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

Sarah1Mitty2

michaels said:

Sarah1Mitty2 said:

lojo1000 said:

sevenhills said:

lojo1000 said:

Confidence fell in 2022 as interest rates rose but there is still an awful lot of that excess money created during covid still around. Unemployment is yet to really pick up (though vacancies continue to fall they are also still relatively high).

While that money lasts, business does not need to cut back on employment.

My view is the money runs out before rates will be cut again. It just may take 6-18 months from here.

Strangely, in 2023 consumer confidence is on the rise, we need to shock some sense into people.

And it continued to rise in March and April as well.....I think June could be a different story as we saw such a jump in rates and a lot of negative media coverage of house prices, etc.

I think the rise may simply be us as humans are remarkably adaptable to change. On the whole, we can change and just accept the new which we get used to and don't feel so bad.

I would put it differently, someone in their early 30`s, yes Thirties! has only (until recently) seen sub - 1% rates in their working lifetime! For older people that is truly shocking to think about. People are heavily programmed to spend cheap debt, and will continue to do so until they are stopped by economic forces it looks like? The media is reporting today that some lenders are now saying people in difficulty should start selling up before things get worse, amazing how quickly things can change isn`t it.

It costs a fortune though to sell (and hopefully buy again), not just fees but also taxes.  I can see why you would try to avoid that if at all possible even if it would appear to make financial sense.  And that is without even considering the psychological/emotional impact.

I think they were talking about people who just can`t afford their debt at these rates, not people who can cut back and scrape through to keep their house. My opinion is that the selling window closed some time ago anyway, but as usual lenders and other VI`s just make these statements too late when everyone else already gets it, more to try and look credible and informed  than anything else.

MobileSaver

hildosaver said:

MobileS

zzzt said:

I guess if there has been some lifestyle creep, then that could explain it ... so the extra money gets spent on car leases, subscription services, regular take away deliveries, etc. which eat up the extra income.

This is it in a nutshell.

The vast majority of people complaining they can't afford their mortgage now really mean that they can't afford their mortgage while at the same time sustaining their new comfortable lifestyle...

This is nonsense. We are in the middle of a cost of living crisis and you think people are just spending too much on luxury items. Try living in the real world.

The vast majority of people struggling with the cost of living crisis are lower earners that would probably never own their own home anyway - mortgage rates are a complete non-issue for them.

I do live in the real world and I've been commenting all year that every single time I've been out and about I've been surprised at how much money people are spending on non-essential items given the doom and gloom headlines. It's worth repeating this, we typically go out for lunch or dinner to somewhere new at least once a week and every single place has been really busy if not literally packed every single time. Obviously it's anecdotal but it's also very obviously not just a one-off case as it's been every time in every part of the UK we've visited.

Case in point we were at a local craft centre both yesterday and the Sunday before, the car park was full both times, as in completely full with people parking on the verges. There was a local distiller selling their wares; £50 for a 70cl bottle of artisan rum and £50 for a 35cl bottle of whisky, we picked up a bottle of both and they were doing a brisk trade in the short time I was at their stall and paying attention. Similarly the pizza seller was barely keeping up with the orders at £25 for two portions; whether you like it or not it's a simple fact that people are spending on non-essential items like there's no tomorrow...

EnterUserName

MobileSaver said:

hildosaver said:

MobileS

zzzt said:

I guess if there has been some lifestyle creep, then that could explain it ... so the extra money gets spent on car leases, subscription services, regular take away deliveries, etc. which eat up the extra income.

This is it in a nutshell.

The vast majority of people complaining they can't afford their mortgage now really mean that they can't afford their mortgage while at the same time sustaining their new comfortable lifestyle...

This is nonsense. We are in the middle of a cost of living crisis and you think people are just spending too much on luxury items. Try living in the real world.

The vast majority of people struggling with the cost of living crisis are lower earners that would probably never own their own home anyway - mortgage rates are a complete non-issue for them.

I do live in the real world and I've been commenting all year that every single time I've been out and about I've been surprised at how much money people are spending on non-essential items given the doom and gloom headlines. It's worth repeating this, we typically go out for lunch or dinner to somewhere new at least once a week and every single place has been really busy if not literally packed every single time. Obviously it's anecdotal but it's also very obviously not just a one-off case as it's been every time in every part of the UK we've visited.

Case in point we were at a local craft centre both yesterday and the Sunday before, the car park was full both times, as in completely full with people parking on the verges. There was a local distiller selling their wares; £50 for a 70cl bottle of artisan rum and £50 for a 35cl bottle of whisky, we picked up a bottle of both and they were doing a brisk trade in the short time I was at their stall and paying attention. Similarly the pizza seller was barely keeping up with the orders at £25 for two portions; whether you like it or not it's a simple fact that people are spending on non-essential items like there's no tomorrow...

I wonder where you are based. In Hertfordshire and London it is the same. People slinging money like there's no tomorrow.

I personally think this is, at least in part, due to the fact a lot of people are still on their old cheap fixed rate. And in part, due to people spending their covid savings "war chest".

Many people up my street are doing home fairly major improvements - major enough to be noticed from the street (think, skip, new windows etc).

I think more time is needed for it to wash through, rather than ever higher interest rates. I guess BoE were too slow to pull the trigger.

They might find that in 12 to 18 months it all accelerates and goes the other way... Down the chute, and quickly.

hildosaver

MobileSaver said:

hildosaver said:

MobileS

zzzt said:

I guess if there has been some lifestyle creep, then that could explain it ... so the extra money gets spent on car leases, subscription services, regular take away deliveries, etc. which eat up the extra income.

This is it in a nutshell.

The vast majority of people complaining they can't afford their mortgage now really mean that they can't afford their mortgage while at the same time sustaining their new comfortable lifestyle...

This is nonsense. We are in the middle of a cost of living crisis and you think people are just spending too much on luxury items. Try living in the real world.

The vast majority of people struggling with the cost of living crisis are lower earners that would probably never own their own home anyway - mortgage rates are a complete non-issue for them.

I do live in the real world and I've been commenting all year that every single time I've been out and about I've been surprised at how much money people are spending on non-essential items given the doom and gloom headlines. It's worth repeating this, we typically go out for lunch or dinner to somewhere new at least once a week and every single place has been really busy if not literally packed every single time. Obviously it's anecdotal but it's also very obviously not just a one-off case as it's been every time in every part of the UK we've visited.

Case in point we were at a local craft centre both yesterday and the Sunday before, the car park was full both times, as in completely full with people parking on the verges. There was a local distiller selling their wares; £50 for a 70cl bottle of artisan rum and £50 for a 35cl bottle of whisky, we picked up a bottle of both and they were doing a brisk trade in the short time I was at their stall and paying attention. Similarly the pizza seller was barely keeping up with the orders at £25 for two portions; whether you like it or not it's a simple fact that people are spending on non-essential items like there's no tomorrow...

Well off person goes to places other well off people frequent and sees lots of well off people there. Not sure what this proves other than those people who have lots of disposable income are not impacted and doing fine. That does not mean most people are in this situation.

Ksw3

Reminds me of a book I read that said that nail salons often do quite well in a recession. Maybe you don't buy a brand new car but the small things that make you happy you continue. 

MobileSaver

hildosaver said:

MobileSaver said:

hildosaver said:

MobileS

zzzt said:

I guess if there has been some lifestyle creep, then that could explain it ... so the extra money gets spent on car leases, subscription services, regular take away deliveries, etc. which eat up the extra income.

This is it in a nutshell.

The vast majority of people complaining they can't afford their mortgage now really mean that they can't afford their mortgage while at the same time sustaining their new comfortable lifestyle...

This is nonsense. We are in the middle of a cost of living crisis and you think people are just spending too much on luxury items. Try living in the real world.

The vast majority of people struggling with the cost of living crisis are lower earners that would probably never own their own home anyway - mortgage rates are a complete non-issue for them.

I do live in the real world and I've been commenting all year that every single time I've been out and about I've been surprised at how much money people are spending on non-essential items given the doom and gloom headlines. It's worth repeating this, we typically go out for lunch or dinner to somewhere new at least once a week and every single place has been really busy if not literally packed every single time. Obviously it's anecdotal but it's also very obviously not just a one-off case as it's been every time in every part of the UK we've visited.

Case in point we were at a local craft centre both yesterday and the Sunday before, the car park was full both times, as in completely full with people parking on the verges. There was a local distiller selling their wares; £50 for a 70cl bottle of artisan rum and £50 for a 35cl bottle of whisky, we picked up a bottle of both and they were doing a brisk trade in the short time I was at their stall and paying attention. Similarly the pizza seller was barely keeping up with the orders at £25 for two portions; whether you like it or not it's a simple fact that people are spending on non-essential items like there's no tomorrow...

Well off person goes to places other well off people frequent and sees lots of well off people there.

Two of the aforementioned eateries that were practically full were a Wetherspoons in Brecon and a Harvester in Merthyr Tydfil...

EnterUserName said:

I wonder where you are based. In Hertfordshire and London it is the same. People slinging money like there's no tomorrow.

I'm rural mid-Wales but in the last six months we've travelled to many different parts of England too and it's the same almost everywhere we've been; hotels, B&Bs, restaurants and cafes at all price points are bustling with people spending money.

Part of me does wonder if the scare of the pandemic has made a lot of people much more aware of their own mortality and they're spending money with the attitude "Might as well enjoy life, I might be dead tomorrow"...

sevenhills

hildosaver said:

It is a huge problem for them if their rent has gone up several hundred a month though.

People are affected by the rising cost of living, but many own their own house or live with someone that does, so the increasing interest rates does not affect them.

It doesn't affect my household at all.

ader42

Plenty of young couples think it’s really bad if they have less than a £1k discretionary spends a month to blow on meals out etc.  

Ibits4321

I'm a landlord who served notice because my tenants said they turned the boiler off a year ago because they couldn't afford to heat the house and the house started getting mouldy. I felt bad, but if they couldn't afford to heat the house it meant they couldn't afford the house.

 When I served notice they said they wished they had known I was going to do this because they'd just spent £1000 for a holiday and they wouldn't have if they knew they would need to move 💀

MattMattMattUK

michaels said:

MattMattMattUK said:

ian1246 said:

Those advocating bringing net migration down evidently haven't been paying attention to the economy and more specifically the route cause of inflation: Lack of workers.

The root cause of inflation is not lack of workers, it is largely external factors, though increased wage demands are having some impact. In some specific sectors there is a lack of workers, at opposite ends of the spectrum, highly skilled workers or unskilled seasonal workers, in the there is not an issue. 

ian1246 said:

Migration is a good thing - it brings economically productive individuals to our country, who proceed to contribute to our overall wealth and that of the government's treasury, allowing additional funding for services. In the long-run, it means the UK may yet escape the general decline of the rest of Western Europe and continue to maintain a significant influence on the world stage.

Migration can be a good thing, it needs to be managed and reflect the needs of the economy. However inflation can also be a bad thing, especially the way the UK has used it, which is failing to train skilled workers and failing to get the unemployed and economically inactive back to work, there is far greater economic benefit to trading the majority of a nation's skilled workers domestically, and of getting those who do not work into work, than importing people to replace them. 

ian1246 said:

In the short term, lack of workers means things like lack of nursery places for newborn children - meaning parents (often women, further widening the gender gap) have to stay at home - further worsening the worker-shortage and negatively impacting the quality of life of the younger demographics (young couples). It means lack of workers in the care sector and the NHS - which both directly affects death/survival-rates and also impacts long-term sickness: further worsening the quality of life of those waiting for treatment and removing them as economically-productive members of society.

We have more than enough people already here to do those jobs.

ian1246 said:

Now, its true there is a significant portion of the British-Born workforce who are long-term economically inactive.... unfortunately there is only so much which can be done to get them economically active. 

We have the highest level of economically inactive in Europe, we have the highest level of long-term sick (which is used to mask higher economic inactivity and unemployment) in Europe, we have the highest level of long term unemployed in Europe (although other countries, mostly Southern Europe have higher levels of overall unemployment). They need to be encouraged back to work, with increasing levels of encouragement until they do work.

ian1246 said:

It is far better to have controlled but generous levels of migration, to allow the UK economy to have the fuel it needs to grow and produce wealth.

We do not need high levels of immigration, we need the right kind of immigration and at relatively low levels. The influx of 500,000 unskilled immigrants last year is of no economic benefit, when it comes to social, economic and infrastructure it is a negative. Having the right immigrants can be and is a benefit to the economy, but what we currently have is not that.

ian1246 said:

The government needs to pull together an over-arching policy, tieing migration and population growth together with sufficient homes being built, as well as increasing the overall productivity in the UK economy - that means long-term investment in modern infrastructure and a generous taxation scheme for companies looking to invest into productivity-enhancing investments.

We do need to build more homes, infrastructure and social requirements, but in reality we also need to aim for lower or ideally zero population growth. I do agree our corporation tax system needs reform, there needs to be vastly more super-deductions for investment, it is why reinvestment in business so low compared to Germany, their corporation tax system actively encourages reinvestment, where as ours discourages it. 

ian1246 said:

From a personal perspective, It seems mad that in a country which has more rainfall than China, despite being a fraction of their geographic and population size, we have long-term droughts and have to import our energy from abroad (which is ££££ exiting the British economy to abroad). Take a leaf from the Victorians and build a ton of Dams, creating a whole bunch of reservoirs to meet both future-water needs and, crucially: allow a massive expansion in Hydro-power (which is far more consistent in the energy provided vs. solar panels or wind). Couple that with a whole bunch of floating-solar panel farms on the newly created reservoirs and it might go a long-way to securing future British-energy needs and helping mitigate future price rises (helping improve businesses productivity and making British people wealthier), whilst also stemming the flow of £££ out of the British economy to foreign suppliers. Bonus points since the resulting well-paid jobs created will likely be focused in Scotland, Northern England and Wales, helping mitigate the wealth-divide vs. the south, as well as potentially drawing some migration from the South to these area's which are generally "more affordable" to live (further helping control house-price increases).

The UK's long term problems are caused by a failure to invest, both in business, people and in infrastructure. If we want energy security then the only viable, long term solution in nuclear, I am all in favour of that, funded by tax rises, owned by the nation. 

ian1246 said:

How would this be paid for? If the government can pluck £300billion out of thin-air for the Pandemic and before that, the global-recession, I'm fairly sure it could pull a far more modest (couple of billion a year?) amount to invest into long-term infrastructure 

The £300 billion that was borrowed/printed is a huge part of why we are facing damaging inflation and the long term impacts of having a debt that exceeds GDP. A couple of billion would not touch the sides, the UK has had an investment deficit to 50+ years, to turn that around, as well as invest in energy security and mitigate the impact of climate change we are going to need to start spending an additional £120-180 billion per year.

ian1246 said:

or fail in that, generate the required £££ by juggling the budget or offering better rates at NS&I

Paying a higher rate of interest to customers does not result in increased profits, it decreases them, NS&I generates a rounding error in revenue in budget terms.

ian1246 said:

or just increasing (modest) taxation...

A modest increase in taxes will not come close, we need significant rises across the board. Combine IC and NI into one income tax, rase the starting rate to 36%, the higher rate to 45% and the additional rate to 49%, as well as reducing the personal allowance to a few thousand. Combine that with a withholding tax on dividend (in line with most other countries), corporation tax reform and benefits reform and we might get somewhere close to the amounts we might need. 

Take that much demand out of the economy and finding employees for the available jobs would certainly not be a problem and we would no doubt see net  migration go into reverse as those who could went overseas to escape the resulting depression.

(Note this does not dispute your analysis re the eventual impact of the twin deficit time-bomb and the under investment problem just that the solution would more likely kill the patient than cure it)

I would suggest that those policies were phased in over time. It would still leave us paying less tax than Scanavian countries and they are hardly struggling for skilled immigrants or investment, whilst also having the highest quality of living and population happiness in the world.