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

Sarah1Mitty2

michaels said:

lmitchell said:

michaels said:

Aberdeenangarse said:

Any additional help for mortgage holders would increase inflation which is why it’s a no no.

Why put in place a policy to remove spending power from the economy - only to replace it using borrowed money.  Even for the lib dems it is a bonkers policy - so expect to see it in place before Christmas...

This is the whole problem though, isn't it? There isn't any spending power in the economy anyway. It's flatlined for the last 6 months and is almost certain to enter life support in the next 6 months.

As so many people keep saying, where do the BoE and government expect ordinary families to just magic an extra £3-4k out of thin air? And before anyone says 'they should've budgeted for this when buying', a rise of 500 basis points in just over a year is something no economist countenanced pre-Ukraine war.

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

Higher borrowing costs eventually reduce the cost of all property, whether it is mortgaged or not, and housing is most people`s biggest cost of living outgoing, reducing the price of housing is just one aspect of reducing overall cost of living though, and of course many people without a problematic mortgage may have other debts that will be increasing in cost to service.

RelievedSheff

lojo1000 said:

MattMattMattUK said:

Strummer22 said:

michaels said:

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

That's ignoring renters. Most landlords have mortgages which have also gotten more expensive, hence they put rent up and that affects a much larger % of the population.

The majority of, but roughly 60/40, landlords have mortgages. . There are some inconsistencies in the data because some is collected nationally, where as others at by England & Wales, Scotland and NI separately. 
Using the 29 million household figure as a baseline, 28.2% of those have a mortgage against them, so 8.17 million. Of that 2.7 million are BTL mortgages, 61% vs 1.7 million, 39% without mortgages. 

Strummer22 said:

Only those with no housing costs, which I suppose is the opposite ends of the spectrum from social housing paid for by benefits, to those with fully paid off mortgages, are completely immune to the increased costs of borrowing. 

Of the 71.8% of dwellings owned without mortgages the majority are owner occupied, some will be second homes and some will be rental. Social housing paid for from benefits (so the taxpayer) will likely fall under both mortgaged and non-mortgaged property, as well as some of the rental property being paid for by the taxpayer. 

I understand the requirement to raise interest rates is largely to protect Sterling otherwise inflation would get even worse, but it does seem that placing the burden and the negatives of that "solution" on just 28.2% of the population is a very poor way of spreading the pain.

Rates are being increased to quell the demand for money; that doesn't just relate to property but also credit cards, car finance and even business investment.

Rate policy is a sledgehammer which has many ill effects but rates should never have been lowered so far and left so low at such an expansionary level for so long.

It doesn't appear to be working just yet.

We were out car shopping at the weekend and there were a surprising amount of people out doing the same.

Turns out there is quite a long wait for the make and model that we would like to buy and 1-2 year old versions are the same money as a new one, if you can get hold of one!

Sarah1Mitty2

michaels said:

Strummer22 said:

michaels said:

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

That's ignoring renters. Most landlords have mortgages which have also gotten more expensive, hence they put rent up and that affects a much larger % of the population.

Only those with no housing costs, which I suppose is the opposite ends of the spectrum from social housing paid for by benefits, to those with fully paid off mortgages, are completely immune to the increased costs of borrowing. 

Rents relate to supply and demand, landlords did not cut rents when mortgage costs fell and can not just automatically pass on increases to mortgage costs, whatever simplistic picture the TV News might present.

If there is a meaningful recession trying to raise rents in that scenario will be interesting to say the least, people (and the media) tend to forget or ignore that a mortgage cost is going to be there until the debt is paid off but a rental cost is only there until the tenant gives notice, the landlord with big mortgage debt is far more trapped by higher rates than his or her tenant.

RelievedSheff

Sarah1Mitty2 said:

michaels said:

Strummer22 said:

michaels said:

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

That's ignoring renters. Most landlords have mortgages which have also gotten more expensive, hence they put rent up and that affects a much larger % of the population.

Only those with no housing costs, which I suppose is the opposite ends of the spectrum from social housing paid for by benefits, to those with fully paid off mortgages, are completely immune to the increased costs of borrowing. 

Rents relate to supply and demand, landlords did not cut rents when mortgage costs fell and can not just automatically pass on increases to mortgage costs, whatever simplistic picture the TV News might present.

If there is a meaningful recession trying to raise rents in that scenario will be interesting to say the least, people (and the media) tend to forget or ignore that a mortgage cost is going to be there until the debt is paid off but a rental cost is only there until the tenant gives notice, the landlord with big mortgage debt is far more trapped by higher rates than his or her tenant.

Where are your renters living after their notice has expired?

They still have to live somewhere!

Sarah1Mitty2

london21 said:

Likely going up again on thursday as the lenders have already increased.

I do wonder when it will go back to 3% again.

Never would be my guess, the cheap money experiment has failed really, and the cost to the economy to exit this experiment is going to be massive, they are already looking at ways to study the effects of QE etc, before using anything like it again. Depending on data we could possibly get a 0.5% hike on Thursday. 

Sarah1Mitty2

RelievedSheff said:

Sarah1Mitty2 said:

michaels said:

Strummer22 said:

michaels said:

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

That's ignoring renters. Most landlords have mortgages which have also gotten more expensive, hence they put rent up and that affects a much larger % of the population.

Only those with no housing costs, which I suppose is the opposite ends of the spectrum from social housing paid for by benefits, to those with fully paid off mortgages, are completely immune to the increased costs of borrowing. 

Rents relate to supply and demand, landlords did not cut rents when mortgage costs fell and can not just automatically pass on increases to mortgage costs, whatever simplistic picture the TV News might present.

If there is a meaningful recession trying to raise rents in that scenario will be interesting to say the least, people (and the media) tend to forget or ignore that a mortgage cost is going to be there until the debt is paid off but a rental cost is only there until the tenant gives notice, the landlord with big mortgage debt is far more trapped by higher rates than his or her tenant.

Where are your renters living after their notice has expired?

They still have to live somewhere!

Exactly, they are living somewhere else but the landlord still has to cover his mortgage liability, that was my point.

RelievedSheff

Sarah1Mitty2 said:

RelievedSheff said:

Sarah1Mitty2 said:

michaels said:

Strummer22 said:

michaels said:

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

That's ignoring renters. Most landlords have mortgages which have also gotten more expensive, hence they put rent up and that affects a much larger % of the population.

Only those with no housing costs, which I suppose is the opposite ends of the spectrum from social housing paid for by benefits, to those with fully paid off mortgages, are completely immune to the increased costs of borrowing. 

Rents relate to supply and demand, landlords did not cut rents when mortgage costs fell and can not just automatically pass on increases to mortgage costs, whatever simplistic picture the TV News might present.

If there is a meaningful recession trying to raise rents in that scenario will be interesting to say the least, people (and the media) tend to forget or ignore that a mortgage cost is going to be there until the debt is paid off but a rental cost is only there until the tenant gives notice, the landlord with big mortgage debt is far more trapped by higher rates than his or her tenant.

Where are your renters living after their notice has expired?

They still have to live somewhere!

Exactly, they are living somewhere else but the landlord still has to cover his mortgage liability, that was my point.

The landlord will get a new tenant. Not difficult when there is a shortage of rental property on the market.

Sarah1Mitty2

RelievedSheff said:

Sarah1Mitty2 said:

RelievedSheff said:

Sarah1Mitty2 said:

michaels said:

Strummer22 said:

michaels said:

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

That's ignoring renters. Most landlords have mortgages which have also gotten more expensive, hence they put rent up and that affects a much larger % of the population.

Only those with no housing costs, which I suppose is the opposite ends of the spectrum from social housing paid for by benefits, to those with fully paid off mortgages, are completely immune to the increased costs of borrowing. 

Rents relate to supply and demand, landlords did not cut rents when mortgage costs fell and can not just automatically pass on increases to mortgage costs, whatever simplistic picture the TV News might present.

If there is a meaningful recession trying to raise rents in that scenario will be interesting to say the least, people (and the media) tend to forget or ignore that a mortgage cost is going to be there until the debt is paid off but a rental cost is only there until the tenant gives notice, the landlord with big mortgage debt is far more trapped by higher rates than his or her tenant.

Where are your renters living after their notice has expired?

They still have to live somewhere!

Exactly, they are living somewhere else but the landlord still has to cover his mortgage liability, that was my point.

The landlord will get a new tenant. Not difficult when there is a shortage of rental property on the market.

Yes, but not necessarily at a price that covers their debt obligation, especially if the stated aim of causing a recession comes to fruition.

RelievedSheff

Sarah1Mitty2 said:

RelievedSheff said:

Sarah1Mitty2 said:

RelievedSheff said:

Sarah1Mitty2 said:

michaels said:

Strummer22 said:

michaels said:

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

That's ignoring renters. Most landlords have mortgages which have also gotten more expensive, hence they put rent up and that affects a much larger % of the population.

Only those with no housing costs, which I suppose is the opposite ends of the spectrum from social housing paid for by benefits, to those with fully paid off mortgages, are completely immune to the increased costs of borrowing. 

Rents relate to supply and demand, landlords did not cut rents when mortgage costs fell and can not just automatically pass on increases to mortgage costs, whatever simplistic picture the TV News might present.

If there is a meaningful recession trying to raise rents in that scenario will be interesting to say the least, people (and the media) tend to forget or ignore that a mortgage cost is going to be there until the debt is paid off but a rental cost is only there until the tenant gives notice, the landlord with big mortgage debt is far more trapped by higher rates than his or her tenant.

Where are your renters living after their notice has expired?

They still have to live somewhere!

Exactly, they are living somewhere else but the landlord still has to cover his mortgage liability, that was my point.

The landlord will get a new tenant. Not difficult when there is a shortage of rental property on the market.

Yes, but not necessarily at a price that covers their debt obligation, especially if the stated aim of causing a recession comes to fruition.

Rents are rising just the same as mortgages.

No landlord is going to rent their property out at a loss. Worst case they sell it and that's one less property available to rent which puts further pressure on the remaining rental stock and further props up rental prices.

MattMattMattUK

lojo1000 said:

MattMattMattUK said:

Strummer22 said:

michaels said:

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

That's ignoring renters. Most landlords have mortgages which have also gotten more expensive, hence they put rent up and that affects a much larger % of the population.

The majority of, but roughly 60/40, landlords have mortgages. . There are some inconsistencies in the data because some is collected nationally, where as others at by England & Wales, Scotland and NI separately. 
Using the 29 million household figure as a baseline, 28.2% of those have a mortgage against them, so 8.17 million. Of that 2.7 million are BTL mortgages, 61% vs 1.7 million, 39% without mortgages. 

Strummer22 said:

Only those with no housing costs, which I suppose is the opposite ends of the spectrum from social housing paid for by benefits, to those with fully paid off mortgages, are completely immune to the increased costs of borrowing. 

Of the 71.8% of dwellings owned without mortgages the majority are owner occupied, some will be second homes and some will be rental. Social housing paid for from benefits (so the taxpayer) will likely fall under both mortgaged and non-mortgaged property, as well as some of the rental property being paid for by the taxpayer. 

I understand the requirement to raise interest rates is largely to protect Sterling otherwise inflation would get even worse, but it does seem that placing the burden and the negatives of that "solution" on just 28.2% of the population is a very poor way of spreading the pain.

Rates are being increased to quell the demand for money; that doesn't just relate to property but also credit cards, car finance and even business investment.

The thing with that is it that it is not feeding through, my credit card interest rates have not moved (no balances, but no rate increases either), I have not looked at car finance but from the state of the market it would not appear to be an impediment. UK business investment is down, but that is largely related to the overall economic climate combined with Brexit. Consumer debt is also rising again, which would indicate that spending is not being constrained. Measures to constrain spending would be better, all unsecured debt not exceeding a multiple of income, constraints based on interest rate cost for debt (eg. unsecured debt of no more than 1.5 times income, no more than 0.2 of income on debts which incur more than 10% interest etc.). It is not necessarily that credit is too cheap, it is that it is far too easy to access, borrowing needs car greater regulation. 

lojo1000 said:

Rate policy is a sledgehammer which has many ill effects but rates should never have been lowered so far and left so low at such an expansionary level for so long.

It is more like slash and burn than anything else, yes it clears the land/inflation, but it destroys when it does so and after a year or two all it leaves is an unproductive wasteland.