Friday, Jan 08, 2010
Inflation Rising
BBC News: UK producer prices up in December
The UK now is completely painted into a corner. It is a net importer, with inflation and thus interest rates at the mercy of the global markets. As a nation we're so highly geared I reckon that base interest rates rising to just 2% will be enough to put us back into recession, we'll see. Interesting five years ahead, and not a period of time that you want to be a home owner.
Posted by c'mon correction @ 11:34 AM (1732 views) Add Comment
12 Comments
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1. alan said...
"However, analysts said the increases were unlikely to signal wider inflationary problems".
If factory input and output costs are going up quickly, why won't it "signal wider inflationary problems"? Is it because other key items in the price index basket (like fuel) are stable or falling?
2. fallingbuzzard said...
ultimately its because demand is weak and there's lots of competition so even after the 30% devaluation we still can't get prices to rise, albeit we complain when the rate reaches 3%!
3. i remember the 90`s said...
Not a time to be a home owner ,what a silly thing to say ,we own our home and its just that a home so what if the value drops you have to live somewhere and i don`t fancy paying someone rent when i can live in mine for free !!!!!
4. alan_540 said...
High interest rates will be painful for people with variable rate mortgages and even more so if they are highly leveraged. But it will cause the price correction that we all want. My advice would be to fix your mortgage rate for the longest that your lender offers, sit back and watch the fun begin.
5. mark wadsworth said...
On the face of it, high inflation -> higher interest rates -> house prices down. Alternatively, more money spent on day to day items -> less money to spend on housing -> house prices down.
But we also know that historically housing is a good hedge against inflation and that this and the next government will do anything it takes to keep prices up. So all in all, not really much of assistance.
6. alan_540 said...
But prices are overvalued right now so not a good hedge until prices drop back to post correction averages surely?
7. Rblpm said...
"Interesting five years ahead, and not a period of time that you want to be a home owner."
Have to say I am a long term bear. Sold up in 2003. Actually ended up buying mid last year. Problem is we have all been saying "not a good time to buy" for so long! I think I joined this site in 2005. Add on 5 years to now, and thats over 10 years that it hasnt been a good time to buy. Life's too short.............
8. Pickle said...
But most people dont own their house. They just have a pile of debt on it. So with inflation they will be sitting sweet, no?
9. mander said...
"the cost of materials bought by producers, rose at an annual rate of 6.9%, the fastest pace since November 2008"
Devalueing the pound is not helping producers but foreign investors and property bulls.
10. fallingbuzzard said...
@5. I think housing is a poor, not a good hedge against inflation. I agree that its value goes up over time but it isn't easily marketable or tradeable, isn't easily divisible, and its usually bought with credit, all not good characteristics for a hedge. And now we're after a bubble, with credit based hedges are prone to, its certainly overvalued. Its only speculation that is driving up values now, not inflation.
11. tenyearstogetmymoneyback said...
Mander @ 7
I was just thinking that myself.
However, it could be helping the few producers we have left, for example the Mini Factory in Oxford which
exports all round the world. Presumably the price of cars like the Mini will fall in Europe while getting more
expensive for us (while cars like VWs will get even more expensive).
12. mander said...
tenyearstogetmymoneyback,
If it helps the few producers then it is the right thing although overall I think not. We should not fallow US on this devaluation game as the pound is more valuable than a few penthouses in Kensington.