minds would reduce the sticker price of a house.

Whilst completely failing to consider the total costs of buying a house which are at near record lows despite high house prices.

It's financial illiteracy.

.

julieq

Hamish, you can't really complain about a situation where supply and demand is putting up mortgage costs when you've been pointing out for years that supply and demand issues are raising accommodation costs. It's two sides of the same coin.

Banks aren't profiteering, in fact they're reacting to the costs they'll incur and capitalisation rules as they try to increase lending. When they lend more, generally we'll have more liquidity, and the costs of lending will decrease, then competition will nudge effective rates down again, but you have to get the chain of cause and effect running in the first place. The SVR hike is actually a positive, not a negative, step into recovery.

Annoying maybe to those having to pay it on top of general costs increasing, but the money goes into the economy through the banks taking it either as profits or to allow more lending, so I'm really not sure why you think it's a big deal unless you've converted to a bear view of the world where money they can't spend because they've paid it to someone else suddenly disappears. This was Graham's argument a while ago, that there's some qualitative difference between money old people spend on costs against money they might spend on extras. And it's wrong.

On house prices incidentally, the irony is that increased lending will tend to moderate rather than increase prices, because it will release pent up supply as much as pent up demand and induce builders to invest.

Emy1501

HAMISH_MCTAVISH wrote: »

Yes.

That's what he wants.:)

Not sure why as homeowner I would want prices to fall but suspect in a few years this what will happen if your idea goes ahead. Anyway time will tell

chucknorris

Emy1501 wrote: »

My finances are fine thank you.

I think that you would find that your finances would be even better if you saved that extra 0.5% mortgage cost for a rainy day and still thought about cutting your outgoings. Rather than paying it to your mortgage lender.

Emy1501

chucknorris wrote: »

I think that you would find that your finances would be even better if you saved that extra 0.5% mortgage cost for a rainy day and still thought about cutting your outgoings. Rather than paying it to your mortgage lender.

That's exactly what I do. The problem is these people stuck on these SVRs tend not to be financially to clever.

Just like some people cant manage how much they can drink some people can't manage their finances. Allowing these people to think they can lead the lifestyle they are living now for ever will cause problems in the future.

HAMISH_MCTAVISH

julieq wrote: »

Hamish, you can't really complain about a situation where supply and demand is putting up mortgage costs when you've been pointing out for years that supply and demand issues are raising accommodation costs. It's two sides of the same coin.

The difference is one is a relatively free market, made up from millions of participants, who cannot collude to engage in cartel-like behavior.

And the other is the banks.;)

Banks aren't profiteering, in fact they're reacting to the costs they'll incur and capitalisation rules as they try to increase lending. When they lend more, generally we'll have more liquidity, and the costs of lending will decrease, then competition will nudge effective rates down again, but you have to get the chain of cause and effect running in the first place. The SVR hike is actually a positive, not a negative, step into recovery.

Disagree.

They are not increasing lending. The money supply is falling, despite more QE. The banking system is currently a big black hole into which we pour money and nothing comes out the other end.

If they were materially increasing lending, I wouldn't complain about higher rates as the economy would be recovering far more strongly.

But they're not.

Annoying maybe to those having to pay it on top of general costs increasing, but the money goes into the economy through the banks taking it either as profits or to allow more lending, so I'm really not sure why you think it's a big deal unless you've converted to a bear view of the world where money they can't spend because they've paid it to someone else suddenly disappears. This was Graham's argument a while ago, that there's some qualitative difference between money old people spend on costs against money they might spend on extras. And it's wrong.

Yes, I know on a very superficial level it has some similarities to Graham's erroneous drivel, but there are some important differences.

Money that goes into housing all comes out the other end. There is a seller for every buyer, and unless we can find a way to eliminate death ALL money and assets are eventually passed on to the younger generations.

However money going into the banks is simply not coming out the other end into the economy. It's being sat on, they are not lending it, and this is threatening the economic recovery.

On house prices incidentally, the irony is that increased lending will tend to moderate rather than increase prices, because it will release pent up supply as much as pent up demand and induce builders to invest.

True.

But they're too dense to realise that the only way to moderate house price growth in the future is to lend more money now so that more houses get built. As it stands today, low lending is only sowing the seeds of the next boom and bust cycle.

shortchanged_2

HAMISH_MCTAVISH wrote: »

Whilst completely failing to consider the total costs of buying a house which are at near record lows despite high house prices.
.

:eek:

Why do you think that is Hamish?

Would it be due to that fact that we currently have such low interest rates?

That is why the current situation is a ticking timebomb because there is a huge risk that people think they can afford these house prices now while the monthly payments may be low but often don't consider that interest rates can and will go up in the future. Very dangerous position.

chucknorris

Emy1501 wrote: »

That's exactly what I do. The problem is these people stuck on these SVRs tend not to be financially to clever.

Just like some people cant manage how much they can drink some people can't manage their finances. Allowing these people to think they can lead the lifestyle they are living now for ever will cause problems in the future.

So your advice is for them to pay an extra 0.5% mortgage cost each year to help them manage their finances?

Using your drinking reference it's like saying to an alcoholic drink more every month while you think of ways to cut down :rotfl:

Emy1501

chucknorris wrote: »

So your advice is for them to pay an extra 0.5% mortgage cost each year to help them manage their finances?

Using your drinking reference it's like saying to an alcoholic drink more every month while you think of ways to cut down :rotfl:

Nope by cutting their mortgage cost you giving them the illusion that they have money to spend which in due course you will take away suddenly. It bit like giving a drug addict more drugs then suddenly taking it off him in one go rather then weaning him off it.

Any way we will see in a few years what effect theses very low rates will have on the market lets hope your right