Bank of England MPC meeting November 3rd 2022 - what are your predictions and how are you preparing

Serve_the_Servants

Cheesy77 said:

Serve_the_Servants said:

The harsh truth is that if they are going to be flogging bonds from November, they really are restricted in what they can do with rate rises. They can no longer do 0.75-1.00 increments as far as I can see. Which is what we need. The bank rate should already be near 5% with inflation running at circa 10%. Because the country is used to cheap money and now they are worried about the impact of unwinding it all, it means we will get to 5-7% much more slowly. 

Interested to know your reasoning behind this? I think they are doing just as they need to by incremental steps. They cannot be sure at what level inflation will start to reduce, and it takes time to see the impact of each rise. Overshoot too quickly and it'll lead to an even bigger problem 

They know better than anyone that inflation won’t reduce markedly (and certainly not near to their target) because they have caused most of it by increasing the monetary supply over and over again…. to what is now an absolutely insane level. That - together with the demise of the pound - is why inflation is going to stay high. If they ignore inflation and start having smaller increases, or even decreasing rates again, then we will quickly end up on the path Turkey took (google their inflation rate) Maybe the BOE will start believing like Turkey that the way to tame inflation is to cut rates. Wouldn’t put it past them! The lunatics have taken over the asylum. 

Cheesy77

They know better than anyone that inflation won’t reduce markedly (and certainly not near to their target) because they have caused most of it by increasing the monetary supply over and over again…. to what is now an absolutely insane level. That - together with the demise of the pound - is why inflation is going to stay high. If they ignore inflation and start having smaller increases, or even decreasing rates again, then we will quickly end up on the path Turkey took (google their inflation rate) Maybe the BOE will start believing like Turkey that the way to tame inflation is to cut rates. Wouldn’t put it past them! The lunatics have taken over the asylum. 

I've seen what's going on in Turkey. Looks like they're doing a Truss x2 and going on a ridiculous pursuit of growth when inflation is at insane levels. 

I'm not saying they should cut rates here but I don't think jumping straight to 5% is the answer either. 

Serve_the_Servants

Cheesy77 said:

They know better than anyone that inflation won’t reduce markedly (and certainly not near to their target) because they have caused most of it by increasing the monetary supply over and over again…. to what is now an absolutely insane level. That - together with the demise of the pound - is why inflation is going to stay high. If they ignore inflation and start having smaller increases, or even decreasing rates again, then we will quickly end up on the path Turkey took (google their inflation rate) Maybe the BOE will start believing like Turkey that the way to tame inflation is to cut rates. Wouldn’t put it past them! The lunatics have taken over the asylum. 

I've seen what's going on in Turkey. Looks like they're doing a Truss x2 and going on a ridiculous pursuit of growth when inflation is at insane levels. 

I'm not saying they should cut rates here but I don't think jumping straight to 5% is the answer either. 

Yes of course I could be wrong, it’s been known. But IMO the main reason they are too timid is because they know so many of the British population just won’t survive high rates. They will simply be wiped out. Mortgage defaults, unsecured defaults galore. The whole economy is now built on cheap money and so many people are very highly leveraged on very meagre incomes. All of this means that no one really knows how to get us out of that mess. 

mi-key

I think they need to be very delicate now. They have already seen the effect the last increase had on the mortgage rates ( making real inflation, i.e. including mortgage payments a lot higher, not lower ). 

While they need to keep  the markets happy, they also need to not cause mass defaults and people losing their homes, which ultimately the government will end up having to foot the bill for. 

Most people can handle their weekly shopping going up by 10%, they can't handle their mortgage payments going up by hundreds a month. 

PK_London

It will be interesting to see how much the BOE raises rates given Jeremy Hunt's tax and spend plans have been delayed until the 17th November. They must have at least some guidance from the government to help them set their rate policy.

Aberdeenangarse

mi-key said:

I think they need to be very delicate now. They have already seen the effect the last increase had on the mortgage rates ( making real inflation, i.e. including mortgage payments a lot higher, not lower ). 

While they need to keep  the markets happy, they also need to not cause mass defaults and people losing their homes, which ultimately the government will end up having to foot the bill for. 

Most people can handle their weekly shopping going up by 10%, they can't handle their mortgage payments going up by hundreds a month. 

As has already been pointed out, whatever the next rate increase by the BoE  it’s unlikely to have much of an affect, if any, on most mortgage rates as it’s already been priced in.

It looks like there’s going to be quite a lot of pain for many peoples finances for the foreseeable future, with 5% mortgage rates being the new norm. House prices will probably drop and then stagnate for some time. There’s no way to sugar coat it.

 Mervyn King last Sunday.

https://www.bbc.co.uk/news/business-63364240

Sarah1Mitty2

Troy_af said:

And just a few days ago someone posted a MSE article saying that interest rates are expected to drop over the next few weeks, as did my broker, which is why I was advised to not apply for a new mortgage just yet.

I really don't think there is any point any more in asking for anybody's predictions because it is quite clear to me now that absolutely nobody, not even the so called "experts" have the slightest of clues as to what on earth is going on or what is going to happen.

This is how Ive decided to deal with it. I should be completing on a purchase within the next few months, with 8 properties in the chain. Ive already decided that if rates go up again and my offer expires for a third time, then I will be pulling out. The chain will probably collapse as a result. What an absolute mess!

Mortgage rates were expected to drop back a bit as the "mini-budget" got unwound, but the global trend is "tightening" so don`t expect rates to drop back to where they were, BOE need to do 1% to retain credibility with the markets IMO.

PK_London

Aberdeenangarse said:

mi-key said:

I think they need to be very delicate now. They have already seen the effect the last increase had on the mortgage rates ( making real inflation, i.e. including mortgage payments a lot higher, not lower ). 

While they need to keep  the markets happy, they also need to not cause mass defaults and people losing their homes, which ultimately the government will end up having to foot the bill for. 

Most people can handle their weekly shopping going up by 10%, they can't handle their mortgage payments going up by hundreds a month. 

As has already been pointed out, whatever the next rate increase by the BoE  it’s unlikely to have much of an affect, if any, on most mortgage rates as it’s already been priced in.

It looks like there’s going to be quite a lot of pain for many peoples finances for the foreseeable future, with 5% mortgage rates being the new norm. House prices will probably drop and then stagnate for some time. There’s no way to sugar coat it.

 Mervyn King last Sunday.

https://www.bbc.co.uk/news/business-63364240

That's quite presumptuous. There's currently a huge 4% gap between base rates and mortgage rates however what we have learnt is that mortgage rates are only loosely tied to BOE base rates. Its the swap rates that matter. There is every possibility that if base rates go up by 75bp next week then swap rates and therefore mortgage rates will follow. US mortgage rates are already at 7% and although they're not directly comparable to UK mortgage rates, they have proven to be the canary in the coal mine.

snowqueen555

Whatever happens it's been a real pain for those who have been looking to buy every time I've gone to apply just keeps going up. I'm hoping I can get the interest rate of 5.4% and think more than that then I don't think I will go for it.

Troy_af

snowqueen555 said:

Whatever happens it's been a real pain for those who have been looking to buy every time I've gone to apply just keeps going up. I'm hoping I can get the interest rate of 5.4% and think more than that then I don't think I will go for it.

Tell me about it. Its becoming an absolute circus now for me, I’ve never experienced anything like it. Get an offer accepted on my house and find a new property. The conveyancing process takes 6 month or longer, meaning everyone’s mortgages expire and the rates go up changing everything.. an endless cycle.

A year now trying to move. My mortgage expires in December. I highly doubt we’ll be ready by then, the solicitors have only had 7 months after all. I can see me applying for a new mortgage, then with the drop in house prices, the lender will maybe down value my onward purchase. What a mess.