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Bootle - Mega Low Ir Here For Next Half-decade

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"Interest rates to stay at record lows 'for five years'

Nathan Cross 09/09/2009 14:50

Interest rates will remain at their current record low levels for the next five years, according to economist Roger Bootle.

Speaking today at the Colliers CRE Economics and Forecasting breakfast, Bootle said the government would be faced with the task of reversing three key policies in the next few years – fiscal spending, quantitative easing, and near-zero interest rates.

He said the top priority would be fiscal tightening with taxes, particularly VAT, to climb.

And Bootle added that interest rates would be the last to be reversed as low rates were vital for the housing market, government bonds and a competitive exchange rate.

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he's been saying this a while - as long as it is possible (low inflation-pressure) then low IRs seem likely, according to his analysis, which I wouldn't dare contradict!

he has also gone on the record as saying house prices will, in these circumstances, fall sharply for a few more years and then trundle along the bottom for 'quite a long time' - whether he meant trundle along with unchanged nominal or unchanged real prices is an interesting question - my bearish take being unchanged nominal prices, giving real, inflation adjusted falls of a few percent a year, finishing off next decade with real terms significant falls, but probbaly no nasty shocks along the way

Edited by Si1

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The whole crash seems to be playing out very much like the Japanese post-bubble situation. The government, determined that pain should be minimised, has taken on massive debt and slashed interest rates no near zero, the banks are unwilling to lend or take risks; more interested in their own balance sheets, and the consumer is paying debt off like mad and saving.

Get ready for a decade of economic stagnation.

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So we're going japanese. what does that mean for those that want to buy a house (to live in)?

Stay put. Further drop are on their way.......but this may take a decade to play out :angry:

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So we're going japanese. what does that mean for those that want to buy a house (to live in)?

Stay put. Further drop are on their way.......but this may take a decade to play out :angry:

If you can afford it without stretching yourself then don't put your life on hold. Over the term of a 25 year mortgage there is very little difference in the onthly payments unless huge differences in property prices.

Also if you hold off buying you may have to buy with a higher mortgage rate when prices do bottom out making the long wait completely pointless unless you are a cash buyer.

I'll be moving in less than 3 years so with that time frame in mind I'm not buying anything at the moment unless houses become cheap again (ie 2001) but if I was settled into an area I was going to live for a long time I would definitely be looking.

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Good to see you about again nohpc. Looks like your prediction of 5.5% peak in IRs in 2007/8 was right. Shows how much I know.

The battle between bears/bulls/neithers still rages.........now more than ever.

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Good to see you about again nohpc. Looks like your prediction of 5.5% peak in IRs in 2007/8 was right. Shows how much I know.

The battle between bears/bulls/neithers still rages.........now more than ever.

I'm a bear at the moment but I try to remain realistic/neutral. My interests have changed from wanting house prices to go up so I can cash in on my property to wanting prices to tank so I can buy a second house to live in with my partner.

Thanks for remembering my prediction!

Edited by nohpc

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I'm a bear at the moment but I try to remain realistic/neutral. My interests have changed from wanting house prices to go up so I can cash in on my property to wanting prices to tank so I can buy a second house to live in with my partner.

Thanks for remembering my prediction!

Im sorry, but "life on hold" while not buying?

WTF does that mean?

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If you can afford it without stretching yourself then don't put your life on hold.

Damned right. I'm loving life in my rented house. The landlord is a nice bloke, he fixes everything when it needs fixing, and he's kind enough to be renting it to us at a gross yield of 3.5% (based on his purchase price).

I'd hate to have my life on hold worrying about negative equity and interest rates.

Edited by dazednconfused

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Damned right. I'm loving life in my rented house. The landlord is a nice bloke, he fixes everything when it needs fixing, and he's kind enough to be renting it to us at a gross yield of 3.5% (based on his purchase price).

I'd hate to have my life on hold worrying about negative equity and interest rates.

But your current situation does not lead you need to buy a house.

My experience of the renting is that it is far less stressful over all although your landlord could kick you our pretty much every time your contract ends.

Also, most rental property appears pretty poor quality. The place I am living in now is really the only place after 6 months searching on right move prior to my partner moving down that was suitable and even then it is to small.

The good properties will still sell at top price and these are the ones I want but as I don't need them at the moment (not settling into an area long term and don't have kids) I won't even take a second look.

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Meh.

Huge unemployment, rising taxes, no returns on savings, retiring boomers and disjointed demographic, financial system broken beyond repair, no industry, energy rationing, punitive carbon rationing, diminishing returns on North Sea oil, loss of confidence in Britain, and nanny police consumer state does not equate to housing prosperity.

Get used to it folks. The moneys gone. Oligarchy/corpocracy.

But if you insist that the little patch of dirt you currently reside on is going to make you self sufficient and wealthy, then go for it.

The only people set to profit are those with historical family title.

Neo-feudal Britain. Same as it ever was.

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must be another roger bootle who predicted prices would peak in 2003 http://www.independent.co.uk/news/business...ays-601169.html

the man is a sage

and onion fan

He did predict a 20% rise in house prices for 2003, which was probably fairly accurate. He also clearly identified the bubble, he simply gave a poor estimate of when it would pop, but that is the nature of inflating bubbles - it is very hard to judge when they will pop, even when they look far too big. However, most importantly he clearly identified a growing bubble, while others denied it.

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Not only is my life 'on hold' I'm also living a 'locked-in' life. Maybe it's just my imagination?

its better than the alternative. Death.

all this fuss over 4 walls.

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Meh.

Huge unemployment, rising taxes, no returns on savings, retiring boomers and disjointed demographic, financial system broken beyond repair, no industry, energy rationing, punitive carbon rationing, diminishing returns on North Sea oil, loss of confidence in Britain, and nanny police consumer state does not equate to housing prosperity.

Get used to it folks. The moneys gone. Oligarchy/corpocracy.

But if you insist that the little patch of dirt you currently reside on is going to make you self sufficient and wealthy, then go for it.

The only people set to profit are those with historical family title.

Neo-feudal Britain. Same as it ever was.

Landowning old b4stards rejoice. Everyone else can turn gypsy. :blink:

We all need to take up serfing. Same as it ever was and always will be in Great Britain. Peasants don't revolt here.

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Also, most rental property appears pretty poor quality.

yep - this is the big, and most reasonable, argument against renting - there's a certain art and attitude required in order to get a decent place and landlord rolled into one, which a lot of people don't want to have to manage. and it can cost a packet when it goes wrong.

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Long timers here know Bootle is a pillock.

The central banks don't set interest rates, the markets do.

Central banks have two levers. 1) They can create inflation, or deflation, through expansion or contraction of the money supply. 2) they can loan to distressed banks.

Over and above that they are powerless to shape the future!

That said - I am in the deflation camp and think rates will remain low for some time because the market knows it could spark a depression if rates rise to quickly.

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Long timers here know Bootle is a pillock.

The central banks don't set interest rates, the markets do.

Central banks have two levers. 1) They can create inflation, or deflation, through expansion or contraction of the money supply. 2) they can loan to distressed banks.

Over and above that they are powerless to shape the future!

That said - I am in the deflation camp and think rates will remain low for some time because the market knows it could spark a depression if rates rise to quickly.

er NO

short timers reckon pretty much the same too actually

;)

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