Interest Rates - BoE should cut them or the governer should go!

SuperV

dunstonh wrote: »

Excellent news. Now first time buyers can start to benefit and maybe people will begin to treat houses as a home and not an investment.

Wrong again.

1) First time buyers that managed to buy property in the last two years will be hit the hardest. They earn more. Or, they used to earn more... Others didn't.
2) First group will either have to pay more - much more in some cases. Second group will probably lose their jobs. Remember that service industry in the UK makes 75% of all jobs. That means that high earners are not bothered to do many jobs, so they pay someone else to do it for them. If high earners are squeezed of cash, they will stop spending so much. So...

lisyloo

Now first time buyers can start to benefit

Nice idea in theory.
In practice a lot of people will have worries about job security.
On the financial side there are increase in mortgage rates, mortgage fees, petrol, food and gas.
As most of us know the CPI measure does not reflect the rises that people are seeing on the ground e.g. anyone with a mortgage (as housing costs are not in CPI).

I've managed to get a good deal but my interest rate is increasing 30%.
Other will not be as lucky as me in securing a good deal for various reasons.

SuperV

lisyloo wrote: »

Medium term I think that is likely, but the BOE have said they will do "whatever it takes" to control inflation and with inflation at 3.8% I can't see that happening immediately.
I don't see inflation coming under control if petrol keeps rising and gas increases 66%.

How do you see things playing out?
I'd be interested to know what you think WILL happen not what SHOULD happen with interest rates.

I don't know. It seems to me that GB (Gordon Brown, not Great Britain) accepted that some rules will have to be changed. I hope that he will change BCCI as well and target inflation.

Speculation:
On the other hand, it seems that there is a lot of resistance as someone expects a waterfall of money. Take a look at NR (Northern Rock). At the moment all its loses will be covered by - the Treasure (please correct me if I am wrong). If you remember, when it happened, NR crises was not handled in the best possible way.

Gorgeous_George

FTBers have been whinging for years that prices were too high. Blame BTL. Blame low interest rates. Don't blame the poor FTBer.

Yet it wasn't until their credit supply was cut that prices were forced down. If FTBers had boycotted the market, none of this hideous HPI would have happened.

Assuming prices fall 40% and LTVs remain around the 90% mark, anyone with LTVs higher than 54% (at peak) will be unable to remortgage. Those with LTVs higher than 60% will be negative equity.

In a falling market, wannabe movers cannot rely on equity to fund a move. Many people will be stuck in homes that are too small for their needs.

And any credit junkie relying on a forthcoming inheritance to ease their woes can kiss goodbye to any hope that the inheritance will bail them out.

GG

jamesd

Dunstonh is right. A few increases in interest rates to help fight inflation would be very welcome and if they help property prices to fall more rapidly that's a good thing for those who haven't bought recently or are looking to trade up.

Lower prices are bad mostly for those who are permanently leaving home ownership or are trading down: retirees mainly. And those people benefit from long term low and stable interest rates that don't hurt the pension income too much.

Some people have the weird idea that paying the highest possible price for something you need to have - a place to live - is a good thing. Should try that argument with water or a car and see how far you get.

Would be nice to see property heading to a tenth of its current price. Somewhere along the way it'd reach a point where the cost to build equals the price and sets the lower limit. Probably well before ten percent is reached.

SuperV

Gorgeous_George wrote: »

FTBers have been whinging for years that prices were too high. Blame BTL. Blame low interest rates. Don't blame the poor FTBer.

4,5,6,7x of a fictitious income & 125% loans...

SuperV

jamesd wrote: »

Dunstonh is right. A few increases in interest rates to help fight inflation would be very welcome and if they help property prices to fall more rapidly that's a good thing for those who haven't bought recently or are looking to trade up.

There is an old saying - if you borrow someone £10k and there is a problem, send someone to collect money.

If you borrow £1million, employ a bodyguard to protect that person.

Sorry, the only way to solve this problem is higher inflation. Crash will affect everything and return Britain 1979. A new Baroness would be needed.

But, there is a small problem - China is very strong. Russia is also now stronger economically than Soviet Union then. India also. They can live without USA & EU very well. And they offer (and offered) much better deals to Africa (and oil producers there).

If the UK falls now, it will not recover for a long period of time, 10-20 years.

SuperV

http://news.bbc.co.uk/1/hi/business/7524834.stm

"Paul Dales, UK economist at Capital Economics, said: "An outright recession is now our central scenario. With industrial production having fallen in both Q1 and Q2, industry is already in recession."

"Alan Clarke, at BNP Paribas, said: "Growth has been much worse than (the Bank of England) expected. What really counts is what that does to the two-year ahead outlook for inflation."

Again and again - BoE should cut the rate!

baby_boomer

If the Prime Minister wants interest rates to be cut, he just has to increase the inflation target from 2% to 4% :eek:

Then the BofE MPC will oblige. But it would be a political and economic disaster .

In the meantime the Bank should continue to act independently in pursuit of the 2% inflation target it has been set by our elected representatives .

This Governor will outlast this Prime Minister.

SuperV

baby_boomer wrote: »

If the Prime Minister wants interest rates to be cut, he just has to increase the inflation target from 2% to 4% :eek:

Then the BofE MPC will oblige. But it would be a political and economic disaster .

Prove it. Why is it better to have a nasty housing crash? Why is it better to have recession?

baby_boomer wrote: »

In the meantime the Bank should continue to act independently in pursuit of the 2% inflation target it has been set by our elected representatives .

Hahahaghghgh... there won't be electorate left after their cure...

baby_boomer wrote: »

This Governor will outlast this Prime Minister.

He is as responsible as PM and FSA for this mess... Even worse, he complains about "The Bonus Culture" as if it is responsible.

They are the same people that few years ago talked about "new economy", "permanent low inflation with high economic growth" etc.