Thursday, Mar 18, 2010
Anybody buying a house now must realise the rates are unnaturally low and will go up in future years
Evening Standard: Ken Clarke: Hung Parliament would be an economic disaster
"Homeowners face painful rises in mortgage rates in coming years, Tory big beast Kenneth Clarke warns today.
In an exclusive interview with the Evening Standard, he said rock-bottom loan rates protecting borrowers from the worst of the recession are bound to end, whoever wins the general election.
“Anybody buying a house now must realise the rates are unnaturally low and will go up in future years.” Mr Clarke warned borrowers: “In working out whether you can afford a house, you have to work out if you can afford a quite perceptible increase in interest rates, regardless of who the government is.”
Posted by tenant super @ 06:19 PM (2179 views) Add Comment
18 Comments
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1. mr g said...
"“Anybody buying a house now must realise the rates are unnaturally low and will go up in future years.” Mr Clarke warned borrowers: “In working out whether you can afford a house, you have to work out if you can afford a quite perceptible increase in interest rates, regardless of who the government is."
Unfortunately a large proportion of our celeb / XFactor / soap obsessed electorate have no idea what interest rates are, let alone understand how they impact on their mortgages and that they should work out if they can afford an increase.
2. shipbuilder said...
Could the argument not be made that if you believe things work better without government interference i.e. supporting asset prices in the case of HPC, then surely the best result is a hung parliament that effectively neutralises government influence? The problem with this is that the parties are so close on policy that a coalition government would effectively be the same as having a Labour or Conservative government anyway.
3. mark wadsworth said...
I dunno if he's right or wrong, but that cheered me up enormously. Let's not forget that KC was part of a government that stood idly by/resisted interfering in the workings of the free market* while house prices crashed, which laid the foundation for a pretty decent economic recovery.
Mr G, you say (quite rightly) that people ought to be prepared for a rise in interest rates, which in practical terms only affects recent purchasers or MEWers with big mortgages. Now, seeing as these are the people with the most constrained budgets, and a hike wouldn't affect people with small or no mortgages, does that not defeat the argument that a modest property value tax (to replace Council Tax, Inheritance Tax, TV licence fee etc) would 'hurt' anybody in particular?
But as SB says, if rates are going to go up whoever wins, that is neither an argument for nor an argument against coalitions. With a coalition, at least they can blame the ensuing HPC on each other.
* Delete according to taste.
4. sirgoogle said...
Looks like we are being prepared for some rather unpalatable conservative policy - but which should come as no surprise to anyone given situation that Crash Gordon has got us into.
The polititions have finally realised that the only real way out of the current recession is higher interest rates, and inflation (lots of it). This will make the market more exciting, create lots of opportunities for investors and raise savings rates (and mortgage rates) - giving savers the feelining that they are getting better returns on their savings (but in reality the sheeple will not realise that their assets are being eroded due to the difference between savings and inflation)
5. gone-to-colombia said...
He's just pointing out the obvious.
I give him all credit for that.
6. fallingbuzzard said...
@4, no chance. inflation won't be anywhere near as high as you make out, but dream about it
7. Doormouse said...
"quite perceptible increase in interest rates" has to be the understatement of the year
8. tenant super said...
I agree that a hung parliament wouldn't be such a bad thing. What cheered me was the unusual candour in the admission that IRs will have to go up whoever is elected. So many other news articles have said that Merv and the gang will keep them low for a very very long time. But that will probably not be possible.
9. cyril said...
@3 An interest rate rise would have a significant effect on everyone because it would take a chunk of money out of the economy. Then houses will go down in price (hurrah), everyone will feel poor and stop spending...and so it goes on.
10. mark wadsworth said...
@ Cyril, ignoring transfers to overseas, interest rate rises do not take a chunk of money out of the economy any more than interest rate cuts put money into the economy. Low interest rates transfer money from savers to borrowers and create asset price bubbles; higher interest rates transfer money from borrowers to savers and create buying opportunities.
The best rate is whatever rate the market sets, free of government interference, that's cheapest for the taxpayer and least-bad for the economy. Those rates may be higher than at present, they may well be lower, that is not for me to say.
By analogy, do you think the economy would run better if they tried to fix GBP exchange rate to any other country's? Or if the government decided on all prices and wages? Or had strict quotas for all output?
11. mick rupert said...
It was heartening to read this article this evening in a publication now seemingly 100% funded by property rampers (now since it has become "free" - ahem, of course there is always a price).
The Evening Standard contains London's "most influential property supplement", remember.
The only thing that crossed my mind given that the article had been given such prominence is perhaps either (a) readers won't appreciate the corresponding downward pressure on property prices following an increase in interest rates, after all this point is VERY carefully skirted in the writing, it's described as BORROWERS feeling PAIN, and/or the more simple option of (b) who the hell out of the standard Standard (sic) readership give a damn who this random Tory "washup" is? (bless him)
In regard of option (a), outlined above, it seems it's like talking about a war but neglecting to mention a certain bunch of unfavoured victims.
Hey, perhaps this IS war!
12. novice pete said...
Hung parliament. Yes, has a certain 'je ne sais quoi' about it.
13. charlie brooker said...
"Ken Clarke: Hung Parliament would be an economic disaster"
And what about a property boom that you never warned against, Ken? Would that be a disaster too?
14. uncle tom said...
cb,
I don't think you can blame KC for not warning against the property boom - I recall him being pretty blunt about the hazards of excess debt, which only took off after he left office.
I crunched the numbers on all the marginal seats yesterday to get my own take on the election outcome.
Unless Cleggy triumphs in the TV debates, the Libdems look like being slaughtered, probably losing over twenty seats to the Tories and perhaps two to Labour.
On simple national poll swings, the Tories might get fifty seats off Labour, but they've been putting a lot of effort and money into those seats where they need a 3-6% swing, so will probably score a few more.
My guess is that the UKIP vote will collapse in favour of the Tories, especially in the marginals, and Labour may lose a few seats as a result of their vote defecting to the BNP, although the BNP won't come close to winning anywhere.
Overall, it looks very close. We could get a situation where the Tories poll more votes than all the others combined, yet fail to get an overall majority of seats. Constituency boundaries, and the number of electors per seat, skew the outcome very heavily in Labour's favour.
15. mander said...
Cameroon said that it is important for interest rates to stay low if they came to power. Conservatives are hopping to mention a few cuts here in there make a big fuss in the media and investors will be happy. Problems are sorted.
The problem people have to live with nowadays is inflation of asset values without any connection to economic reality and especially with people earnings and low interest rates favours just that, Mr Cameroon.
16. Crunchy said...
"Anybody buying a house now must realise the rates are unnaturally low and will go up in future years."
There goes the yield and future appreciation. The backside of BTL. :)
17. Crunchy said...
UKIP. The vote for the enlightened. That's them out of the running.
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