Monday, Dec 10, 2007
The cut that won't cut it
Times: Bank’s interest rate reductions just won’t cut it this time
"The last time that the economy faced a serious threat, at the turn of the decade, the Bank’s response was to pump up consumer demand with cheap money – cutting base rates all the way to 3.5 per cent. The Bank knew well that this risked a build-up of excessive personal debt, but it argued rightly that the alternative was a painful downturn. Yet now the same pragmatic strategy seems unlikely to work again. Households have already taken on a £1.4 trillion debt mountain, and have been spending almost all of their disposable income. In meaner times, and with house prices sliding, it seems improbable that many will be so reckless as just to carry on as before."
Posted by confused76 @ 12:17 PM (397 views) Add Comment
3 Comments
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1. japanese uncle said...
Deregulation works to the advantage of those who can take advantage of it. Millions of the ignorant are just used to the profit of the few cunning. Put back adequate regulation in place, including total ban on equity release (perfectly justifiable to protect of the financially naiive from disaster in the event of falling house price which is not an unfortunate event but always an inevitability) and on the BTL transactions (to stabilize house market). In the meantime, it may be a very good idea indeed to put back the pension tax break in place that had been criminally robbed from the general public by the 'economic genius'. Restoring PEP and TESSA is another good idea, to encourage people to save, rather than spend. Financia education must be geared to guiding people to be good bank customers in the context of three decades ago, namely reasonable savings, with little or no borrowing without arrears at all, and NEVER in the context of the 21st centuty where good bank customers are financial junklies.
2. Andysuth said...
I was a first time buyer Feb'05.
I bought a house that I could easily afford, not "Overstretching myself" as many advised.
This interest rate cut means I have an extra £5.70 a month. Call the wife, tell her there will be a Christmas.
We can all go out and buy that XBox 360 the sales men want us to buy. That's less than £5.70, right?
Let's be honest, saving my £1,500 over the 25years of my mortgage isn't going to start the next guilded age and make me buy another house to keep the overinflated prices going, is it?
-AS
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