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Interest rates
Comments
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nollag2006 wrote: »We can only hope for a cut to give house prices a bit of a push up, but I don't think we'll see anything before Christmas.
Good to see that we are at the top of the interest rate cycle though.
:money:
We may well be at the top of the latest set of rises. The news for borrowers may not be quite so good.
Banks raise funds to lend in 3 ways:
- Savers' funds
- Interbank money market
- Securitisation (packaging up debts and selling them on)
The problem is that the market for securitisation has all but dried up, almost completely removing that source of cheap funds.
LIBOR (London InterBank Offer Rate - a daily sample of the rate at which banks lend to each other) has shot up as the perceived counterparty risk has increased in the money markets. This means that source of funding has become a lot more expensive.
Annecdotally, it looks to me like savers' rates are heading higher too. That might just be me of course.
The most likely outcome as far as I can see is that for all but the 'primest of the prime', interest rates paid on consumer and mortgage debt is likely to rise not fall.0 -
No change - petrol at £1/l & food prices rocketing."Mrs. Pench, you've won the car contest, would you like a triumph spitfire or 3000 in cash?" He smiled.
Mrs. Pench took the money. "What will you do with it all? Not that it's any of my business," he giggled.
"I think I'll become an alcoholic," said Betty.0 -
Guy_Montag wrote: »No change - petrol at £1/l & food prices rocketing.
Food is only about 8% of the CPI weighting. Petrol far less.0 -
Reletive %ages of the CPI:Miscellaneous goods & services 10.0
Food & non-alcoholic beverages 10.3
Alcohol & tobacco 4.3
Clothing & footwear 6.2
Housing & household services 11.5
Furniture & household goods 6.8
Health 2.4
Transport 15.2
Communication 2.4
Recreation & culture 15.3
Education3 1.8
Restaurants & hotels 13.8
You'll notice housing isn't included. This is because the CPI was set up using a similar method of measuring inflation to that the ECB uses in preparation for the UK joining the Euro. The BoE/ONS/ECB are looking at a way to include it.
It's important to remember that the CPI isn't meant to represent the level of inflation that you face. It's just a proxy with a particular target. The RPI is meant to be more representative (hence its use for paying out on index linked bonds for example) but in reality, we all face our own individual inflation rate depending on how we spend our money.
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Reletive %ages of the CPI:
Food & non-alcoholic beverages 10.3
Alcohol & tobacco 4.3
Clothing & footwear 6.2
Housing & household services 11.5
Furniture & household goods 6.8
Health 2.4
Transport 15.2
Communication 2.4
Recreation & culture 15.3
Education3 1.8
Restaurants & hotels 13.8
Miscellaneous goods & services 10.0
You'll notice housing isn't included. This is because the CPI was set up using a similar method of measuring inflation to that the ECB uses in preparation for the UK joining the Euro. The BoE/ONS/ECB are looking at a way to include it.
It's important to remember that the CPI isn't meant to represent the level of inflation that you face. It's just a proxy with a particular target. The RPI is meant to be more representative (hence its use for paying out on index linked bonds for example) but in reality, we all face our own individual inflation rate depending on how we spend our money.
Rents (LA & private) are included, but mortgage costs are not. Of course rents have largely not changed in the last ten years, while property prices have rocketed.
Interestingly I earn a decent wage & live in a v. cheap property, my rent takes up 20% of my post tax income, so how many tenants here spend less than 12% of their expenditure on rent.
Looks like they'll introduce property prices, just as they start to tip into a crash - surely some co-incidence."Mrs. Pench, you've won the car contest, would you like a triumph spitfire or 3000 in cash?" He smiled.
Mrs. Pench took the money. "What will you do with it all? Not that it's any of my business," he giggled.
"I think I'll become an alcoholic," said Betty.0 -
As I say, it's a proxy for not a measure of inflation.
It's not as straight forward as it seems to measure housing costs as a %age of income. For example, how to measure a tenant on HB who gets more HB (to some extent at least) as their rent rises? Why measure rents at all when the majority own or are buying their home? What to measure for the large minority that own their house outright?
Let us not forget, if interest rates are cut and house prices rise, housing costs for all those with mortgages fall. It's only new buyers that face higher costs than they would have before (or have to buy a cheaper place).
It's not just as simple as saying, "HPI is xx%, the CPI is y% therefore the CPI is rubbish".0 -
As I say, it's a proxy for not a measure of inflation.
It's not as straight forward as it seems to measure housing costs as a %age of income. For example, how to measure a tenant on HB who gets more HB (to some extent at least) as their rent rises? Why measure rents at all when the majority own or are buying their home? What to measure for the large minority that own their house outright?
Let us not forget, if interest rates are cut and house prices rise, housing costs for all those with mortgages fall. It's only new buyers that face higher costs than they would have before (or have to buy a cheaper place).
It's not just as simple as saying, "HPI is xx%, the CPI is y% therefore the CPI is rubbish".
I'm not saying that - merely commenting that I'm surprised that rent is considered to be such a small expense & looking at some way to explain this. Whether as you say everyone who receives HB brings the average down, yet surely you should be looking at market rents, or including HB as part of that person's income - which it is, though they do not see it as such.
In America, I believe, they use the rentable value as a proxy for all owned properties. Though I suspect this is not a very accurate system.
You are, of course, there is a real problem where the majority of people own their own place (to an extent), yet this is not accounted for."Mrs. Pench, you've won the car contest, would you like a triumph spitfire or 3000 in cash?" He smiled.
Mrs. Pench took the money. "What will you do with it all? Not that it's any of my business," he giggled.
"I think I'll become an alcoholic," said Betty.0 -
They'll see this months CPI figures at the meeting unlike the previous few, if it wasn't for the petrol increase i'd say a drop might just be pushed through witht he petrol high im gonna guess CPI might be a 2%Money, Money, Money ..... Banks/Casinos/Bookies give me all you money its a poor mans world....0
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Guy_Montag wrote: »I'm not saying that - merely commenting that I'm surprised that rent is considered to be such a small expense & looking at some way to explain this.
If the average rent paid by tenants is 30% of their income and a third of the population are tenants then this would be about right wouldn't it?0
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