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

druss

It makes me laugh to see people shouting that the cost of oil has gone up so they should either take it out of the inflation calculation or cut rates!

Inflation is a measured increase on prices of items deemed neccesary for the average person to live.

Just because the cost of oil has risen we hear remove petrol form the index
if the housing market increases we get remove cost of housing from the index
oil has put the cost of food up .....


By the time this has finished we would end up with an index that contains nothing of importance to living costs!


At the moment although we all experience increased costs there are no signs yet of any major impact on employment, high street spending etc

So why cut rates?

People need to reign in what they are spending and stop playing keep up with the joneses.

I am no fan of our current government but there is litlle they can do, unless they move the goal posts again.

carl1981

MRSTITTLEMOUSE wrote: »

Mortgage rates are higher than they were,but by no means high.I remember paying 15% not long after we bought our first house.Unfortunate,but it's a risk you take.It's just that because we have had such low rates for so long people who have never known any different are finding it a shock to see them slowly creeping up.I'd say they were midway.

even taking into account lack of miras? makes them towards the higher end of the scale for 40% tax payers when you look at historic rates

carl1981

jamesd wrote: »

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.

para 1 - I would love my car to increase in value on average by say 5% a year, I would keep it for 50 years then retire on the uplift.

para 2 - don't be a pillock, there is always an equilibrium between affordability/availability of finance and prices (albeit with overs and unders, hence influencing booms and busts). If it were to go to a tenth of current price, I'd be buying towns at a time, but I'd imagine they'd be snapped up before...

carl1981

SuperV wrote: »

Simple explanation of the current situation.

Imagine a blind(folded) driver. He or she can only use accelerator to change the speed of a car.

When the road surface is smooth, he or she can accelerate. When there are some potholes, he or she will decrease the speed.

But what if the pothole is HUGE? What if there is a pedestrian in front of the vehicle? It will brake to late! It can't predict really what will happen and can react only AFTER something has happened.

Use this analogy for BoE basic interest rate. When the economy is doing very well, they increase interest rate. When there are some bumps, they decrease.

But what can they do AFTER they cause an accident - a number of lost jobs?

stop and give their details?

SuperV

druss wrote: »

By the time this has finished we would end up with an index that contains nothing of importance to living costs!

It will contain what could be affected by BoE interest rate. Remember, Britain is not Empire any more.

druss wrote: »

At the moment although we all experience increased costs there are no signs yet of any major impact on employment, high street spending etc

Well, maybe it is a time for you to start reading newspapers? 6% drop in sales will mean that you need less sales assistants. No bonuses will mean less job for those who charge for help.

Remember, economy exists because one group of people have to offer what other groups need and vice versa.

And the Government gets its cut in all transactions that is used to pay NHS, education, pensions, police, army...

SuperV

carl1981 wrote: »

stop and give their details?

To a police officer that is on strike playing with his/her children as teachers are on strike as the Government had to cut their salaries, stopped 50% mortgage loans deals and final salary pensions?

OK, that will not happen )))

SuperV

Northern Rock's losses climb to £600m as more borrowers fall into arrears
(http://www.guardian.co.uk/business/2008/aug/05/northernrock.creditcrunch)

And so on...

SuperV

May be as bad as early 90s

(http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/08/fsa_as_bad_as_early_90s.html#commentsanchor)

And so on...

jamesd

That's looking promising but the bad news is that mortgage rates have been falling, so that will be starting to reduce the downward push on property pries. Looks like the next BoE change will be a drop as well, so more bad news coming there for people looking to buy a home.

carl1981, just invest the money you save from buying cars more cheaply. Property prices will probably stop falling before they reach 10% but how many towns did you buy when they were half their current price in 2002 and the average wage was 82% of its 2007 value? When one third back in 1998 with average wage 70% of its 2007 value?

tonyE1

I am convinced rates will be cut, at least by 1/2% by early 2009.
The reasons include:
* commodity prices across all complexes are well off their peaks oil 30%, Corn 30% ags will fall further partly because biofuels have lost their attraction, but the factor that will cause commodities to fall most is the strengthening of the dollar ( at least to below 1.75 ).
* the weakening UK economy
The only black cloud on the horizon is if everything kicks off in the middle east

I think any drop in house prices will be short and sharp but will recover quickly except in specific areas such as new builds outside of london. The reason being that those people that sell at a large discount will do so because they have to, otherwise they will wait. Once the fire sales are out of the system things will recover from a short hard drop.

I think the FSA are telling the banks things could get bad to scare people into not demanding wage increases for fear of unemployment. The last thing Brown needs now if mass unemployed claiming benefits and not paying tax.

As for OECD etc I suspect that 13 months ago they were saying the outlook for the global/uk economy was rosy so I would take what they say about growth rates with a large pinch of salt. Anyone can predict things on an equilibrium basis but a cloud or blue sky can always be guaranteed tp appear from nowhere.

Chatam House and their $200 barrel of oil is a wake up to Brown to do something less reactionary like Nuclear or wind and implement something such as the electric car infrastructure as in Israel - but of course he won't because he has no vision beyond his disasterous PFI / tax credits / NHS IT / Identity Card scheme ... [ any other expensive grandiose private sector sponsored elephant ]