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Bank Of England Calls For Assessment Of Interest Rate Rises On Borrowers

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http://www.guardian.co.uk/business/2013/jun/26/bank-england-interest-rate-rises-financial-stability

Households could be forced to cut spending or work longer hours to keep up their debt repayments if interest rates rise suddenly. The warning from the Bank of England came as it called for an urgent assessment of the impact from a sharp rate increase after four years of low borrowing costs.

The Bank also used its financial stability report to give banks permission to release £70bn of easy-to-sell instruments, such as government bonds, which they have been forced to hold in case there is a re-run of the 2007 credit crunch. Paul Tucker, the outgoing deputy governor for financial stability, said it would be "foolhardly" to predict how much of the £70bn of liquidity being released might feed through into lending. But, he said, the relaxation of the rules would "strike the appropriate balance between achieving resilience and reducing possible impediments to the supply of credit to the economy".

The report made six recommendations intended to avert another banking crisis including calling on the Treasury to examine whether banks are ready for a cyber-attack and make banks reassess the way they measure risks.The first recommendation in the report, used by the new financial policy committee (FPC) to spot the next big risks to the financial system, focused on the impact of rising interest rates. Financial markets have already been spooked by concerns that the Federal Reserve might start to reduce the $85bn (£55.3bn) a month stimulus being pumped into the US economy with traders pointing to faster than usual rises in government bond yields.

Perhaps if they had borrowed less they wouldn't need to work longer hours and cut back spending so much. However if you borrowed the maximum allowed you clearly will be in trouble.

Glad to see all of those working at the BoE with PhD in economics clearly haven't wasted their education.

I feel assured we have the right people in charge.

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No assessment of interest rate falls on savers .... So for completeness

Households could be forced to cut spending or work longer hours if savers' interest rates fall suddenly.

+1

the low interest rates are for the bankers benefit not the mortagees.

banker propoganda, pure and simple.

Edited by TheCountOfNowhere

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Perhaps if they had borrowed less they wouldn't need to work longer hours and cut back spending so much. However if you borrowed the maximum allowed you clearly will be in trouble.

Glad to see all of those working at the BoE with PhD in economics clearly haven't wasted their education.

I feel assured we have the right people in charge.

They know exactly what the impact will be, and what they want to do about it. They need a formal study into the problem so when they say "this can't be allowed to happen so we must print shedloads of money buy more bonds to keep interest rates low and stimulate the economy" they can point to something official that says it's the right thing to do.

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They know exactly what the impact will be, and what they want to do about it. They need a formal study into the problem so when they say "this can't be allowed to happen so we must print shedloads of money buy more bonds to keep interest rates low and stimulate the economy" they can point to something official that says it's the right thing to do.

I think you give them too much credit (ha), they were doing what was whispered in their ears, the party kept on rolling a bit longer, idiots got into debt at this point in the cycle and will be appropriately fleeced over the remainder of their working lives. It's never a part of any plan, its always whats best for those with influence right now.

If the indebted mugs get farmed more aggressively as their debt balloons who with any influence would have a problem with that?

Jam today and jam tomorrow as far as 'they' are concerned. I don't see that money printing can stop a higher cost of borrowing now, this is only england, piddly little country, we'll just be collateral damage when the us raises rates.

Bring it on, we stayed out of the debt binge for good reason, here comes the reason.

Edited by cybernoid

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Households could be forced to cut spending or work longer hours

There's an almost charming naiveté visible in so many of these pronouncements- like this idea that everyone is in a position to either cut their spending or increase their working hours at will.

Meanwhile in the world beyond the BoE where the consequences of their failed policies get played out in real time a lot of people have little left of spending to cut- and zero chance of working overtime.

One of the drawbacks to having a public school educated elite running the country is that they have no real idea what the lives of most people are really like- so they operate on the basis of some disneyland fantasy and are constantly surprised when their projections fall apart.

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The warning from the Bank of England came as it called for an urgent assessment of the impact from a sharp rate increase after four years of low borrowing costs.

They'll have already done that as it'll have formed part of their previous "policy" calculations to justify what they've been doing - if only to themselves. In fact they've been constantly telling the media what they think the consequences would be (that it would be awful) to justify keeping rates at the current crazy levels - but best for them not to mention that at this juncture eh.

That's not to say that it'll be accurate because their incompetence is already well established. An "urgent assessment" to find reasons to justify changing their mind on low rates when US rates rise - an IMF style U turn.

Likely they've been caught on the hop yet again with the repeated news from the US that their interest rate increases are now in the pipeline - not tomorrow but they're foreseeable in the not too distant future of a year or two. Maybe in a few months if it's politically expedient to say encourage confidence.

Edited by billybong

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Paul Tucker, the outgoing deputy governor for financial stability, said it would be "foolhardly" to predict how much of the £70bn of liquidity being released might feed through into lending. But, he said, the relaxation of the rules would "strike the appropriate balance between achieving resilience and reducing possible impediments to the supply of credit to the economy".

Yeah the balance and everything will be so appropriate :rolleyes:

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I would have thought that it would be obvious that prolonged exposure to low interest rates and easy lending would induce dependency. Which is what, I am certain, we have now got.

They must have known that from the start. So they want an excuse not to withdraw but to continue. So it will get worse and savers and taxpayers will end up paying (again) for the over indulgent who borrowed too much.

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I would have thought that it would be obvious that prolonged exposure to low interest rates and easy lending would induce dependency. Which is what, I am certain, we have now got.

They must have known that from the start. So they want an excuse not to withdraw but to continue. So it will get worse and savers and taxpayers will end up paying (again) for the over indulgent who borrowed too much.

Even the govt is hooked on low rates. The entire global economy is now hooked on low rates.

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I think you give them too much credit (ha), they were doing what was whispered in their ears, the party kept on rolling a bit longer, idiots got into debt at this point in the cycle and will be appropriately fleeced over the remainder of their working lives. It's never a part of any plan, its always whats best for those with influence right now.

If the indebted mugs get farmed more aggressively as their debt balloons who with any influence would have a problem with that?

Jam today and jam tomorrow as far as 'they' are concerned. I don't see that money printing can stop a higher cost of borrowing now, this is only england, piddly little country, we'll just be collateral damage when the us raises rates.

Bring it on, we stayed out of the debt binge for good reason, here comes the reason.

+1000000

I lost sympathy a long time ago

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When I see announcements/studies like this, I'm always in 2 minds about whether they're trying to see the seed/get ppl used to the idea that a rise is coming or just frighten people into making sure that the status quo is kept.

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The warning from the Bank of England came as it called for an urgent assessment of the impact from a sharp rate increase after four years of low borrowing costs.

Apart from all the other likely reasons that sort of announcement helps to assert the point that borrowers (and by all accounts there are a lot of them) are more or less at the whim of the so called policymakers - on a day when Osborne is pronouncing some policy.

But they' themselves are doing everything to keep rates low (you lucky people) but it'll be those overseas people who upset the apple cart.

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I'm definitely getting the idea that the way is being prepared for interest rate rises, I can't see any reason for recent statements to that effect other than that TPTB can say "Well, we did warn you" when it does all kick off. Once the Fed starts moving then we'll follow.

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I borrowed the maximum at 2.19% and put it in index-linked certs at ~4% tax-free.

wow, collecting pennies from the tarmac in front of a steamroller.

I sure its a brilliant plan, but I hope you have calculated in your Life insurance, your fees and your redemption costs.

Edited by Bloo Loo

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I think you give them too much credit (ha), they were doing what was whispered in their ears, the party kept on rolling a bit longer, idiots got into debt at this point in the cycle and will be appropriately fleeced over the remainder of their working lives. It's never a part of any plan, its always whats best for those with influence right now.

If the indebted mugs get farmed more aggressively as their debt balloons who with any influence would have a problem with that?

Jam today and jam tomorrow as far as 'they' are concerned. I don't see that money printing can stop a higher cost of borrowing now, this is only england, piddly little country, we'll just be collateral damage when the us raises rates.

Bring it on, we stayed out of the debt binge for good reason, here comes the reason.

Even the govt is hooked on low rates. The entire global economy is now hooked on low rates.

I sort of agree with these two statements, but I think the conclusion means you can't have a "higher interest rates, debtors get their comeuppance" outcome. Debtors would suffer, the government is a debtor, therefore debtors won't get their comeuppance.

Edited by Voice of Reason

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I sort of agree with these two statements, but I think the conclusion means you can't have a "higher interest rates, debtors get their comeuppance" outcome. Debtors would suffer, the government is a debtor, therefore debtors won't get their comeuppance.

Govt debt will be of the order of magnitude of 1 or 2 times national income

Private debtors are of the order of 5 times

Inflation and interest rates that JUST keeps private debtors alive and on the treadmill, will make govt dent relatively much more manageable

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I sort of agree with these two statements, but I think the conclusion means you can't have a "higher interest rates, debtors get their comeuppance" outcome. Debtors would suffer, the government is a debtor, therefore debtors won't get their comeuppance.

It's the US that will set this in motion, this government might not like it but the US wont care. The UK government is not in charge of the cost of borrowing, low base rates and money printing only delays the problem whilst making it worse. It all came to a head in 2008, 5 years ago now. The US sensibly had their house price correction and are in a better position to start reverting rates to a sustainable level. That we did not allow the correction and are now in a worse position as a result is not their fault or their problem.

This government is a debtor and debtors will get their comeuppance. That can actually happen. The UK government is small fry, the US is setting the agenda.

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It's the US that will set this in motion, this government might not like it but the US wont care.

Some of the US banks seem to be lobbying for higher interest rates as well. They've calculated they'll make big profits with higher-rates.

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Some of the US banks seem to be lobbying for higher interest rates as well. They've calculated they'll make big profits with higher-rates.

Of course they will, UK banks will too when they ramp interest rates up. And now that they have suckered every last fool in, why wouldn't they do that? Does anyone really thing that The Powers That Be care about "hard-working families?" Interest rate rises are exactly what bankers and politicos want now, which is why they have suddenly started paving the way for it.

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OK I come from it from the other side.

I got divorced in 2007 and ended up with more debt than I could have ever imagined. Just over 4x salary.

The low interest rate have been a real boom for me and six years on I have made hay whilst the sun has shines.

I am now in a comfortable position where it doesn't matter where rates go

How ever I think the credit crunch would have happened any way the banks behaver just brought the event forward a few years.(that is why it is lasting so long)

You cant have positive yields for ever because that just makes the rich richer until the workers don't have enough to live on.it was only ever increasing debt that made the system work.

Once you have reached peek debt then I think zero yields and money printing is the only way open

Edited by gf3

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  • 241 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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