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

Sarah1Mitty2

Good points.

wheldcj

michaels said:

Thing is we still have the pandemic unplanned savings overhang and it is pretty huge - all those car, holiday and kitchen purchases that couldn't happen during the pandemic.



That is now being spent so even with the cost of living squeeze and the slow acting mortgage squeeze (slow acting because of the preponderance of fixed rates) spending is still keeping the economy humming.  I predict that suddenly the supertanker will turn, the savings will have been spent and/or confidence will disappear and the economy will reverse very quickly - but monetary policy will again prove to be a very slow acting lever, with mortgage fixes again meaning that it takes years for impacts to be felt.

Fiscal policy should have been the answer and a brave politician would have done the unpopular because in the mid to long term it would have been the right thing to do.  That is what we lack in terms of political leadership, too much is decided by focus group.

It would be interesting how (and which demographic) this is broken down.   

My take on it is that there is an awful lot of money in the boomer generation.   They benefitted most from the monumental rise in house prices.  Whether that was being able to navigate the property ladder because the increments between each rung was smaller or simply buying and staying put.   Add to that an ability to probably save more in later working life because mortgage payments have reduced in real terms substantially.   

I can see that demographic still having a lot of ability to withdraw savings and/or downsize and spend.   Interest rate hikes enable them to gain more wealth on savings but they may also be at an age where they spend because they can't take it with them.   That is why the BoE using rate rises to curb inflation is really only targetting a specific demographic.

I wouldn't be surprised if those between 20 and 50 and especially those in 20s and 30s are withdrawing whatever nest eggs they built in lockdown and previously simply to pay bills.  Again interest rate rises wont encourage then to stop spending if spending is limited to a warm roof over your head and food in your belly.

Radical as it sounds I think we have to find a way of moving some of the house price profit from the last 40 years back into supporting the current generation of mortgage holders and renter.

Sarah1Mitty2

wheldcj said:

michaels said:

Thing is we still have the pandemic unplanned savings overhang and it is pretty huge - all those car, holiday and kitchen purchases that couldn't happen during the pandemic.



That is now being spent so even with the cost of living squeeze and the slow acting mortgage squeeze (slow acting because of the preponderance of fixed rates) spending is still keeping the economy humming.  I predict that suddenly the supertanker will turn, the savings will have been spent and/or confidence will disappear and the economy will reverse very quickly - but monetary policy will again prove to be a very slow acting lever, with mortgage fixes again meaning that it takes years for impacts to be felt.

Fiscal policy should have been the answer and a brave politician would have done the unpopular because in the mid to long term it would have been the right thing to do.  That is what we lack in terms of political leadership, too much is decided by focus group.

It would be interesting how (and which demographic) this is broken down.   

My take on it is that there is an awful lot of money in the boomer generation.   They benefitted most from the monumental rise in house prices.  Whether that was being able to navigate the property ladder because the increments between each rung was smaller or simply buying and staying put.   Add to that an ability to probably save more in later working life because mortgage payments have reduced in real terms substantially.   

I can see that demographic still having a lot of ability to withdraw savings and/or downsize and spend.   Interest rate hikes enable them to gain more wealth on savings but they may also be at an age where they spend because they can't take it with them.   That is why the BoE using rate rises to curb inflation is really only targetting a specific demographic.

I wouldn't be surprised if those between 20 and 50 and especially those in 20s and 30s are withdrawing whatever nest eggs they built in lockdown and previously simply to pay bills.  Again interest rate rises wont encourage then to stop spending if spending is limited to a warm roof over your head and food in your belly.

Radical as it sounds I think we have to find a way of moving some of the house price profit from the last 40 years back into supporting the current generation of mortgage holders and renter.

Can`t really be done, that "profit" has either been spent already or is shrinking with each new rate rise. One potential way would be changing council tax bands so that those in the most expensive properties pay even more and some bands are free, but an older person in a big house might have very little actual income without selling the house so it doesn`t work either.

wheldcj

I think what I am saying is that a boomer may have bought they property for £20k and if somewhere in the central part of London could be in excess of £1m.  Their property maybe making more income for them than their actual income!  If they downsize and/or relocate that is an awful lot of spendable profit.   Surely some of that could go back into society to support the next generation rather than interest rates potentially strangulating the economy.

Find any survey about windfall taxes on energy companies and pretty much everyone is in favour because it is excess profit purely because of circumstance.  What is the difference with a windfall tax on property profit?

Sarah1Mitty2

wheldcj said:

I think what I am saying is that a boomer may have bought they property for £20k and if somewhere in the central part of London could be in excess of £1m.  Their property maybe making more income for them than their actual income!  If they downsize and/or relocate that is an awful lot of spendable profit.   Surely some of that could go back into society to support the next generation rather than interest rates potentially strangulating the economy.

Find any survey about windfall taxes on energy companies and pretty much everyone is in favour because it is excess profit purely because of circumstance.  What is the difference with a windfall tax on property profit?

People only want this when their property isn`t making profit (recently bought) or they are looking at negative equity due to silly borrowing decisions (recently bought) or people are shouting for mortgage bailouts because rates went up a little bit to still below historical norms (recently borrowed too much) why should someone in their 70`s or 80`s or older feel pressured to sell a home or be taxed excessively when they do sell that home due to price increases from a banker`s Ponzi scheme that the working age public of the last 20 years gladly went along with that they had no part in?

wheldcj

Not true.  My LTV is well below 50% I have fixed my rate for 7 years so have no benefit personally.  UK property is a ponzi scheme in my opinion, those who have made silly borrowing decisions etc are often normal people on normal wages with normal savings buying a bang average house.   Save for a massive correction in property prices we have essentially stopped any of the next generation (without a significant push up from the bank of mom/dad/nan/grandad) from ever owning their own house.

That seems pretty sad to me.

Sarah1Mitty2

wheldcj said:

Not true.  My LTV is well below 50% I have fixed my rate for 7 years so have no benefit personally.  UK property is a ponzi scheme in my opinion, those who have made silly borrowing decisions etc are often normal people on normal wages with normal savings buying a bang average house.   Save for a massive correction in property prices we have essentially stopped any of the next generation (without a significant push up from the bank of mom/dad/nan/grandad) from ever owning their own house.

That seems pretty sad to me.

That explains in a sentence why, especially with rising rates, all this is now coming to an end, no need to tax anyone, if people want to live in their house until they die that is up to them, people who need to sell will have to accept a lower price and that sets the new market price.

wheldcj

All that will happen is that the current younger generation and the future generations ability to own property will largely dictated by whether your parents (and more so grandparents) pass down their own property wealth.   And yes I understand how the class system has worked for generations but this will be far deeper engrained.   Meritocracy will be out of the window.

Altior

wheldcj said:

Not true.  My LTV is well below 50% I have fixed my rate for 7 years so have no benefit personally.  UK property is a ponzi scheme in my opinion, those who have made silly borrowing decisions etc are often normal people on normal wages with normal savings buying a bang average house.   Save for a massive correction in property prices we have essentially stopped any of the next generation (without a significant push up from the bank of mom/dad/nan/grandad) from ever owning their own house.

That seems pretty sad to me.

The stats don't bear this out. 

Sarah1Mitty2

wheldcj said:

All that will happen is that the current younger generation and the future generations ability to own property will largely dictated by whether your parents (and more so grandparents) pass down their own property wealth.   And yes I understand how the class system has worked for generations but this will be far deeper engrained.   Meritocracy will be out of the window.

Not really how a "market" works, if ability to pay is taken away something has to give, I think what will happen is that interest rates will decimate house prices and those with large mortgage debt will struggle and those with no mortgage debt will have to get used to their house being worth a lot less. What you describe is what happens when cheap debt keeps getting given out, that train has gone now it looks like.