Wednesday, Mar 26, 2008
King admits that cutting the base rate has made no difference to mortgage rates
Torygraph: BoE 'losing the battle' as UK economy slows
What the article omits is that base rate cuts have weakened Sterling thus pushing up inflation, so household incomes are even more squeezed than they would have been had rates been left on hold. He also 'warned that house prices would not rise at all over the next few years', a reality shock for many no doubt.
Posted by fed up @ 09:29 PM (1129 views) Add Comment
20 Comments
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1. bystander said...
Has anyone heard anything in the mainstream news about the dire state of the sterling? The first most people will know about it will be when they pop over to France on a booze cruise to discover that, even with the increases in the tax on alcohol in the UK, it will be cheaper to buy their booze in the UK, or when they fly to their favourite spot in the Costas to discover their budget will spread to one meal a day and a bottle of beer between six. The currency is currently trading at its lowest ever rate against the Euro, which is where most people will spend it, but because it is doing OK against the incredibly weak dollar, everything is alright. There appears to have been a blanket ban on mentioning any drops against the Euro. I have spoken to many people in the UK, all of whom have absolutely no idea how sterling has been devalued - at least Wilson warned people they would be poorer. Merv tried, but Crash has made no such announcement. He is a liar and a traitor to the best interests of the British people and should be treated appropriately.
2. planning4acrash said...
So, how do we sort him out? I say, a march on Whitehall for our currency.
3. planning4acrash said...
House prices have been let to boom so that people would ask for the low interest rates that will destroy sterling and force us into the euro or amero. Same situation in the us.
4. quiet guy said...
There has been so much doomism in the mainstream press recently about the coming house price correction that I'd been getting bored with this site recently. Then this sentence caught my eye:
"Mr King warned last month that Britons were facing a major fall in their standard of living as they face these pressures."
That's rather bearish coming from the Bank of England Governor and a bit worrying. We have mostly lusted after our much anticipated HPC but I wonder what the overall effect will be? I don't think the iPod generation is really ready for a drop in their standard of living and I suspect that the average UK adult will react rather badly to turning down the heating, running an old car and giving up the annual foreign holiday. Even worse still will be the tension between hard pressed private sector workers and public sector who want to keep their guaranteed pensions and (sometimes) non-jobs.
I'm not into apocalyptic dooming but I suspect that things could get rather unpleasant for us.
5. larry pickleman said...
quiet guy said "I don't think the iPod generation is really ready for a drop in their standard of living and I suspect that the average UK adult will react rather badly to turning down the heating, running an old car and giving up the annual foreign holiday.!"
react badly? like what? Throw a can of beer at the flat screen tv? This ipod generation you are hinting upon need a good kick up the a*se and a nice big recession/depression is probably the best thing for them!
6. Tipping Point said...
"Jim Cousins, a Labour MP on the Treasury Committee said: "People are not going to be able to refinance their mortgages. You're losing the battle on both fronts. People can smell it."
Not us much as we can smell the stench of V.I. self interest in yourself Mr Cousins. Here we are with a global credit crisis, one where the US has seen no improvement even after trouncing the value of the dollar, and Mr Cousins blames Mr King personally for all that is wrong. So Mr Cousins, you're worried about some of your pen pushing government employed constituents loosing their homes. You would rather we got the money printing presses going, inflated everyone on the minimum wage into Dickensian poverty and left the UK struggling to service its overseas debt for decades to come.
And just how did this London private school boy become Labour member of parliament for Newcastle (http://en.wikipedia.org/wiki/Jim_Cousins). Was it his Oxford Uni punting skills that won over the voters!
7. stillthinking said...
I hope we aren't in the situation where there is a dramatic house price crash, but only visible to foreign purchasers. They are down 20% already for some currencies (not sterling of course).
8. bystander said...
Good observation stillthinking - that might be exactly what happens.........the media are doing absolutely nothing to highlight the plight of sterling to the British public, but many europeans who own property in the UK have lost a lot of money on their London pied-a- terre, or mansion in the home counties, or block of new builds in Leeds etc. etc, just on currency exchange rates alone. The ECB, massaged and comforted by figures comming from Germany have lost sight of the bigger picture, they are based in Frankfurt after all. Trichet may be the man to bring down the Club Med.
Sterling will continue to devalue as the BoE cuts rates to stave of recession (bail out the governments mates), imported inflation will rocket and subsequently the standard of living for all will plummet. I wish this was not true, but then Crash made promises only a politician can break.
9. Fed Up said...
To add to bystander's first comment, I suspect that most people visiting the continent this year won't really notice the extra cost until they get their credit card bills after they have got back. Even then the media have brainwashed them to believe that the weak pound is a result of the 'credit crunch', not the BoE leaving rates too low.
Whilst the media peddle the 'housing demand is so high because we are a densely populated island' etc story, for the very same reason of high population density, we are highly dependent on food and fuel imports and need a strong currency, backed up by higher interest rates, to pay for them. But then it doesn't suit the media agenda to say this.
10. Government Educated said...
About 5 years ago you could buy one Euro for US $ 0.84 today it costs $1.58. the living standards in asia have doubled over 10 years but in the US they have been almost flat. We in Great Britain (are we allowed to say that these days? ) are being robbed, our savings our pensions and investments are slowly being depreciated in value. How do we protect ourselves against elected criminials and their accomplices in the media. Gold and Silver and also if you can manage it a massive mortgage (which is same as shorting cash).
11. stillthinking said...
I am not so sure that the devaluation is from either government or the BoE. Imports must be going down soon if disposable income is falling.
Probably because the financial industry had invisible exports which totalled 40% of the total (roughly from memory), so our exports, because of basket case banks, are facing a massive cut.
Or maybe the world has realised that even without criminally negligent government, we are, nationally, a bunch of lazy work shy b@stards looking for a hand out.
12. Orwell said...
Peeerleeease save me from the overstatement in this article:
"Mr King warned last month that Britons were facing a major fall in their standard of living as they face these pressures."
I mean its not as if we haven't spent next year's income and the year after that (and the year after?) on Chinese consumer trinkets is it?
13. Si said...
Larry,
I don't know what planet you live on but I though I'd better step in on behalf of the iPod generation, being an old (30) member of them. For the record I still share a house with 3 other ipodders, never owned a flat screen, although I drink a fair amount of beer, but that's half because I still cant afford to get on with life given student debts (I did however take a phd) and simply cannot afford a house.
My mate who went to uni, got a well (for an engineer) paid job in the city, DOES have a plasma screen telly. He even has his own tiny flat in Southend. However even though he bought several years ago and renovated it himself with a very modest amount of equity release, he can no longer afford to pay more than interest on the mortgage.
The average ipodder is crippled with debt, and facing a wall of taxes and debt that, if things don't change dramatically, will mean that they will never afford that house (or even the flat screen)
This absolute tripe in the tory papers about the average kid being able to release endless money (such as a deposit) from their folks is just that, written to make the middle classed / middle aged of England feel better about themselves about having so much money. I speak for myself and all my friends here.
Of course it's different in torygraph world where tarquin gets his debts & deposit paid by his parents, lucky him.
14. Omg said...
"stillthinking" - I really wish you would.
15. it_is_going_with_a_bang said...
Mr King said: "I would be surprised if in a few years' time house prices were markedly above where they are now. I expect broadly stable house prices over the next few years"
Yes and a stable currency, mortgage market, job market, .......
I guess it is his job to use the word "stable" in anything he says. Makes a change to "fundamental".
I fail to see how he can stop a HPC if people cannot borrow the same silly amounts of cash at the same silly teaser rates ( much like the US ).
I'm not entirely sure what standard of living is supposed to mean... that you can buy anything you want because the bank will lend you the money?
It's widely accepted that we only have this "standard" of living due to a HUGE mountain of debt.
16. mark said...
the BOE should let it crash and burn, it is the only sure way of getting back to normal...
17. maddison said...
I think the Government is going to start having to take responsibility rather than delegating it to the BOE. Some fiscal loosening might be in the offing!
18. inbreda said...
I was wanting to move to france. Given the state of GBP Vs Euro has anyone got any advice? Is it a widely held view that I have already missed the boat? Is GBP likely to go lower?
19. symo said...
Wow, I mean wow. Mervyn is in for the chop now. Admitting that cutting interest rates increases inflation and wekens economies, why it's almost like he is preparing for a rate rise (I wish).
20. Letthemfall said...
It would be unbelievable if house prices were "markedly above" present levels in a few years, onset of double digit inflation excepted. What surprises me is how prices (other than for flats) are sticking so hard. Perhaps a few more months will see a difference. In common with some other comments, I feel that only a big recession will correct the imbalances in our economy - no govt will do so. If there isn't one, I suspect those of us who do not own a large house will continue to see a relative drop in our standard of living. Sooner or later the debt must unwind and equilibrium will be restored, but at the moment the Bank and Govt are doing their damnedest to prevent it happening.