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Base rates will increase again

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  • thegentleway
    thegentleway Posts: 1,094 Forumite
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    edited 27 July 2023 at 2:57PM
    Cus said:
    Anyone know why they just didn't bump up the rate by 2-3% six months ago rather than this monthly mini increases?
    My guess is they don't want to tank the economy into recession. It feels slow but it you zoom out a few years, these rate changes are quite abrupt.
    No one has ever become poor by giving
  • eskbanker
    eskbanker Posts: 37,039 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Cus said:
    Anyone know why they just didn't bump up the rate by 2-3% six months ago rather than this monthly mini increases?
    My guess is they don't want to tank the economy into recession. It feels slow but it you zoom out a few years, these rate changes are quite abrupt.
    ....said the poster with the apt username!
  • Rosa_Damascena
    Rosa_Damascena Posts: 6,975 Forumite
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    Cus said:
    Anyone know why they just didn't bump up the rate by 2-3% six months ago rather than this monthly mini increases?
    My guess is they don't want to tank the economy into recession. It feels slow but it you zoom out a few years, these rate changes are quite abrupt.
    And being cynical the Tories still see a chance of winning the next election / a hung parliament. Like it or not, Fishy Rishi is delivering on his promise around boats (albeit without its intended impact, other than delivering what the proletariat thinks it wants) and he does know what he is doing financially. 

    I am personally nervous of a crash this autumn. I come at this from a perspective of a saver - having closed down all my stagnant / low paying accounts earlier this summer and am looking for a fix for a decent term. Looks like the time will be right in the next fortnight. 
    No man is worth crawling on this earth.

    So much to read, so little time.
  • Cus
    Cus Posts: 779 Forumite
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    boingy said:
    Cus said:
    Anyone know why they just didn't bump up the rate by 2-3% six months ago rather than this monthly mini increases?
    Because that would have caused a MAJOR disturbance in The Force, or the markets as they are more properly called.  :)
    For an example, take a look at the aftermath of the Liz Truss era. Markets hate big surprises, especially ones that politicians promote as "bold and radical".
    Gently does it in the world of economics.
    They could drop hints that anything upto 2% is on the table, soften the narrative so it's not a surprise to markets. Everyone is praising the Fed for raising their rates quicker and earlier than everyone else, well we could have done even better 😁
    Overall it would have probably brought down our inflation quicker and we'd all be better off.
  • Exodi
    Exodi Posts: 3,892 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper Combo Breaker
    Cus said:
    Anyone know why they just didn't bump up the rate by 2-3% six months ago rather than this monthly mini increases?
    My guess is they don't want to tank the economy into recession. It feels slow but it you zoom out a few years, these rate changes are quite abrupt.
    And being cynical the Tories still see a chance of winning the next election / a hung parliament. Like it or not, Fishy Rishi is delivering on his promise around boats (albeit without its intended impact, other than delivering what the proletariat thinks it wants) and he does know what he is doing financially. 

    I am personally nervous of a crash this autumn. I come at this from a perspective of a saver - having closed down all my stagnant / low paying accounts earlier this summer and am looking for a fix for a decent term. Looks like the time will be right in the next fortnight. 
    I think the general public is yet to be convinced that the measures are working outside of politicians suggesting they are. Nearly 20% more people came over last month than the same time last year.

    Out of interest, what are you specifically nervous about? Fixing at 6% now but then in a couple months time new fixes are announced at 8%? There's a lot to say with the Mathematics of delaying, and there's been several posters that have putt across several very well articulated and data-driven examples that the logic of constantly waiting for the next best fix may be detrimental, especially if the money is earning easy access rates for the interim.

    Unfortunately banks are also not so quick to increase rates following a BoE change.
    Know what you don't
  • Nebulous2
    Nebulous2 Posts: 5,666 Forumite
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    ader42 said:
    This “crisis” is simply a return to lifestyles like the less afluent 1980s when we had higher taxation and nurses were paid £7k per year. Not a crisis really, just a readjustment of peoples reality.

    Most of any “housing crash” that people are expecting will be due to inflation everywhere and not house prices coming down significantly imho.

    I’m still expecting BOE base rate to get to the historical average of 7% as things are being taken (too) slowly. 

    My low mortgage fix is up next April :( 

    You've got me on a trip down memory lane.

    We were living on two nursing salaries in the mid-eighties. I can't remember what we were earning, but it was enough to buy a reasonable flat, and looking back we had a feeling that the world was our oyster and a great deal was within our grasp. I was able to take an additional part-time job and earned enough in 6 months to pay for a new kitchen.

    We managed a fairly regular curry, regular trips to the pub to listen to live music, quite a few camping trips, and our first (and only for a long time) new car. 

    I'm not sure much of that would be possible now on two starting qualified nurses salaries.    
  • sevenhills
    sevenhills Posts: 5,938 Forumite
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    Cus said:
    Anyone know why they just didn't bump up the rate by 2-3% six months ago rather than this monthly mini increases?
    They where hoping rates wouldn't need to go so high, that judgement was influenced by the Government having a massive debt that would also make it difficult for them.
  • sevenhills
    sevenhills Posts: 5,938 Forumite
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    Exodi said:

    Now couple this with the fact that most UK mortgages are held with fixed term promotional periods and you are left with the current situation where the majority of mortgage holders are still cruising on fixed 1-2% interested rates. I'm (fortunately?) in this group for now.

    But just think about all those credit cards and general debt held by ordinary people, plus the debt held by many businesses.
    The business debt will lead to higher prices, that will feed the inflation even more.
  • Exodi
    Exodi Posts: 3,892 Forumite
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    edited 28 July 2023 at 12:40PM
    Exodi said:

    Now couple this with the fact that most UK mortgages are held with fixed term promotional periods and you are left with the current situation where the majority of mortgage holders are still cruising on fixed 1-2% interested rates. I'm (fortunately?) in this group for now.

    But just think about all those credit cards and general debt held by ordinary people, plus the debt held by many businesses.
    The business debt will lead to higher prices, that will feed the inflation even more.
    I'd expect a significant amount of consumer debt (e.g. loans, car finance, etc) is held on fixed rates also. It's greatest impact is on refinancing.

    I completely disagree with the assertion that increased interest rates will increase inflation.

    The whole point of increasing interest rates is to encourage saving and discourage spending. Reduced spending = reduced demand and reduced demand = reduced prices.

    At least that is the theory believed by most economists and adopted by the BoE. Obviously if there was a genuine belief outside of your comment that increasing interest rates increases overall inflation, don't you think the BoE would have been dropping interest rates instead?

    I doubt Andrew Bailey will be speaking to his ops team:

    "Right we've just agreed another 0.25% effective from the 4th August - can you update that on the system and push out communications?"
    "No problem, 0.25% on the 4th August, loud and clear."
    "Thanks, it's been quite the set of decreases over the past year"
    "Decreases?" *gulp*
    Know what you don't
  • InvesterJones
    InvesterJones Posts: 1,217 Forumite
    1,000 Posts Third Anniversary Name Dropper
    Well, Turkey tried to reduce interest rates as a means of combating inflation...:p

    But yes, as above, increasing interest rates contributes much less to inflation via pass through than it takes away via reduced availability of money for  spending/investment
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