Inflation, Inflation, Inflation...

Crashy_Time

chucknorris wrote: »

I agree that many people will not be sensible with money, and some will get into trouble, but what I said was:

Having debt doesn't necessarily mean that you don't enjoy a positive cashflow.

Many businesses and individuals have sensible levels of debt, but as you say others do not, there will always be some that can't manage their financial affairs. I'd say it is almost certain that the sensible ones will have mainly mortgage debt and the less sensible ones unsecured credit debt, and somewhere in the middle there will be sensible people successfully managing their finances and saving to buy a house in the future. Debt isn't necessarily a bad thing.

Ok, I agree with you for the most part, but I think the stats and general state of the economy show that most ordinary people have not coped very well with nearly unlimited cheap credit over the past few years, and also IMO a say 600k mortgage on some very average house in a suburb of London is not how to "successfully manage finances". It might work for a while at near zero rates, but if interest rates move up many will be in trouble.

DiggerUK

Inflation, inflation, inflation.

Generali wrote: »

...aka if the recovery is so strong and the Fed is raising rates, why hasn't inflation taken off?............

A non sequitur, inside another non sequitur. A boom rekindled by funny money is not a recovery.
Raising rates has never been used to boost inflation, and as far as I know, has never been proposed as a means of doing so.

Prices for oil and US farm produce are low because production is higher than demand.

Overall, the worlds ability to produce goods cheaper and in larger quantities has never been greater. There will be losers in the world, and it won't be pretty..._

~Debt has never led to economic collapse, but shortage of liquidity to service debts has. Insolvency is how the next economic malaise will come about, same as ever..._

Generali

Crashy_Time wrote: »

The problem with your analysis and Chuck`s is that your economic world view takes things like "buyers" and "consumers" as a given, as if there are hordes of these people just waiting in the wings to take up the slack. People are tapped out and heavily indebted after the biggest credit experiment in history, oil is going to stay low, property is going to crash and markets are going to crash. Tracker funds, cash, and cheap rent or debt free home are the way to go.

Why would shares 'crashing' not impact on tracker funds? It seems highly unlikely to me, mathematically impossible actually.

cells

Crashy_Time wrote: »

Ok, I agree with you for the most part, but I think the stats and general state of the economy show that most ordinary people have not coped very well with nearly unlimited cheap credit over the past few years, and also IMO a say 600k mortgage on some very average house in a suburb of London is not how to "successfully manage finances". It might work for a while at near zero rates, but if interest rates move up many will be in trouble.

less than 3% of London homes transact per year

2015 £500k 3% of transactions
2014 £456k 3% of transactions
2013 £392k 3% of transactions
2012 £355k 3% of transactions
2011 £338k 3% of transactions

If prices fall 10% it only really harms just 3% of transactions
If prices fall 20% it only really harms just 6% of transactions

of course only the lunatic fringe think 50% off by Christmas. More than 20% down imo is impossible and if it happened it impacts very few people.

(PS also worth noting that of the transactions not all probably not even a majority will be new buyers eg FTBs and BTLs. A lot will be seller buyers moving sideways. In which case you can cut the number of impacted people in HAlF. So a 20% fall might only really impact some 3% of transactions over the last two years in London

So pretty safe and good prudent lending and investment, despite what some nutter on the internet says (and has been saying for a long time).

worldtraveller

UK inflation as measured by the Consumer Prices Index was unchanged at 0.3% in February, according to the Office for National Statistics.

The largest downward contribution came from the transport sector, from price changes for items such as road passenger transport, second-hand cars and bicycles.

Rising food prices, particularly for vegetables, offset this.

ONS

Generali

worldtraveller wrote: »

UK inflation as measured by the Consumer Prices Index was unchanged at 0.3% in February, according to the Office for National Statistics.

The largest downward contribution came from the transport sector, from price changes for items such as road passenger transport, second-hand cars and bicycles.

Rising food prices, particularly for vegetables, offset this.

ONS

I'd be interested to see the services inflation which is largely governed by wages rather than goods inflation which has many inputs but is governed more by the oil price than anything else.

Oil prices can't fall much further. Wages can rise by a large amount. In the UK the employment rate is at an all time high and unemployment benefits claims are at a 40 year low just about.

I still am of the opinion that inflation and interest rates will rise and rise quickly.

Filo25

Generali wrote: »

I'd be interested to see the services inflation which is largely governed by wages rather than goods inflation which has many inputs but is governed more by the oil price than anything else.

Oil prices can't fall much further. Wages can rise by a large amount. In the UK the employment rate is at an all time high and unemployment benefits claims are at a 40 year low just about.

I still am of the opinion that inflation and interest rates will rise and rise quickly.

The one opposing argument to this with regards to the Labour market though is I do think there is a lot of underemployment out there, I think there is more slack in the Labour market than you might think from looking at the headline unemployment numbers.

I do agree though that its hard to see the inflationary environment looking quite so benign in the medium term.

CLAPTON

Filo25 wrote: »

The one opposing argument to this with regards to the Labour market though is I do think there is a lot of underemployment out there, I think there is more slack in the Labour market than you might think from looking at the headline unemployment numbers.

I do agree though that its hard to see the inflationary environment looking quite so benign in the medium term.

I would agree there is a lot of underemployment out there;
in addition the steady increase in the supply of labour will hold wage inflation down (albeit increased by the upgrade to the NMW

Filo25

cells wrote: »

less than 3% of London homes transact per year

2015 £500k 3% of transactions
2014 £456k 3% of transactions
2013 £392k 3% of transactions
2012 £355k 3% of transactions
2011 £338k 3% of transactions

If prices fall 10% it only really harms just 3% of transactions
If prices fall 20% it only really harms just 6% of transactions

of course only the lunatic fringe think 50% off by Christmas. More than 20% down imo is impossible and if it happened it impacts very few people.

(PS also worth noting that of the transactions not all probably not even a majority will be new buyers eg FTBs and BTLs. A lot will be seller buyers moving sideways. In which case you can cut the number of impacted people in HAlF. So a 20% fall might only really impact some 3% of transactions over the last two years in London

So pretty safe and good prudent lending and investment, despite what some nutter on the internet says (and has been saying for a long time).

I am one of the muppets buying in London now as well, fully aware that a correction to London values may well be just around the corner.

The problem I have as a FTB is that there just aren't that many areas of London left that I am willing to live in that are still affordable, another 20-30% rise would knock me out of the market altogether.

Even though I am pretty optimistic on rates remaining low I fixed for 5 years, just to avoid remortgaging in the short term in case there is a significant correction and I don't want to be trapped on SVR if that happens.

Ultimately its a property I intend to own until retirement (unless we get an opportunity to upsize but not a major priority) so short term moves aren't of too much interest to me anyway, obviously would prefer not to buy at the top of the market but who honestly knows if this is the top of the market or not.

We aim to be overpaying on the mortgage significantly within a few years, so if there was a modest pullback we might even use it as an opportunity to move up in the market. If rates went to 10% at the time of remortgaging, we could still pay that, and I REALLY don't think that is going to happen in the forseeable future.

cells

Filo25 wrote: »

I am one of the muppets buying in London now as well, fully aware that a correction to London values may well be just around the corner.

The problem I have as a FTB is that there just aren't that many areas of London left that I am willing to live in that are still affordable, another 20-30% rise would knock me out of the market altogether.

Even though I am pretty optimistic on rates remaining low I fixed for 5 years, just to avoid remortgaging in the short term in case there is a significant correction and I don't want to be trapped on SVR if that happens.

Ultimately its a property I intend to own until retirement (unless we get an opportunity to upsize but not a major priority) so short term moves aren't of too much interest to me anyway, obviously would prefer not to buy at the top of the market but who honestly knows if this is the top of the market or not.

We aim to be overpaying on the mortgage significantly within a few years, so if there was a modest pullback we might even use it as an opportunity to move up in the market. If rates went to 10% at the time of remortgaging, we could still pay that, and I REALLY don't think that is going to happen in the forseeable future.

dont worry about it its probably the right thing to do.
Prices may be high but mortgage rates are low which should help pay down the debt sooner and the interest be a smaller burden.

London prices are getting too high. A solution one that I would favour even though it would harm my own fortunes is that the council/social stock in inner London zone 1 & 2 & 3 should be sold off as it becomes vacant until each borough is at 10% social stock.
That would help the London problem greatly and help reallocate housing more efficiently