Friday, May 11, 2007
Get ready for the next increase, in August?
Times Online: Borrowers take more of the strain as interest rates reach 6-year high
"In a poll for Reuters, a third of the City economists questioned predicted that base rates would rise again, to 5.75 per cent, by August." ... It is becoming increasingly plausible that rates will eventually have to rise to 6 per cent, or perhaps even higher, OK, so we just wait for the fallout in November, any nominatins for who should join Guy Fawkes on the bonfire, I'll vote for GB(H) ...
Posted by fahrenheit451 @ 01:07 PM (348 views) Add Comment
17 Comments
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1. fahrenheit451 said...
I should have added ...
"A record 30,075 people were declared insolvent in the first three months of this year. The number of court actions to seize homes from people unable to pay mortgages also leapt by more than 10 per cent to 33,715 in the first quarter."
Sub-prime ... sub-prime ... sub-prime
Watch out, the crash is comming ...
2. p. o. o. r said...
The new interest-rate increase will add a further £16 a month (£192 a year) to the average mortgage bill, based on a £100,000 loan.
Where am I going wrong - £100,000 + 0.25% = £100,250 = additonal £250 per year = £20.83 per month.
How is the figure of £16 a month calculated? Am I having a Friday afternoon moment?
3. dohousescrashinthewoods said...
Is this perhaps a 100,000 average initial mortgage of which an average amount has been repaid? (about 23% looking at the differenc between the figures)
4. mrmickey said...
Problem is their trying to use interest rates to control general inflation not houseprice inflation. The global financial system is now so complex that raising interest rates could have no effect on general inflation but could crash the housing market. Raising interest rates to control inflation is a bit like repairing a swiss watch using a lump hammer.
5. Ticktock said...
The UK economy seems dependant on ever rising house prices in order to achieve growth. Therefore Mrmickey is probably right that it is 'other' inflation that is the cause of their concern, and that this 'other' inflation is largely out of their control via Interest rate rises.
However, if they fail to raise rates in the face of clearly rising inflation (however much they fudge the figures) the whole gig about 'inflation targeting' and Central Bank 'independence' might become clear to the average Joe creating a potential political and economic crisis.
In my opinion, they know the system is flawed and will eventually unraval if not altered.
Very interesting to read an FT editorial the other day in which it suggested that it might be time to agree with the EU an exceptable way of including the cost of housing within CPI statistics, presumeably to make them a little more believable. But what would this mean, if prices are now toppy, to include such stats. in CPI. Falling house prices helping lower inflation and reduce the need for more raises?
The engineered house price 'boom' was, and is, an enourmous fraud in my opinion. But those that engineered it are still at the wheel, and will remain there if they can sustain the illusion.
How far they are prepared to go to do this will determine the future of house prices in my opinion.
6. Orwell said...
HA HA HA HA HA HA HA Mr. M., excellent analogy!!!!!!
7. confused76 said...
Agreed, it should not be just IR, I do not see how the government can fix the housing problem without hurting the economy, unless:
- start taxing the BTL
- relax construction planning constraints
- adopt stricter tax rules for the russian international tax-free crowd
8. Andy said...
The no of people not able to meet there mortgage repayments is the tip of iceberg.
Below this is the no of people not able to afford the maintenance on there houses - with less free money and higher building costs this represents a second larger iceberg layer.
Poorer maintained houses can drag the price of a whole street down - the third layer.
etc etc
Full steam ahead for the UK's Titanic. The Crew say were unsinkable.
9. tyrellcorporation said...
I'm sure New Nu Labour would like the idea of a 1% tax on BTL mortgages which gets chanelled into 'affordable' housing schemes. They've taxed everything else but one begs the question, why they haven't had a go at the BTL crowd already? Mmmm, maybe they're a part of that crowd.
10. Orwell said...
Michael Meacher definetely is...He has 20 hiouses he lets out up here in the Cotswolds!!
I lurrrrve socialists!
11. taffee said...
I would be interested to know the cabinet and boe exposure to properties
12. Bigguy said...
Speaking of cabinet & boe exposure to property, & accountability, I was thinking the other day that if the Royal family have had thier books exposed re tax and their finances, then why shouldn't the same thing happen with all MP's. with their finances made public for all to see their relevant vested interests.
13. Tom said...
p.o.o.r.
Assuming mortgage rate of 1.5% above base rate repayments on a £100,000 25 year mortgage would be:
Base rate 5.25%:
100,000 / ((1 - 1/1.0675^25) / 0.0675) = £8,388.69 per annum
Base rate 5.50%:
100,000 / ((1 - 1/1.070^25) / 0.070) = £8581.05 per annum
Difference = £192
14. Ticktock said...
Michael Meacher is a Labour party member ie. mildly left of centre, more a capitalist with a conscience. He is not, therefore, a 'socialist'
In the UK. peoples opinion as to what a 'socialist' is, seems at times to be severeley (and deliberately in my opinion) distorted. In the same way peoples view of house prices are distorted, peoples view of our foreign policy, and indeed much of our history, is distorted too.
This is not to claim any points for 'socialism' or 'communism', but I think it a serious mistake to allow the Corporate media (and education system) to be allowed to missrepresent the ideology of anybody, whether they be Socialist, Fascist, Islamist, or any other critic of global capitalism.
If Capitalists are 'so clearly right' ,then they ought to be able to engage in honest debate without resorting to such tactics.
15. manjit1966 said...
Light the blue touch paper and stand well back !!
Here's to higher interest rates and a reality check for all those fools who have overborrowed on their mortgages and credit cards
There is no escaping enjoy the party !!
Manjit
16. Whiteknight said...
Not cutting interest rates so low in the first place and then raising them ahead of the curve would have been good use of the lending rate tool.
The global financial system is actually rather more simple than people make out. Although simple is a relative term.
However, turning off the supply of cheap money is the ONLY thing that will avoid effective hyper inflation and the only way to do this is to get out the a hammer.
We are not no much looking at a fine Swiss Watch with intricately linked workings as a runaway freight train.
Infact, the lending rate tool IS and always has been fairly blunt and it is people thinking they can administer an intricate solution using it (via PR and statement timing) that always gets us into this mess.
Anybody who believes the published rate of inflation is a fool.
Basically the rate of house price increases in the last few years HAS been the general rate of inflation. Profits increases from companies are averaging similar.
17. tony marshall said...
p.o.o.r - The £16 assumes a repayment mortgage over 25 yrs - as the interest is only part (albeit a very big part) of the repayments, a rise doesn't increase the repayments proportionately. If it was an interest only mortgage, then you would be dead right - and as the people most likely to be crippled by such an increase probably took out an interest only mortgage, your figure is in fact more relevant than the £16