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

wheldcj

Slightly off topic but Sunak keeps saying that mortgage support isn't sensible and the plan has to be to reduce inflation.  However wont the current and continued increase in mortgage payments fuel inflation?  Or do none of the factors we use to measure our inflation include mortgage/rent in the basket?

Aberdeenangarse

wheldcj said:

Slightly off topic but Sunak keeps saying that mortgage support isn't sensible and the plan has to be to reduce inflation.  However wont the current and continued increase in mortgage payments fuel inflation?  Or do none of the factors we use to measure our inflation include mortgage/rent in the basket?

Shush, don’t say that! The idiots at the BoE haven’t worked that out yet!

Sg28

wheldcj said:

Slightly off topic but Sunak keeps saying that mortgage support isn't sensible and the plan has to be to reduce inflation.  However wont the current and continued increase in mortgage payments fuel inflation?  Or do none of the factors we use to measure our inflation include mortgage/rent in the basket?

Mortgage payments aren't included in CPI inflation. Which is the measure the boe uses. 

Plus if people have to pay more in mortgage interest then it reduces disposable income and reduces demand in the wider economy. So "should" help to reduce inflation. 

lojo1000

wheldcj said:

Slightly off topic but Sunak keeps saying that mortgage support isn't sensible and the plan has to be to reduce inflation.  However wont the current and continued increase in mortgage payments fuel inflation?  Or do none of the factors we use to measure our inflation include mortgage/rent in the basket?

link explaining

Sarah1Mitty2

Sg28 said:

wheldcj said:

Slightly off topic but Sunak keeps saying that mortgage support isn't sensible and the plan has to be to reduce inflation.  However wont the current and continued increase in mortgage payments fuel inflation?  Or do none of the factors we use to measure our inflation include mortgage/rent in the basket?

Mortgage payments aren't included in CPI inflation. Which is the measure the boe uses. 

Plus if people have to pay more in mortgage interest then it reduces disposable income and reduces demand in the wider economy. So "should" help to reduce inflation. 

 Existing mortgages are only a small part of it, comment today on bbc politics show said that there are not enough people with "problematic" (i.e overborrowed) mortgages for this interest rate approach to work, people who are comfortable with their mortgage or have no mortgage are still spending, so why keep raising? A few answers come to mind

1) Inflation has never been tamed with interest rates below the level of inflation?

2) Higher debt costs prevent companies borrowing to expand and employ more people leading to a slowdown in the economy.

3) Higher cost of borrowing puts the brakes on people taking out NEW  mortgages and lowers the cost of housing (people`s biggest COL outlay)

Any more?

Newbie_John

Sarah1Mitty2 said:

Sg28 said:

wheldcj said:

Slightly off topic but Sunak keeps saying that mortgage support isn't sensible and the plan has to be to reduce inflation.  However wont the current and continued increase in mortgage payments fuel inflation?  Or do none of the factors we use to measure our inflation include mortgage/rent in the basket?

Mortgage payments aren't included in CPI inflation. Which is the measure the boe uses. 

Plus if people have to pay more in mortgage interest then it reduces disposable income and reduces demand in the wider economy. So "should" help to reduce inflation. 

 Existing mortgages are only a small part of it, comment today on bbc politics show said that there are not enough people with "problematic" (i.e overborrowed) mortgages for this interest rate approach to work, people who are comfortable with their mortgage or have no mortgage are still spending, so why keep raising? A few answers come to mind

1) Inflation has never been tamed with interest rates below the level of inflation?

2) Higher debt costs prevent companies borrowing to expand and employ more people leading to a slowdown in the economy.

3) Higher cost of borrowing puts the brakes on people taking out NEW  mortgages and lowers the cost of housing (people`s biggest COL outlay)

Any more?

If I have less disposable income I will buy less items like coke, nice meat cuts, takeaways etc. Those companies would sell less and would have to stop increasing the price and maybe even lower them - effectively lowering inflation.

Sarah1Mitty2

Newbie_John said:

Sarah1Mitty2 said:

Sg28 said:

wheldcj said:

Slightly off topic but Sunak keeps saying that mortgage support isn't sensible and the plan has to be to reduce inflation.  However wont the current and continued increase in mortgage payments fuel inflation?  Or do none of the factors we use to measure our inflation include mortgage/rent in the basket?

Mortgage payments aren't included in CPI inflation. Which is the measure the boe uses. 

Plus if people have to pay more in mortgage interest then it reduces disposable income and reduces demand in the wider economy. So "should" help to reduce inflation. 

 Existing mortgages are only a small part of it, comment today on bbc politics show said that there are not enough people with "problematic" (i.e overborrowed) mortgages for this interest rate approach to work, people who are comfortable with their mortgage or have no mortgage are still spending, so why keep raising? A few answers come to mind

1) Inflation has never been tamed with interest rates below the level of inflation?

2) Higher debt costs prevent companies borrowing to expand and employ more people leading to a slowdown in the economy.

3) Higher cost of borrowing puts the brakes on people taking out NEW  mortgages and lowers the cost of housing (people`s biggest COL outlay)

Any more?

If I have less disposable income I will buy less items like coke, nice meat cuts, takeaways etc. Those companies would sell less and would have to stop increasing the price and maybe even lower them - effectively lowering inflation.

Yes, and you might also need to cut back on eating out, nights at the pub etc. leading to a fall in employment in the service sector leading in turn to less rental demand and rents falling, which again is one of the biggest COL outlays for people at the moment.

poppy10_2

Myrrdinthemage said:

inflation is supply side, not demand side (and therefore the solution should be to lower rates to cause investment 

People keep trotting out that line, but it's simply not borne out by the facts. Core inflation (stripping out energy and food) is the highest it has been for over 30 years, led by massive rises in recreation and leisure, hospitality and discretionary spending.

The data shows that retail sales remain high. Car sales on finance remain high. House prices remain high. Pubs and restaurants are packed. Builders and tradespeople are booked up months in advance as everyone gets home improvements and extensions done. There is massive demand out there. It needs to be dampened down for inflation to call 

poppy10_2

wheldcj said:

Slightly off topic but Sunak keeps saying that mortgage support isn't sensible and the plan has to be to reduce inflation.  However wont the current and continued increase in mortgage payments fuel inflation?  Or do none of the factors we use to measure our inflation include mortgage/rent in the basket?

No, none of the currently used inflation measures (CPI and CPI-H) take into account mortgage payments. 

RPI does, and that remains well over 11%, but the govt discourage its use 

wheldcj

Sg28 said:

wheldcj said:

Slightly off topic but Sunak keeps saying that mortgage support isn't sensible and the plan has to be to reduce inflation.  However wont the current and continued increase in mortgage payments fuel inflation?  Or do none of the factors we use to measure our inflation include mortgage/rent in the basket?

Mortgage payments aren't included in CPI inflation. Which is the measure the boe uses. 

Plus if people have to pay more in mortgage interest then it reduces disposable income and reduces demand in the wider economy. So "should" help to reduce inflation. 

Interesting, so when we work out how an average person's spending on a like for like basis has changed over a year we exclude maybe the biggest outlay of those people.

However the BoE include Energy & Fuel costs both directly and indirectly in the CPI albeit these purchases are external/global cost increases that cannot be tamed with interest rate rises etc  

If we had been concentrating on core inflation (the new buzz word it seems) from the start then last year we would be what 4-5% maximum?   Less need to follow a steep interest rate rise, less bargaining power for the employee to negotiate large wage increases and more composure that gas/oil prices once stabilised at a new norm would drop inflation back quite quickly.

Now we have an interest rate that has done diddly squat to stop spending, has the potential to destroy disposable income for many many years to come for mortgage holders and rip the hide out of the rental market.  Next year we will have CPI inflation at 0% but a huge recession on the way.