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

StevieMA

snowqueen555 said:

Damn, are mortgage rates going to go up or were they priced in? I'm pretty close to buying.

Yes. This morning before announcement NatWest were offering a 5 year fixed with no product fees at .4.69%. After the announcement a 5 year fix with no product fee is now at 5.34%. 

propertyhunter

Sarah1Mitty2 said:

propertyhunter said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

I think we have to relieve the labour market. It's too tight - not enough people to do essential jobs. So we relax our immigration policy - grant more visas. It allows us to be more productive. I think hold interest rates now they are where they are because their effects aren't filtering through yet - only a proportion of mortgage holders are affected so far since more people are on fixed rates. I dread to think what is going to happen in 2025-26 when most people are exposed to the current interest rates. 

Increase wages for essential jobs is the answer, not more immigration, IMO.

Increasing wages does nothing when unemployment is at record lows - there's no one to do the work full stop. This pushes up prices. Immigration is good when managed appropriately to bring in the right skills and talent which we need. If they don't come here, they go elsewhere - while the country suffers from a skills and knowledge deficit and the population gets poorer. 

lmitchell

Sarah1Mitty2 said:

lmitchell said:

Sarah1Mitty2 said:

lmitchell said:

lojo1000 said:

MattMattMattUK said:

lmitchell said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

Scrap VAT on energy.

Inflationary. Reduces costs slightly to consumers, not supply side.

lmitchell said:
Enforce lower standing charges.

No net change. Standing charges are already set by Ofgem, the suppliers make no profit from them and reducing standing charges means that unit rates need to rise.

lmitchell said:
Reduce fuel duty.

Inflationary. Would reduce costs to consumers and businesses, but the reduction in costs to consumers and subsequent increased spending would increase inflation more than the drop to business. 

lmitchell said:

Those three solutions alone would get us back down fast - and without rates having to go much higher than 3%.

Those three "solutions" would increase inflation, potentially significantly, as well as reducing government revenue at a time that deficit is rising and borrowing has reached the highest proportion of GDP for 60 years. They are not solutions, they are making things worse. 

A lot of small businesses have suffered from rising energy costs. Reducing VAT here would keep many in business even if not increasing supply, so I think this is a good idea.

Similarly with fuel duty - it would reduce the cost to bring goods to market and hence encourage supply.

The revenue lost by the government would need to be financed which has negative impacts but on the whole I still think this direct approach to increasing supply works.

Just don't cut interest rates at the same time.

Agreed. It's not inflationary whatsoever. As you say, reducing energy costs would enable producers to supply more cheaply, due to reduced overheads. Ensuring the producers do pass on those savings to the end user would be the biggest challenge.

Returning the additional National Insurance tax (1.25% hike) that Hunt scrapped would surely cover much of these costs. I think we could all stomach another 1.25% in tax if it meant inflation was slashed and interest rates returned to more sustainable, stable levels.

And I'd also agree that we'd need to let bank rate sit as is for the next 6 months while these energy cuts take effect.

They are returning to more sustainable stable levels, it is because they were artificially held below those levels for so long that we are now in the present mess, the return to normal will unfortunately see people who overstretched unable to pay their debt though.

Sustainable, stable levels would be 3%+ - comfortable enough above 2% inflation target and still enough to give savers some returns. Consumer spending IS needed to grow the economy, whether you like it or not.

But the inflation is running at 4 times the target, at least, that is why those low rates are not sensible or sustainable! You seem to be thinking of what is comfortable for a mortgage debt holder rather than the economy as a whole (The BOE is looking at the whole economy)

I'm saying that is where we should be looking to return to after this shambolic period. Had the BoE hiked to 2.5%-3% in late 2021 this would all be over already IMO.

Sarah1Mitty2

propertyhunter said:

Sarah1Mitty2 said:

propertyhunter said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

I think we have to relieve the labour market. It's too tight - not enough people to do essential jobs. So we relax our immigration policy - grant more visas. It allows us to be more productive. I think hold interest rates now they are where they are because their effects aren't filtering through yet - only a proportion of mortgage holders are affected so far since more people are on fixed rates. I dread to think what is going to happen in 2025-26 when most people are exposed to the current interest rates. 

Increase wages for essential jobs is the answer, not more immigration, IMO.

Increasing wages does nothing when unemployment is at record lows - there's no one to do the work full stop. This pushes up prices. Immigration is good when managed appropriately to bring in the right skills and talent which we need. If they don't come here, they go elsewhere - while the country suffers from a skills and knowledge deficit and the population gets poorer. 

I don`t agree, many of the potential workforce are at "Uni" living at home and paying out debt for a worthless degree, the "50% to go to Uni" thing needs to be put to rest once and for all, one way to do it is to make wages for necessary jobs much more attractive, another is to raise the academic bar for getting into Uni meaning that a lot of kids will just have to go out and find a job.

Sarah1Mitty2

lmitchell said:

Sarah1Mitty2 said:

lmitchell said:

Sarah1Mitty2 said:

lmitchell said:

lojo1000 said:

MattMattMattUK said:

lmitchell said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

Scrap VAT on energy.

Inflationary. Reduces costs slightly to consumers, not supply side.

lmitchell said:
Enforce lower standing charges.

No net change. Standing charges are already set by Ofgem, the suppliers make no profit from them and reducing standing charges means that unit rates need to rise.

lmitchell said:
Reduce fuel duty.

Inflationary. Would reduce costs to consumers and businesses, but the reduction in costs to consumers and subsequent increased spending would increase inflation more than the drop to business. 

lmitchell said:

Those three solutions alone would get us back down fast - and without rates having to go much higher than 3%.

Those three "solutions" would increase inflation, potentially significantly, as well as reducing government revenue at a time that deficit is rising and borrowing has reached the highest proportion of GDP for 60 years. They are not solutions, they are making things worse. 

A lot of small businesses have suffered from rising energy costs. Reducing VAT here would keep many in business even if not increasing supply, so I think this is a good idea.

Similarly with fuel duty - it would reduce the cost to bring goods to market and hence encourage supply.

The revenue lost by the government would need to be financed which has negative impacts but on the whole I still think this direct approach to increasing supply works.

Just don't cut interest rates at the same time.

Agreed. It's not inflationary whatsoever. As you say, reducing energy costs would enable producers to supply more cheaply, due to reduced overheads. Ensuring the producers do pass on those savings to the end user would be the biggest challenge.

Returning the additional National Insurance tax (1.25% hike) that Hunt scrapped would surely cover much of these costs. I think we could all stomach another 1.25% in tax if it meant inflation was slashed and interest rates returned to more sustainable, stable levels.

And I'd also agree that we'd need to let bank rate sit as is for the next 6 months while these energy cuts take effect.

They are returning to more sustainable stable levels, it is because they were artificially held below those levels for so long that we are now in the present mess, the return to normal will unfortunately see people who overstretched unable to pay their debt though.

Sustainable, stable levels would be 3%+ - comfortable enough above 2% inflation target and still enough to give savers some returns. Consumer spending IS needed to grow the economy, whether you like it or not.

But the inflation is running at 4 times the target, at least, that is why those low rates are not sensible or sustainable! You seem to be thinking of what is comfortable for a mortgage debt holder rather than the economy as a whole (The BOE is looking at the whole economy)

I'm saying that is where we should be looking to return to after this shambolic period. Had the BoE hiked to 2.5%-3% in late 2021 this would all be over already IMO.

As a saver I would prefer base rate nearer 7%.

michaels

lmitchell said:

Sarah1Mitty2 said:

lmitchell said:

Sarah1Mitty2 said:

lmitchell said:

lojo1000 said:

MattMattMattUK said:

lmitchell said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

Scrap VAT on energy.

Inflationary. Reduces costs slightly to consumers, not supply side.

lmitchell said:
Enforce lower standing charges.

No net change. Standing charges are already set by Ofgem, the suppliers make no profit from them and reducing standing charges means that unit rates need to rise.

lmitchell said:
Reduce fuel duty.

Inflationary. Would reduce costs to consumers and businesses, but the reduction in costs to consumers and subsequent increased spending would increase inflation more than the drop to business. 

lmitchell said:

Those three solutions alone would get us back down fast - and without rates having to go much higher than 3%.

Those three "solutions" would increase inflation, potentially significantly, as well as reducing government revenue at a time that deficit is rising and borrowing has reached the highest proportion of GDP for 60 years. They are not solutions, they are making things worse. 

A lot of small businesses have suffered from rising energy costs. Reducing VAT here would keep many in business even if not increasing supply, so I think this is a good idea.

Similarly with fuel duty - it would reduce the cost to bring goods to market and hence encourage supply.

The revenue lost by the government would need to be financed which has negative impacts but on the whole I still think this direct approach to increasing supply works.

Just don't cut interest rates at the same time.

Agreed. It's not inflationary whatsoever. As you say, reducing energy costs would enable producers to supply more cheaply, due to reduced overheads. Ensuring the producers do pass on those savings to the end user would be the biggest challenge.

Returning the additional National Insurance tax (1.25% hike) that Hunt scrapped would surely cover much of these costs. I think we could all stomach another 1.25% in tax if it meant inflation was slashed and interest rates returned to more sustainable, stable levels.

And I'd also agree that we'd need to let bank rate sit as is for the next 6 months while these energy cuts take effect.

They are returning to more sustainable stable levels, it is because they were artificially held below those levels for so long that we are now in the present mess, the return to normal will unfortunately see people who overstretched unable to pay their debt though.

Sustainable, stable levels would be 3%+ - comfortable enough above 2% inflation target and still enough to give savers some returns. Consumer spending IS needed to grow the economy, whether you like it or not.

But the inflation is running at 4 times the target, at least, that is why those low rates are not sensible or sustainable! You seem to be thinking of what is comfortable for a mortgage debt holder rather than the economy as a whole (The BOE is looking at the whole economy)

I'm saying that is where we should be looking to return to after this shambolic period. Had the BoE hiked to 2.5%-3% in late 2021 this would all be over already IMO.

Encouraging people onto fixed rate mortgages (through SVR being used as a profit centre against those who can not remortgage) has really slowed the impact of monetary policy meaning once inflation appears it is already too late.  I do fear that we will have the opposite problem on the way down - cutting rates will have limited effect when most have fixed for 2-5 years at current higher levels.

Fiscal tightening could fix the problem, more quickly, more fairly and would help solve the debt trajectory crisis coming down the road reducing tax and interest later on and could be reversed when needed.

norsefox

lojo1000 said:

propertyhunter said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

I think we have to relieve the labour market. It's too tight - not enough people to do essential jobs. So we relax our immigration policy - grant more visas. It allows us to be more productive. I think hold interest rates now they are where they are because their effects aren't filtering through yet - only a proportion of mortgage holders are affected so far since more people are on fixed rates. I dread to think what is going to happen in 2025-26 when most people are exposed to the current interest rates. 

Agree with expanding the labour market since labour is a resource - it does however need to be productive labour.

People aren't moving to the UK to retire.  They move here to work.  The problems in recruitment are across almost all industries, but a huge number are in classically 'unskilled' jobs, as well as healthcare services, nurses, doctors, teachers, carers etc.

lojo1000

Sarah1Mitty2 said:

propertyhunter said:

Sarah1Mitty2 said:

propertyhunter said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

I think we have to relieve the labour market. It's too tight - not enough people to do essential jobs. So we relax our immigration policy - grant more visas. It allows us to be more productive. I think hold interest rates now they are where they are because their effects aren't filtering through yet - only a proportion of mortgage holders are affected so far since more people are on fixed rates. I dread to think what is going to happen in 2025-26 when most people are exposed to the current interest rates. 

Increase wages for essential jobs is the answer, not more immigration, IMO.

Increasing wages does nothing when unemployment is at record lows - there's no one to do the work full stop. This pushes up prices. Immigration is good when managed appropriately to bring in the right skills and talent which we need. If they don't come here, they go elsewhere - while the country suffers from a skills and knowledge deficit and the population gets poorer. 

I don`t agree, many of the potential workforce are at "Uni" living at home and paying out debt for a worthless degree, the "50% to go to Uni" thing needs to be put to rest once and for all, one way to do it is to make wages for necessary jobs much more attractive, another is to raise the academic bar for getting into Uni meaning that a lot of kids will just have to go out and find a job.

Agree. I've been saying this for years. Going to university to get a non-relevant degree is a waste of resources (for too many) which could be applied in the economy. It's a great example of a misallocation of resources encouraged by bad public policy.

It works neither as a signal to employers nor as a useful training/knowledge exercise (compared to working over the same period).

Seraphi

poppy10_2 said:

Seraphi said:

poppy10_2 said:

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 

House prices have fallen significantly. People just haven't noticed because of not that great numeracy and the increasing burden of mortgages.

If a house worth £277k in April 2022 is worth £286k in April 2033 (3.5% increase) it may look as if house prices have increased. However it's actually a 5.2% decrease when you consider inflation (April CPI 8.7%). That house needs to be worth £301k in April 2023's money - just to stay level. 

That calculation is only true if wages are rising in line with inflation.

As it is, wage rises have been well under the rate of inflation. So house prices have become more expensive relative to wages. Yes they might be cheaper to an international investor who is converting from dollars to sterling but that doesn't apply to the majority of purchasers, who have seen their value of their salaries eroded by inflation more than house prices have been eroded by inflation. Thus making that house more expensive in real terms for them to buy.

You stated that "House prices remain high". Not "House prices relative to wages remain high".

Whilst I take your point and I don't disagree with you - wages matter - my calculation is entirely valid and more importantly - correct.

You simply decided to change the terms of debate mid argument. As an aside, when we look at real terms price changes of commodities and services we tend to ignore wages. CPI or CPIH isn't calculated relative to wages.

poppy10_2

Sarah1Mitty2 said:

propertyhunter said:

Sarah1Mitty2 said:

propertyhunter said:

lojo1000 said:

propertyhunter said:

They don't know what they're doing because this is supply side inflation - caused partly by Brexit increasing our import costs and limiting our labour market, combined with the war in Ukraine and its effects. It's not being driven by demand side inflation caused by people spending too much. I don't know how people in this country get into high office. I fear it's cronyism and corruption rather than on merit. 

What are your practical supply side solutions and where would you put base rates now?

I think we have to relieve the labour market. It's too tight - not enough people to do essential jobs. So we relax our immigration policy - grant more visas. It allows us to be more productive. I think hold interest rates now they are where they are because their effects aren't filtering through yet - only a proportion of mortgage holders are affected so far since more people are on fixed rates. I dread to think what is going to happen in 2025-26 when most people are exposed to the current interest rates. 

Increase wages for essential jobs is the answer, not more immigration, IMO.

Increasing wages does nothing when unemployment is at record lows - there's no one to do the work full stop. This pushes up prices. Immigration is good when managed appropriately to bring in the right skills and talent which we need. If they don't come here, they go elsewhere - while the country suffers from a skills and knowledge deficit and the population gets poorer. 

I don`t agree, many of the potential workforce are at "Uni" living at home and paying out debt for a worthless degree, the "50% to go to Uni" thing needs to be put to rest once and for all, one way to do it is to make wages for necessary jobs much more attractive, another is to raise the academic bar for getting into Uni meaning that a lot of kids will just have to go out and find a job.

The world has changed. The days of being able to leave school at 16 without any qualifications and walk into a decently paid solid job and work your way up the career ladder have gone for the vast majority of people. If you don't have any advanced qualifications then other than unstable low paid retail/delivery/manual/gig economy jobs then there is nothing really out there for you. 

People aren't spending £9K+ per year on tuition fees just for fun. It's pretty much essential now to enter the labour market