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dog

The Wrong Kind Of Inflation

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Overstretched borrowers have been praying for inflation. Unfortunately it may not help this time because we have the wrong kind of inflation and the inflationary pressures are due to goods and services from outside the UK. From a home owner's perspective, there are three types of inflation:

Positive house price inflation

This is good for the home owner because it is compensation for the risk of ownership (and interest burden).

Positive salary inflation

This is good because it reduces the burden of servicing mortgage debt.

Positive goods and services inflation

This is bad because it increases the burden of servicing mortgage debt.

As things stand.

We have negative house price inflation.

We have negative salary inflation in the private sector (due to layoffs and static pay). Note - The public sector are giving themselves fat pay rises but this is not sustainable.

Commodity prices are rising quickly as are the costs of goods and services. Since so many of these goods and services are now sourced from abroad, the higher costs will simply reduce our standard of living (and will not translate into salary inflation).

Inflation used to be the friend of the home owner. It has become the home owner's enemy.

Edited by dog

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We have negative salary inflation in the private sector (due to layoffs and static pay). Note - The public sector are giving themselves fat pay rises but this is not sustainable.

Wanting to work in a semi-government organization I can't say to much but the man on the street working in the private sector resents the Fat cats wages. The downside for these public "servants" is that the general public will be demanding their sacking.

Funny. I was taught that the role of government was to be lean during the booms and spend like crazy on the crashes :huh: So if they ARE being frugal now heaven help us all.

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  • 339 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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