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Vince Cable: Interest Rates May Have To Rise To Combat Housing Boom

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http://www.theguardian.com/business/2013/dec/22/vince-cable-interest-rates-housing-boom

The business secretary, Vince Cable, has warned that interest rates may have to rise to constrain a "raging housing boom" in London and the south-east.

Speaking on BBC1's Andrew Marr Show, he said if interest rates were not increased by the Bank of England, there was a danger that large parts of London could be inhabited only by foreigners and bankers as house prices spiralled.

He added that, on the other hand, if interest rates were increased it would have a negative impact on UK manufacturing since exchange rates would rise, making exports harder.

It is the first time Cable has spoken so openly about the possibility of interest rates rising due to the imbalance in the economic recovery.

He again called for the government to rethink its Help to Buy scheme, which he said was conceived in entirely different circumstances. He also hinted strongly he did not want to follow the Conservative path on spending cuts after the election in 2015, saying the social fabric was under strain.

Cable said: "There is a raging housing boom in London and the south-east, and not in other parts of the country. The danger of raising interest rates is that you hit those parts of the country which are not yet fully recovered, you push up the exchange rate and that hits manufacturing. We don't want that. On the other hand, if you do not increase interest rates – if that is the way the governor and the Bank of England go – then this boom that is taking place in housing prices gets out of control and the only people that can afford to live in large parts of London are foreigners and bankers, and we don't want that either."

He said the government needed to look again at the Help to Buy scheme, which involves government backing for mortgages so that buyers do not have to provide such a large deposit, saying "it was conceived in very different circumstances".

It's almost as if London needs a separate interest rate to the rest of country....

"Northern unemployment is an acceptable price to pay for curbing London house price inflation"

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Darned if you do and darned if you don't.

It's currently a struggle to attract people to London at current salaries - if prices/rents rise further then London growth is going to be stunted the same as if you raise interest rates.

I think the best course of action is to keep interest rates nailed to the floor, keep pushing help to buy at 100% ltv and sit back and watch it collapse.

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He'll just be remembered as that crazy old man in the corner, warning of dangers to come, but no one beleives him....them 15 mind into the film and he's right!!!!

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Surprised there isn't more comment here about Cable's interview on the Marr Show. He highlighted just how reckless Osborne and Carney's current policies are. He did the same in 2005, when every other politician was running full speed to oblivion.

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This will be TPTB mantra bcos they fear they have lost control over rates. There is NO WAY ON EARTH these psychopath servants of #banksters would voluntarily raise rates

Edited by Killer Bunny

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So raising rates in London is necessary because the house price boom is raging out of control because of help to buy etc, but raising rates is bad for the rest of the country?

How does that work?

A scottish nationalist said to me recently that the government will take action to lower house prices in London and this will be really bad for Scottish house prices, they might go down! I dint know what to say!

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I come to the conclusion that there are a collective bunch of psychopaths running the country, who have not learned from their previous mistakes. They believe that any problem can be fixed by lowering the cost of money.

The problems is that they have now inflated the mother of all bubbles and cannot reduce the cost of borrowing further - what happens next? Keep watching to find out!

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I think we all know by now they only say this to stoke the markets. Plus 2015 we've got the idiots that gave us the mega housing boom coming back to keep interest rates low. The little dark voice in the back of my mind is telling me to buy now somewhere I want to live if I intend to stay in this country. My gut is telling me to get on a boat to a place with a similar climate. My brain is telling me to build a spaceship and leave this planet before they destroy it.

Edited by scrappycocco

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I come to the conclusion that there are a collective bunch of psychopaths running the country, who have not learned from their previous mistakes. They believe that any problem can be fixed by lowering the cost of money.

The problems is that they have now inflated the mother of all bubbles and cannot reduce the cost of borrowing further - what happens next? Keep watching to find out!

Rates can't raise because the govt is having to borrow £100bn a year to stay afloat. It can only do that with cheap money. Borrowing that amount at "normal" rates and the UK's biggest expense will be interest repayments rather than social security.

Policy makers have got themselves into a corner but they just hope the 5h1t doesn't hit the fan whilst they are in charge.

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Rates can't raise because the govt is having to borrow £100bn a year to stay afloat. It can only do that with cheap money. Borrowing that amount at "normal" rates and the UK's biggest expense will be interest repayments rather than social security.

Policy makers have got themselves into a corner but they just hope the 5h1t doesn't hit the fan whilst they are in charge.

It would be interesting to see the terms of existing UK government debt. If it is loaned at a fixed rate for 5 years+ then rising rates would not be so damaging.......also they would collect more tax from savings accounts if rates rise.

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It would be interesting to see the terms of existing UK government debt. If it is loaned at a fixed rate for 5 years+ then rising rates would not be so damaging.......also they would collect more tax from savings accounts if rates rise.

I think most of it's long term, which means it's someone else's problem. I seem to remember Darling rolling up most of the UK's debt and putting it on the long term tab.

The issue is new debt issues. If we continue with the current deficit of £100bn a year this is going to put £5bn or £6bn a year on our current interest payments.

The problems occur when the growth stops and you still have to make these payments hence the need for perpetual growth.

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They only need to raise mortgage rates, rather than the base rate, which can be done through changes to bank capital requirements.

The media talk as if the economic problems are difficult, intractable problems. In fact, the housing crisis, and the resulting economic crisis, are easy to solve. There are loads of policy options.

It's only a political problem - the government just don't want a functioning economy. The purpose of Conservative politics is to keep wealth away from the masses.

Vince isn't always right, but he's the only politician who comes anywhere close.

Edited by (Blizzard)

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I think most of it's long term, which means it's someone else's problem. I seem to remember Darling rolling up most of the UK's debt and putting it on the long term tab.

The issue is new debt issues. If we continue with the current deficit of £100bn a year this is going to put £5bn or £6bn a year on our current interest payments.

The problems occur when the growth stops and you still have to make these payments hence the need for perpetual growth.

Below is the current profile of future gilt redemptions (which need to be refinanced through new issuance). On top of this you have new issuance due to the budget deficit and short term rolling debt such as Treasury Bills and National Savings.

Gross issuance of gilts over the next five years is expected to be around £750bn.

GiltRedemptionsSep2013.gif

(Source: Debt Management Office)

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Talks, talks and talks. Nothing will change, but he will have made the right sort of noises. The masses are taken in by chatter. The World would be better if he got off the pot, and let some one else's bottom have a go.

What exactly should he do?

Osbrown and chums are running the show.

Yes, the lib-dems should have brought down the government several years ago, but VC on his own?

Edited by (Blizzard)

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Below is the current profile of future gilt redemptions (which need to be refinanced through new issuance). On top of this you have new issuance due to the budget deficit and short term rolling debt such as Treasury Bills and National Savings.

Gross issuance of gilts over the next five years is expected to be around £750bn.

GiltRedemptionsSep2013.gif

(Source: Debt Management Office)

So plenty to still roll over then. Rates need to stay low for a while yet then.

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The shrill music hall like "Old Tart" should have "gone nuclear" ages ago, instead he dines out for years, giving the intangible "holding Tories feet to the fire". Crying wolf again, and doing SFA. Three years ago, everyone thought Tory Boy was the answer, but in reality he was in the same league as that Scottish idiot.

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Does postcode = London/SE?

Add 2% to mortgage rate.

It's almost as if Bank of England WANT a housing boom.

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Just 2%?

With crazy talk like this you'll be going hill walking.

Bank of England are still living in the 17th century.

For some reason they seem to be utterly incapable of identifying the location of land, insisting that the cost of capital to develop land must be identical in Kensington as it is in Northumberland.

Surcharging is simple, effective and can be targetted wherever they wish without impacting the overall policy rate at which the Treasury needs to borrow.

Their lack of imagination is astonishing given Haldane never shuts up about technology.

Edited by R K

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