Are we expecting BOE to remain at 4.75% on 8th February 2025?

BikingBud

RelievedSheff said:

Aberdeenangarse said:

RelievedSheff said:

Aberdeenangarse said:

lojo1000 said:

Aberdeenangarse said:

lojo1000 said:

Here begin the cries for help for those who overcommitted on their mortgage.

https://www.theguardian.com/business/live/2023/jun/16/mortgage-rates-uk-government-urged-to-provide-emergency-help-costs-rising-nationwide-liberal-democrats-business-live?filterKeyEvents=false&page=with:block-648bfde38f08abfd8db3db78#block-648bfde38f08abfd8db3db78

It was only a question of time. I doubt they’ll be much the Government can do to prop up the housing market before the next General Election, and bringing MIRAS back is a no no. Frightening to see repossessions up 50% in the last quarter! I quite like the LibDems idea for targeted help to stop people losing their homes. Sensible idea.

Serious question, to draw a comparison. Would you also support financial help for renters who fall behind on their rent because the rent went up? 

Difficult question I really can’t answer. I actually own two BTL’s and the rent the tenants are paying was already below the market rate and is now well below. Probably by about 25%! 

So raise the rents at the next opportunity.

They are long term decent tenants and I somehow doubt either of them could afford to pay the going rate and I’m certainly not going to throw them out on the streets! The last increase, a year ago, was 5% which I thought fair. The properties are mortgage free and just extra money to me, ensuring a well off retirement!

Not sure how that becomes your problem.

7 words that sum up the worst of society 

TheAble

Altior said:

There's a strange delusion with the property market, where people seem to want uber cheap borrowing forever, easy access to the market for first time/young buyers, a property market correction, stable property prices and no repossessions.

Repossessions must be possible, the cost of borrowing must be able to go up, it must be quite tough to access the market.

It's unfortunate if an individual or family is on the wrong side of one of those variables, but that is life. Big financial choices have risk attached to them. There has to be a moral hazard. You can't go to the limit to get a big house, borrow £40K to furnish it, get a £30K Audi on pcp, and expect other people to pick up the tab if interest rates go up. 

Also completely agree. Though I suspect unfortunately this is where we're heading - as soon as the repos and the squealing starts, the government will step in. And those who were sensible and frugal and put money aside to protect themselves against interest rate rises will get nothing, whereas the feckless will be made whole. It seems to be the modern way, sadly.

norsefox

sevenhills said:

lojo1000 said:

More pain for those looking to remortgage today as wages rise more than expected.

Surely there are more things causing inflation than just wage increases/decreases?

I would say that wage increases 4% below inflation is causing inflation to decrease.

I’d agree with that logic.

The UK is suffering higher inflation that just about any comparable nation. The causes are numerous; some out of our control, and some caused entirely by our own poor decision making.

The Chancellor and BoE keep bemoaning pay increases and workers demanding more, as if a) that isn’t entirely how ‘free’ markets are meant to work, and b) higher wages with frozen tax thresholds doesn’t significantly increases the tax take and benefit the exchequer anyway. 

It’s interesting that Sunak’s view in 2019 was that tax collection relative to GDP should be 35%, if not acceptable at 37.5% and chastised Labour’s planning for 39.1%. We’re now at 40% and it will continue to climb through to 2028 when the current plan is to unfreeze thresholds. Lord knows what we’ll actually end up at.

With interest rates going where they are, and inflation remaining stubbornly high I can’t see any plausible way thresholds stay where they are. The number of people paying HRT has sky-rocketed since its introduction and will continue to climb. People on middle incomes shouldn’t be losing 42%/44%/50%+ of their earnings. 

Perhaps I am overly cynical, but I can’t see any way out of the current predicament. We’re a second-tier global nation, with a third-rate government, and a political class absolutely determined to tackle every problem except the ones that are causing our pain.

We probably need to get used to lower living standards, paying higher taxes, for worse outcomes than we did 10-20 years ago.

Aberdeenangarse

We probably need to get used to lower living standards, paying higher taxes, for worse outcomes than we did 10-20 years ago

That’s what it looks like is going to happen.

sevenhills

norsefox said:

The Chancellor and BoE keep bemoaning pay increases and workers demanding more, as if a) that isn’t entirely how ‘free’ markets are meant to work, and b) higher wages with frozen tax thresholds doesn’t significantly increases the tax take and benefit the exchequer anyway. 

We probably need to get used to lower living standards, paying higher taxes, for worse outcomes than we did 10-20 years ago.

Some are demanding a catch up pay rise, but I think that they will all accept a below inflation pay rise.
The Government seems to be winning the media battle, no media outlet even mentions the money supply. It's almost like high pay rises caused this inflation 

RelievedSheff

BikingBud said:

RelievedSheff said:

Aberdeenangarse said:

RelievedSheff said:

Aberdeenangarse said:

lojo1000 said:

Aberdeenangarse said:

lojo1000 said:

Here begin the cries for help for those who overcommitted on their mortgage.

https://www.theguardian.com/business/live/2023/jun/16/mortgage-rates-uk-government-urged-to-provide-emergency-help-costs-rising-nationwide-liberal-democrats-business-live?filterKeyEvents=false&page=with:block-648bfde38f08abfd8db3db78#block-648bfde38f08abfd8db3db78

It was only a question of time. I doubt they’ll be much the Government can do to prop up the housing market before the next General Election, and bringing MIRAS back is a no no. Frightening to see repossessions up 50% in the last quarter! I quite like the LibDems idea for targeted help to stop people losing their homes. Sensible idea.

Serious question, to draw a comparison. Would you also support financial help for renters who fall behind on their rent because the rent went up? 

Difficult question I really can’t answer. I actually own two BTL’s and the rent the tenants are paying was already below the market rate and is now well below. Probably by about 25%! 

So raise the rents at the next opportunity.

They are long term decent tenants and I somehow doubt either of them could afford to pay the going rate and I’m certainly not going to throw them out on the streets! The last increase, a year ago, was 5% which I thought fair. The properties are mortgage free and just extra money to me, ensuring a well off retirement!

Not sure how that becomes your problem.

7 words that sum up the worst of society 

Why would you sell (or rent) someone something knowing full well you could get more for that same product (or property) from someone else?

Sarah1Mitty2

TheAble said:

Altior said:

There's a strange delusion with the property market, where people seem to want uber cheap borrowing forever, easy access to the market for first time/young buyers, a property market correction, stable property prices and no repossessions.

Repossessions must be possible, the cost of borrowing must be able to go up, it must be quite tough to access the market.

It's unfortunate if an individual or family is on the wrong side of one of those variables, but that is life. Big financial choices have risk attached to them. There has to be a moral hazard. You can't go to the limit to get a big house, borrow £40K to furnish it, get a £30K Audi on pcp, and expect other people to pick up the tab if interest rates go up. 

Also completely agree. Though I suspect unfortunately this is where we're heading - as soon as the repos and the squealing starts, the government will step in. And those who were sensible and frugal and put money aside to protect themselves against interest rate rises will get nothing, whereas the feckless will be made whole. It seems to be the modern way, sadly.

Can you roughly outline how you see this happening, without it being inflationary and causing even more interest rate hikes, or worse a full blown run on the currency?

Sarah1Mitty2

RelievedSheff said:

BikingBud said:

RelievedSheff said:

Aberdeenangarse said:

RelievedSheff said:

Aberdeenangarse said:

lojo1000 said:

Aberdeenangarse said:

lojo1000 said:

Here begin the cries for help for those who overcommitted on their mortgage.

https://www.theguardian.com/business/live/2023/jun/16/mortgage-rates-uk-government-urged-to-provide-emergency-help-costs-rising-nationwide-liberal-democrats-business-live?filterKeyEvents=false&page=with:block-648bfde38f08abfd8db3db78#block-648bfde38f08abfd8db3db78

It was only a question of time. I doubt they’ll be much the Government can do to prop up the housing market before the next General Election, and bringing MIRAS back is a no no. Frightening to see repossessions up 50% in the last quarter! I quite like the LibDems idea for targeted help to stop people losing their homes. Sensible idea.

Serious question, to draw a comparison. Would you also support financial help for renters who fall behind on their rent because the rent went up? 

Difficult question I really can’t answer. I actually own two BTL’s and the rent the tenants are paying was already below the market rate and is now well below. Probably by about 25%! 

So raise the rents at the next opportunity.

They are long term decent tenants and I somehow doubt either of them could afford to pay the going rate and I’m certainly not going to throw them out on the streets! The last increase, a year ago, was 5% which I thought fair. The properties are mortgage free and just extra money to me, ensuring a well off retirement!

Not sure how that becomes your problem.

7 words that sum up the worst of society 

Why would you sell (or rent) someone something knowing full well you could get more for that same product (or property) from someone else?

Because the "someone else" could be more transient, more trouble, or a young person with potential to lose a job and go back to parents etc., the poster doesn`t want to lose long term tenants and a long term income stream, that is the risk all landlords take with hiking rents.

michaels

This is going to be unpopular but the point of interest rises is to take spending power out of the economy, cooling demand for products and labour to the point where increasing prices, including wages, the price of labour, simply chokes of demand thus killing inflation.

However as a tool it hits very unequally, mentioned elsewhere was that currently only 30% of home owners have a mortgage down from 4%+ (older homeowners who have paid of their mortgage plus more renters).  So basically it is this 30% who will need to take the hit on disposable income and lower consumption to bring the economy back into balance whilst the other 70% have a free ride.

The other way to reduce demand is through fiscal policy.  The govt could increase taxes on everyone but not increase spending and share the pain equally - other pluses are that this is pretty much instantaneous in impact, not like IR increases which are trickling through as fix rates end and the extra govt income would increase the rate of increase in the national debt, reducing the interest bill (less debt and a lower interest rate due to more sustainable debt) allowing a lower tax burden in the future.

I guess reasons not to are political expediency - why hit rich retired Tory voters and the fact interest increases come through as bills from the banks as a result of the 'Independent' BoE so are less directly caused by the govt.

lojo1000

michaels said:

This is going to be unpopular but the point of interest rises is to take spending power out of the economy, cooling demand for products and labour to the point where increasing prices, including wages, the price of labour, simply chokes of demand thus killing inflation.

However as a tool it hits very unequally, mentioned elsewhere was that currently only 30% of home owners have a mortgage down from 4%+ (older homeowners who have paid of their mortgage plus more renters).  So basically it is this 30% who will need to take the hit on disposable income and lower consumption to bring the economy back into balance whilst the other 70% have a free ride.

The other way to reduce demand is through fiscal policy.  The govt could increase taxes on everyone but not increase spending and share the pain equally - other pluses are that this is pretty much instantaneous in impact, not like IR increases which are trickling through as fix rates end and the extra govt income would increase the rate of increase in the national debt, reducing the interest bill (less debt and a lower interest rate due to more sustainable debt) allowing a lower tax burden in the future.

I guess reasons not to are political expediency - why hit rich retired Tory voters and the fact interest increases come through as bills from the banks as a result of the 'Independent' BoE so are less directly caused by the govt.

I don't think central banks should be setting rates at all. They should be responsible for regulation and acting as lender of last resort on a penal basis.

If multibillion $ banks cannot manage their business, they should not be in business.  If they are so clever as to be rewarded with being kept in business then why could they not see the 2008 property bubble coming - so many commentators did and they saw it coming years before it happened. 

Of course, we know it is political connections that matter, not common sense. Why were stress tests removed?

What will be there excuse this time around?

Let the bad banks fail and you will see more focus on risk based lending as opposed to speculation.

Reduce the amount of borrowing allowed against property; over time taking it down to 50% LTV. The exception being new-builds.

This reduces prices and speculation. Reduces financial risk on the borrower and lender. Reduces money in the economy thereby dampening inflation.

Money will be directed toward productive investment rather than financial speculation of capital gains on property.

- the secondary market for property is nowhere near as productive (when compared to new builds) and only serves to facilitate changes in circumstance (family, job, etc).

- much better to encourage capital investment in improving transport, developing new technologies, building new houses where needed, etc.


Yes, there will be pain for some years whilst price correct.  But as we currently, too many experience the boom bust and it puts the potential growth of the country at risk every cycle.