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Guest_James Toney_*

Interest Rates Will Hit 5%

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having just taken all my STR fund and savings out to buy a house for cash - happy to live in it till they carry me out - I KNEW interest rates would rise - but know any rise however small will help those struggling to save a deposit, those reliant on interest to supplement their income, and stop any further ramping of house prices. A change of sentiment is so badly needed and the greedy sellers need to learn a salutary lesson. :unsure:

surely a 5% BOE rate is 'normal'

Edited by olliegog

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sorry if already posted http://www.dailymail...o=feeds-newsxml

with quotes like

Mr Fisher said the increase was likely to happen as soon as possible

Bank is looking to increase rates tenfold from their current low of 0.5 per cent.

nice

EXTRA EXTRA! READ ALL ABOUT IT!

get your fixed rate mortgages before they sell out!

bankers, like everyone else need sales.

Fear drives the mortgage market, today the fear is rising costs.

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"If this were to happen, families would be spending more of their disposable income on debt interest than they have in 20 years."

But at the moment they're sitting in their own warm effluent wondering why they feel so rich?

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http://www.telegraph.co.uk/finance/economics/8220862/Homeowners-should-prepare-for-interest-rates-of-5pc-warns-Bank-of-England-markets-chief-Paul-Fisher.html

“We hope people are aware that interest rates at some point will go up again and that they will head back to a normalised position,” he said. Confirming that “normalised” rates would be “around” 5pc, he added: “What we need to do is to trigger the mindset in people that that’s where rates will eventually go back to.”

I don't think rates are going anywhere anytime soon. All of those who've moved to variable are now holding the biggest gun of all at the heads of the MPC. 8m on variable if the stats are accurate. The BoE clearly has no idea what economic effect raising rates in such a situation will be and they certainly don't want to bring down the banks causing another bailout which of course will upset the taxpayers if they get to lose their house meanwhile the bankers get another bailout. This is a political nightmare created by idiots.

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snip

They would also really like people to get their debt levels down so they can safely increase rates once more.

how does this square with "we have to get the banks lending again", and "£200bn set aside for lending"?

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EXTRA EXTRA! READ ALL ABOUT IT!

get your fixed rate mortgages before they sell out!

bankers, like everyone else need sales.

Fear drives the mortgage market, today the fear is rising costs.

+1

We all know they will rise, but when and by how much is what we really need to know. Mortgage holders in this country would simply not be able to handle 0.5% to 5% in a very short space of time (i.e. 3 years) and the reality is, neither could the economy.

What I need is for someone to please give me a rational explanation as to why raising interest rates will control this "inflation" which seems to be creeping up every month.

To my eye, this is primarily driven by the VAT rise (to 17.5%) and oil prices rises, the latter being key as there is a critical interdependency in oil prices and everything which we consume.

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I find this "likely to happen as soon as possible" to be quite surprisingly strong as a statement.

I think the public statements of Andrew Sentance, followed now by this, could represent planned 'news flow' warning the public and markets.

They are going to have to work hard to correct a general public expectation of 0% interest and falling prices. I think they may not be able to time it right. The time they have to raise rates is also a time where they can't not hurt growth. Its called stagflation.

I note a new high in gold against sterling, I don't think the timing of this is a coincidence.

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http://www.telegraph.co.uk/finance/economics/8220862/Homeowners-should-prepare-for-interest-rates-of-5pc-warns-Bank-of-England-markets-chief-Paul-Fisher.html

I don't think rates are going anywhere anytime soon. All of those who've moved to variable are now holding the biggest gun of all at the heads of the MPC. 8m on variable if the stats are accurate. The BoE clearly has no idea what economic effect raising rates in such a situation will be and they certainly don't want to bring down the banks causing another bailout which of course will upset the taxpayers if they get to lose their house meanwhile the bankers get another bailout. This is a political nightmare created by idiots.

A very intersting way to look at it and it makes complete sense, although the credit cannot go to the 8m "homeowners" :rolleyes: ! I guess the other thing to consider is an election in 4.5 years time and p!ssing off 8m+ potential voters 12 to 18 months beforehand would not be too wise either

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Interest rates can't rise. The impact on the indebted would be too severe - mass defaults and distressed sales

Leading to huge bad losses for the banks

This will not be allowed to happen; printy, printy instead and ZIRP all the way.

This announcement by the BofE is designed to reassure mug savers to pursuade them to carry on holding their wealth in paper that the CBs are printing into oblivion.

The threat to the CB plans is physical gold and silver - Max Keiser's campaign may have the bankers running scared:

"Yeh, hold your paper fiat plebs. I know wee've stiffed you with inflation and ZIRP nominal rates. But, but, but, we're gonna put rates up soon, honest, to give you a better deal. Please don't sell your paper for silver. Please!"

And I say, "swivel!"

The big question is when will the bank close the gold and silver window for the plebs, i.e. there'll be capital controls in the UK well befoe we ever see the Bnk of England set a base rate that's above even its fiddled inflation number.

100% guaranteed.

Edited by Arbitrage

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A very intersting way to look at it and it makes complete sense, although the credit cannot go to the 8m "homeowners" :rolleyes: ! I guess the other thing to consider is an election in 4.5 years time and p!ssing off 8m+ potential voters 12 to 18 months beforehand would not be too wise either

Part of the credit belongs to the BoE for being asleep during the bubble and then only having one option once it was decided the banks couldn't fail. Once interest rates collapse and you have a large mortgage clearly the logical position is to go to the variable and get the lower rate. In a sense the BoE has created the mother of all bank runs although not in a way they are used to ie Northern Rock. This is a mortgage bank run which will ruin everyone if significant numbers find mortgage payments unaffordable. We are in an unknown area the BoE won't model the micro economic effects of increasing interest rates as they only care about the macro.

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Higher IRs = more savings in the bank = banks more able to cope with a downturn?

Rising inflation + flat nominal wages = falling real wages

Most people in the UK are too poor to save. And many have jumbo debts too!

The UK's savings ratio fell from 6% in 2009 to 3% in 2010

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how does this square with "we have to get the banks lending again", and "£200bn set aside for lending"?

I am reading into it that the bank wants business lending up (£200bn put aside), and asset prices (home loans) back to normal.. but all in a reasonably controlled manner.

[ Edit to add: As for the talk of interest rate rises.. I think the Americans call it "jaw boning". ]

Edited by libspero

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Interest rates can't rise. The impact on the indebted would be too severe - mass defaults and distressed sales

Leading to huge bad losses for the banks

So desperately do the indebted cling to this theory. If rampant inflation takes hold ALL the banks debts will vanish more quickly in real terms, not just the % that fail to scrape together every last penny to pay their most important debt.

Strange to release this a few days before Christmas though, is this to halt some last minute credit card use? To try and stem some unwise spending? Or maybe they just wanted to spoil peoples festive cheer?

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Interest rates can't rise. The impact on the indebted would be too severe - mass defaults and distressed sales

Leading to huge bad losses for the banks

This will not be allowed to happen; printy, printy instead and ZIRP all the way.

This announcement by the BofE is designed to reassure mug savers to pursuade them to carry on holding their wealth in paper that the CBs are printing into oblivion.

The threat to the CB plans is physical gold and silver - Max Keiser's campaign may have the bankers running scared:

"Yeh, hold your paper fiat plebs. I know wee've stiffed you with inflation and ZIRP nominal rates. But, but, but, we're gonna put rates up soon, honest, to give you a better deal. Please don't sell your paper for silver. Please!"

And I say, "swivel!"

The big question is when will the bank close the gold and silver window for the plebs, i.e. there'll be capital controls in the UK well befoe we ever see the Bnk of England set a base rate that's above even its fiddled inflation number.

100% guaranteed.

What makes you think that the Bank of England, or the Treasury, or anyone else for that matter, can control the market?

Sure, you can get a quick hit on interest rates, by printing a bit of money, but do that, and you can quickly generate inflationary expectations and a lower willingness to hold bonds. It is in the bond markets that rates of interest are determined, not by the Bank of England base rate.

Luckily for the Bank of England, there dont appear to have been much in the way of changes to the willingness of people to hold on to their money, rather than spend it. As a result, market rates of interest have become very low. Not sure how long that will last, there is every chance that rates will explode upwards as inflation continues to rise. The key thing here is commodity pricing.

I see that oil is now over $90 a barrel, and rising along with many other commodities. Sooner or later that will hit prices everywhere, and people who have not moved any savings that they have into more inflation proofed assets will rush to do so.

Then there will be some corrective pain.

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So desperately do the indebted cling to this theory. If rampant inflation takes hold ALL the banks debts will vanish more quickly in real terms, not just the % that fail to scrape together every last penny to pay their most important debt.

From the banks point of view this isn't about profit, its about survival

Deflation = falling asset prices + bad debts = losses = banks die

Inflation = banks' balance sheets remain solvent -= banks fight to live another day. Inflation means that the plebs debts will be wiped out. The banks can start to make money by making new loans to households that now have low levels of debt.

From a game theory point of view the behavour of the banks in the past indicates that they expected to be bailed out by the taxpayer and by inflation.

Don't bet again st the bankers

And by the way, I don't have any debt. Do you?

Loser.

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What makes you think that the Bank of England, or the Treasury, or anyone else for that matter, can control the market?

Sure, you can get a quick hit on interest rates, by printing a bit of money, but do that, and you can quickly generate inflationary expectations and a lower willingness to hold bonds. It is in the bond markets that rates of interest are determined, not by the Bank of England base rate.

Luckily for the Bank of England, there dont appear to have been much in the way of changes to the willingness of people to hold on to their money, rather than spend it. As a result, market rates of interest have become very low. Not sure how long that will last, there is every chance that rates will explode upwards as inflation continues to rise. The key thing here is commodity pricing.

I see that oil is now over $90 a barrel, and rising along with many other commodities. Sooner or later that will hit prices everywhere, and people who have not moved any savings that they have into more inflation proofed assets will rush to do so.

Then there will be some corrective pain.

In case you haven't noticed: we operate with fiat, not commodity, money

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  • 312 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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