Inflation will rise faster than expected

John_Pierpoint

Surely the global economy is a "devil take the hindmost" competitive situation?
The Western world in particular is failing to keep ahead of the pack, being overtaken in the rat race and so has falling living standards as its outlook ?
The days when the USA federation in particular had a clear technical & productivity advantage over the war ravaged empires of the rest of the world, are long gone.
However the politicians are still talking platitudes, adjusting the value of money and trying to buy votes, with the voters money.

I was wondering yesterday, following the tweets about Google, Amazon & Starbucks fiddling their tax liabilities, which side of the argument had the moral high ground.

Eellogofusciouhipoppokunu

Just out of interest, will those people on here who are expecting high inflation be securing a 10 year fixed rate mortgage?

Just asking because I often see predictions on here (or claims of past predictions unsupported by evidence) but not too many people actually acting on their predictions. It kinda makes me wonder what the point of making the prediction is in the first place if the predictor doesn't actually do anything?

Ok, I can see that people can play 'king of the forum' but that really doesn't put much money in your pocket does it?

Perhaps one answer is that the predictor really isn't so sure of their own prediction to actually put their money where their mouth is?

I remember that some bloke used to go on about peak oil and how it would decimate Western civilisation. I used to ask him what he was doing on a personal level to protect himself because I held a similar view about rising oil/energy prices and set up our lifestyle to reduce our family's reliance on it. This person didn't do anything, it turned out he just liked scaring other people.

wotsthat

poppy10 wrote: »

Only if wages are rising in line with inflation. As it is, wages are stagnant while the cost of living is going up, meaning people are getting squeezed - high inflation is doing nothing to help them, unlike previous inflationary periods

We don't have high inflation and wages are increasing.

If my mortgage debt today is £100,000 and inflation is 4% then this time next year in real terms it's value will have decreased by £4000 regardless of any wage increase.

If I've fixed my mortgage payments then ANY pay rise will be beneficial - in a years time the mortgage payment will be the same but I'll be earning more.

Yes the cost of living may well be increasing but that affects everyone regardless of whether they have a mortgage or not. However, our nervous mortgage holder with a fixed rate won't be see his mortgage payment increasing so his personal inflation rate may well be lower overall than the average. A fixed rate is a hedge against inflation.

They could rent but I can't see rents falling or being stable in an inflationary environment so that doesn't seem to offer a better hedge against inflation.

Eellogofusciouhipoppokunu

wotsthat wrote: »

We don't have high inflation and wages are increasing.

If my mortgage debt today is £100,000 and inflation is 4% then this time next year in real terms it's value will have decreased by £4000 regardless of any wage increase.

On average you'll also be 4% closer to being mortgage free, based on a standard 25 year mortgage.

wotsthat

Eellogofusciouhipoppokunu wrote: »

Just out of interest, will those people on here who are expecting high inflation be securing a 10 year fixed rate mortgage?

I'm considering a 5 or 10 year fix (preferably offset) mainly because I tend to be cautious. Additionally I find it hard to believe that rates will be any lower than today in 5 or 10 years. There would be a monthly premium over current payments - I just need to take a view on the cost of security vs. the risk that rates go nowhere for 5 to 10 years.

2015 is a good break point for me so I'd like to hang on until then - obviously interest rates don't change for my convenience but I can't really see high rates before then.

Don't know what the G-Gang plan to do - they tend to sit in judgement of others rather than share their own plans.

wotsthat

Eellogofusciouhipoppokunu wrote: »

On average you'll also be 4% closer to being mortgage free, based on a standard 25 year mortgage.

4% in total payment terms or 4% in time terms?:)

Always best to be clear.

CLAPTON

inflation i.e. an increase in prices makes no difference to your debt or the date you become mortgage free.

the reason that people say inflation is a solution to debt is because historically price inflation has been closely related to wage inflation.

so wage inflations means that as a proportion of your income the mortgage repayments are lower

you could choose to maintain your mortgage payments at the same proportionate level and so become debt free quicker

Eellogofusciouhipoppokunu

wotsthat wrote: »

I'm considering a 5 or 10 year fix (preferably offset) mainly because I tend to be cautious. Additionally I find it hard to believe that rates will be any lower than today in 5 or 10 years. There would be a monthly premium over current payments - I just need to take a view on the cost of security vs. the risk that rates go nowhere for 5 to 10 years.

2015 is a good break point for me so I'd like to hang on until then - obviously interest rates don't change for my convenience but I can't really see high rates before then.

Don't know what the G-Gang plan to do - they tend to sit in judgement of others rather than share their own plans.

I think the 10 year fixed offset is just about the most secure mortgage you could get. Unlimited overpayments, tax benefits, instant access to a vast pool of cash and the security of knowing how much you'll be paying on your mortgage for the next 10 years. Can't really beat it.

As a mortgage is most people's largest monthly bill, often by a country mile, it makes sense to lock down your largest 'cost of living'. A bit like buying a rail season ticket on the 31st December before rail fares rise on 1st Jan, knowing that your inflation related pay rise will come in April and so locking in those rail prices you'll not only have prevented 3 months (Jan-Mar) of reduced income prior to the April pay rise, but also gain from 9 months of increased income from the inflation linked payrise.

One regular on here never really understood that you could lock down the inflation that costs you money (product inflation) and therefore benefit from inflation that gains you money (wage inflation). There again, less abstract financial concepts are difficult for him so I'm not surprised he didn't get it.

Eellogofusciouhipoppokunu

wotsthat wrote: »

4% in total payment terms or 4% in time terms?:)

Always best to be clear.

Yes. After all, we are penning legal documents that could impact Nations, not just posting in an obscure corner of the internet.


Oh... hang on!

JonnyBravo

Eellogofusciouhipoppokunu wrote: »

Just out of interest, will those people on here who are expecting high inflation be securing a 10 year fixed rate mortgage?

Just asking because I often see predictions on here (or claims of past predictions unsupported by evidence) but not too many people actually acting on their predictions. It kinda makes me wonder what the point of making the prediction is in the first place if the predictor doesn't actually do anything?

Ok, I can see that people can play 'king of the forum' but that really doesn't put much money in your pocket does it?

Perhaps one answer is that the predictor really isn't so sure of their own prediction to actually put their money where their mouth is?

I remember that some bloke used to go on about peak oil and how it would decimate Western civilisation. I used to ask him what he was doing on a personal level to protect himself because I held a similar view about rising oil/energy prices and set up our lifestyle to reduce our family's reliance on it. This person didn't do anything, it turned out he just liked scaring other people.

Well more broad brush strokes and I'd like to be noted as an exception once again.
I took a fixed rate offset for 10 years over 4 years ago from FD. A poor decision (so far) it turns out as the flexible offset would have saved me money (so far).
Not terrible though as it used for BTL purposes so at least it saves me paying so much tax.
It is at times entirely offest and at others only minimally as the money is used to trade/invest in shares.