Why We Need More Than 1 Rate Cut

[Time to raise the rents.]

Sky News does it all for me............

Bring on the extra cuts thanks.......

http://www.sky.com/skynews/xml/article/0,,...2896460,00.html

[colonel faulkner]

Sky News does it all for me............

Bring on the extra cuts thanks.......

http://www.sky.com/skynews/xml/article/0,,...2896460,00.html

<{POST_SNAPBACK}>

I think this is written from a VI perspective. Cliff D'Arcy has STR'd, so I actually think that when he says "0.25 won't make a difference" he actually means "I hope 0.25 won't make a difference"

[Time to raise the rents.]

I think this is written from a VI perspective. Cliff D'Arcy has STR'd, so I actually think that when he says "0.25 won't make a difference" he actually means "I hope 0.25 won't make a difference"

<{POST_SNAPBACK}>

We need more like him!

[Levy process]

Sky News does it all for me............

Bring on the extra cuts thanks.......

http://www.sky.com/skynews/xml/article/0,,...2896460,00.html

<{POST_SNAPBACK}>

I don't think that is his point really. It seems to me that his point is that there won't be much of an effect on the man in the street directly in terms of unsecured loans and mortgages. I tend to agree.

So why will they cut interest rates then (if indeed they do)? Presumably to boost manufacturing industry by cutting the cost of business borrowing. Certainly not to help the inflation figure - that's about twice what it was when they started raising the rates again last year. In fact I'd say the inflation figure is such that there is a lot of reason not to cut rates at all.

The Bank of England won't be cutting rates just to let housing become even more over priced than it already is. The numerical effect of one, two or three quarter point cuts would be fairly small in terms of house prices. And if people are just thinking about affordability, they need to think about the fact that in the current low inflation era, they will miss out on inflation doing the heavy lifting for them and erroding their mortgage in comparison to their wage. Presumably if the Bank cuts rates, then they are expecting just that very low inflation environment for now.

[Jason]

They'll be more articles like this in the future. As soon as they realise a 0.25% drop didn't help, they say more cuts are needed, until we're at 0% (not that it will get that low).

[Guest Charlie The Tramp]

In July 2004, personal debt in the UK (made up of mortgages, personal loans, credit cards, overdrafts, etc.) totalled £1,012 billion. However, by June 2005, this figure had increased to £1,107 billion. In other words, our debt burden increased by £95 billion - almost 9½% - in just eleven months.

The cost of servicing this extra £95 billion debt (our annual interest bill) is roughly £6 billion a year. I reckon that it would take perhaps four quarter-point cuts in the base rate to slash this amount from our annual interest bill. What's more, this assumes that our debt stops growing, which is highly unlikely, because we've become a nation of credit junkies!

Yes the BoE will give the debtors a present to clear their debts as inflation is dead in comparison to the past.

Well it`s definitely different this time.

The lenders wont be happy bunnies though if they lose their pound of flesh.

Edited August 2, 2005 by Charlie The Tramp

[Time to raise the rents.]

They'll be more articles like this in the future.  As soon as they realise a 0.25% drop didn't help, they say more cuts are needed, until we're at 0% (not that it will get that low).

<{POST_SNAPBACK}>

You never know, I bet that's what they said in Japan as well.....

[Rapid Descent]

Yes, yes cut rates to 0% then we can grow an even bigger bubble so that when the blood letting starts nobody will escape...

[cue evil cackle]

I can picture TTRTR now at home.... I'm so ronery...

[Guest Charlie The Tramp]

You never know, I bet that's what they said in Japan as well.....

<{POST_SNAPBACK}>

But this is the UK, we love high interest rates, historically speaking that is.

Edited August 2, 2005 by Charlie The Tramp

[sean taylor]

And look at what happened to real estate in Japan.

Sometimes you can't give money away. 0% interest rates only help housing if lenders are still keen to lend. You can set short term rates at whatever you like and it won't make a jot of difference in a credit crunch.

[Matt]

Remember, if interest rates are cut it is because the economy is struggling, but this time the government has no room to borrow its way out. I always felt the 90s/dotcom boom should have led to a recession. It will, it's just been delayed for a few years by us all getting into debt.

[AgeingBabyBoomer]

You never know, I bet that's what they said in Japan as well.....

<{POST_SNAPBACK}>

...depist e which, their property prices have been plummetting since the earlyl nineties

ABB

[Bear Goggles]

You never know, I bet that's what they said in Japan as well.....

<{POST_SNAPBACK}>

Indeed, I bet they also said that property prices couldn't drop 70%

So you are correct. You never know!

[Culpability Brown]

You need rates of zero to save this market.

Problem is TTRTR you're not going to get that.

[Guest Bart of Darkness]

Sky News does it all for me............

Done what, stated that a 0.25% cut in rates will be a waste of time? Well, yes, they've certainly done that.

I reckon that it would take perhaps four quarter-point cuts in the base rate to slash this amount from our annual interest bill.

Dream on TTRTR, it ain't gonna happen!

[gone west]

You need rates of zero to save this market.

Problem is TTRTR you're not going to get that.

<{POST_SNAPBACK}>

To save this market what you need is for public perception to turn around. Once the majority of people believe they will get a better return on their money from housing than from other assets they will return. But even leveraging to extremes with ultra low rates (say less than 2%) will not save an asset class that the majority feel is going down in value in the near future.

[Red Baron]

I think a rate cut is more than likely due to Gordon's placemen on the MPC.

Will a cut have an affect on the property market? Unlikely in my view - the market has already turned.

Edited August 3, 2005 by Red Baron

[VacantPossession]

Bring on the extra cuts thanks.......

<{POST_SNAPBACK}>

Why, so you can carry on making un-earned income at everyone else's expense?

VP

Edited August 3, 2005 by VacantPossession