BOE MPC - Interest Rates remain at 0.5%

padington

westernpromise wrote: »

Only in yield terms; or they flatlined.

We've seen two iterations of this in recent times. In 1993ish to 1996ish house prices levelled off, interest rates happened to go down and rents did indeed go down too.

The rent on my place in W9 has been ~£30k a year for a good 7 years now.

But it was a buyers market 93 and 96 wasn't it ? In a sellers market the cost savings wouldn't have got passed on.

caronoel

westernpromise wrote: »

Only in yield terms; or they flatlined.

We've seen two iterations of this in recent times. In 1993ish to 1996ish house prices levelled off, interest rates happened to go down and rents did indeed go down too.

The rent on my place in W9 has been ~£30k a year for a good 7 years now.

I've seen the rent on my properties in sw11 as sw4 rise by 5 to 8% annually over the past 7 years! While the underlying asset value has more or less doubled in the same time frame.

So the overall effect is that the yield has fallen from 8% to 5%.

Still happy at those levels though

mwpt

mwpt wrote: »

Yes, thank you. I've been meaning to explore this for a while.

My current understanding from an outside view is that mortgage rates are set by buyers of the MBS (mortgage backed securities) products. In the same way that government bond prices are set by the buyers of those bonds. Central banks buying the bonds of course suppresses the price. I'm not sure whether the central banks buy MBS?

So of course as yields on government bonds and other investments are suppressed, so the market chases lower yields on MBS and so underlying mortgage rates can come down.

Anyone have more first hand experience with how mortgage rates are set?

So yeah, the fed at least does buy mortgage-backed securities.

http://www.bloomberg.com/news/articles/2016-02-10/this-is-why-the-fed-is-paying-interest-to-big-banks

During and after the financial crisis, the Fed bought trillions of dollars in Treasuries and mortgage-backed securities. It didn't pay for them with wads of bills. Instead, it simply credited the sellers of the securities with bigger reserves at the Fed. So now banks have way more reserves than they could possibly use.

Interesting to note that not only does the central bank buy the debt based assets created out of nothing, but by doing so it increases the reserves of the private banks in the process, allowing them to create more debt out of nothing. No wonder banks preferred creating mortgage debt than lending to business.

This of course keeps mortgage rates low. I haven't managed to find if the BOE buys MBS' directly or if the yield is merely suppressed indirectly. I'm not at all surprised that the more risky mortgage lending was curbed by regulators given the above and the potential for abuse by private banks.

All of it strikes me as just an incredible unwieldy mess. How do they pull back from this?

lisyloo

chucknorris wrote: »

I certainly don't see my rental properties in the way that you describe them, I lived in them myself for about 15 years.

As a renter I would. Not because of your property which I'm sure are relatively nice but because of the size/location/commute being rubbish for the price. i mean in terms of the value perceived by the average individual and not relative to general supply and demand.
I am certainly not alone in thinking London prices are stratospheric for what you get and I mean anywhere inside reasonable commuting distance not just Pcl.

chucknorris

lisyloo wrote: »

As a renter I would. Not because of your property which I'm sure are relatively nice but because of the size/location/commute being rubbish for the price. i mean in terms of the value perceived by the average individual and not relative to general supply and demand.
I am certainly not alone in thinking London prices are stratospheric for what you get and I mean anywhere inside reasonable commuting distance not just Pcl.

Everyone has different preferences, but:

Location: Battersea was my chosen area, of course I can understand why someone might want to live somewhere else, but this is where I chose to live, and as far as I know my tenants really like Battersea too (it isn't a cheap alternative).

Commute: My commute was a 23 min cycle to work. Others could cycle to the West end too, if not, there are plenty of buses and trains, I sometimes walked to work during the Summer too.

Size: They are large 2 and 3 bed properties, as I was single at the time, there were more than adequate for me. They are also decent size for 2/3 sharers too.

The point is that he said:

'and take the least worst of a !!!!!! bunch'

They would of course be considered expensive when compared to other areas outside London, I too think that London rents are bonkers, but my properties are definitely not '!!!!!!'

westernpromise

caronoel wrote: »

I've seen the rent on my properties in sw11 as sw4 rise by 5 to 8% annually over the past 7 years!

There was a noticeable jump at one point, when one pair of tenants who’d been paying about £400 a week left and it then re-let for about £500. Since then though it has varied between £550 and £575 a week, largely from circumstances. Someone from Australia with no local renting history paid up a bit for it, someone else who wanted to move in the day after the last tenant moved out got a discount, and so on.

My void minimization strategy is to make tenants think hard about leaving because they’ve got the best landlord they’ve ever had or heard of. If anything needs fixing they phone the letting agents rather than me, and said agents have a £1,500 float that funds whatever tradesmen are required. They don’t have to argue with the tightwad landlord over what needs doing; the agents just sort it and tell me about it later. The tenants don’t have to wait in at home for tradesmen either, unless they want to be there. The agents use the same 2 or 3 firms, so they just stop off at the office, collect the spare keys en route to the job, and drop them back. Looking at what the agents pay tradesmen, they get better prices than I ever managed. If an appliance misbehaves I never repair it, I just replace it with a brand new one with a warranty, which can usually be done within a working day. The record was when the tenants reported a dodgy microwave in the morning, and when they got home from work that evening, it had been replaced.

I figure if you’re spending £30k a year with me, you deserve some proper service. My own landlords in contrast have mostly been the most ghastly cheapskates. I was renting a million-quid house off one and when the ancient washing machine door failed the landlord made us wait a week while a replacement door was ordered, which he thought was going to save him some money. That failed as well, the whole machine had to replaced anyway, so he bought a Beko - the cheapest made-in-Turkey washing machine possible; a million quid house with a £190 washing machine in it. We left not long after. I’d have replaced it with another Neff or another Miele or whatever, so they get a new machine under warranty, and I’d have avoided the 5-month void he’s currently enjoying. I think the Beko mentality and the having-a-lot-of-voids problem are two cheeks of the same bottom.

I’m convinced that paying for management is actually net free or even a benefit. It is so much better for the tenants that they either stay longer or pay more or both.

worldtraveller

British factories had their weakest month in nearly three years in February, a survey showed on Tuesday, raising a warning signal that the country's recovery from the financial crisis could be slowing further.

The Markit/CIPS manufacturing Purchasing Managers' Index (PMI) fell sharply to 50.8, below all the forecasts in a Reuters poll, from 52.9 in January. It was just above the reading of 50 delineating expansion from contraction.

"The near-stagnation of manufacturing highlights the ongoing fragility of the economic recovery at the start of the year and provides further cover for the Bank of England's increasingly dovish stance," Rob Dobson, a senior economist at Markit, said.

Reuters

caronoel

worldtraveller wrote: »

British factories had their weakest month in nearly three years in February, a survey showed on Tuesday, raising a warning signal that the country's recovery from the financial crisis could be slowing further.

The Markit/CIPS manufacturing Purchasing Managers' Index (PMI) fell sharply to 50.8, below all the forecasts in a Reuters poll, from 52.9 in January. It was just above the reading of 50 delineating expansion from contraction.

"The near-stagnation of manufacturing highlights the ongoing fragility of the economic recovery at the start of the year and provides further cover for the Bank of England's increasingly dovish stance," Rob Dobson, a senior economist at Markit, said.

Reuters

And your point is???????????????

DiggerUK

Hopefully, the unrealistic expectations of a 'normalisation' of rates, has now been set aside with the conclusion that this crisis still has legs on it..._

http://www.bbc.co.uk/news/business-35831827

Thrugelmir

DiggerUK wrote: »

Hopefully, the unrealistic expectations of a 'normalisation' of rates, has now been set aside with the conclusion that this crisis still has legs on it..._

If deflation sets in. Then even nominal rates of interest become "real".