Jump to content
House Price Crash Forum

Recommended Posts

http://news.sky.com/story/1288335/bank-of-england-governor-cools-rate-rise-talk

"Bank Of England Governor Cools Rate Rise Talk

"Mark Carney tells MPs any base rate rise will be "limited and gradual" and gives a hint of where it will be in five years' time."
TSC member and Labour MP Pat McFadden said the bank's shifting position on rates was like an
unreliable boyfriend - one day hot, one day cold".
What a great analogy...in my opinion, he's a lying cheating boyfriend who keeps string you along to get their own way and cares not for you and will abuse you at will.

Share this post


Link to post
Share on other sites

The only justification for raising rates while Osborne still needs to borrow 7% of GDP every year to keep the economy out of recession would be a concern that the London megabubble is leaking out into the provinces. Evidence for that seems patchy at best, if anything London appears to be on the slide again, therefore a rate rise at this juncture is most unlikely.

Share this post


Link to post
Share on other sites

"Materially lower" than 5% in 5 years. What can that mean?

Id call half of 5% a generous figure to give to that definition, so a 2% rise from the current 0.5% over 5 years. A 'gradual' rise also implies consistency in the amount of increase over time.

2% over 5 years is 0.4% a year which is 0.1% a quarter. So certainly a doubling of the current 0.5% to 1% within the next 2 years.

Tracker mortgages about now are 2 to 3% or so. Lets take the best case of 3% for the sake of argument.. this half a percent rise within the next 2 years is an increase of 17%.

Buy to lets are typically interest only mortgages, average uk rent is 800 a month, so the landlord typically loses an additional 140 odd a month or so.

'Owner' occupiers on interest only will need to find a similar sum of course, those on repayment once off their trackers will find they have to pay maybe another 100 quid or so a month.

Thats being generous, and thats within 2 years. It will ratchet up over time, only in the one direction. Hopefully they have the room to adjust to these obvious and inevitable changes. :lol:

Share this post


Link to post
Share on other sites

The whole MPC are just pri1ck teasers.

Monday: "Rates could go back to 5%!"

Tuesday "Not this year"

Wednesday "But soon! Look out!"

Thursday "We didn't say how soon"

Friday "But they will rise, and possibly fast"

Saturday "A tortoise is fast, compared to a slug and we said possibly"

Sunday "Phew, we got away with it for another week."

Share this post


Link to post
Share on other sites

You don't have to have lower interest rates to dampen the housing market....all you have to do is restrict the lending, funding for lending, printing free money..... ;)

Share this post


Link to post
Share on other sites

Each time Carney blows hot and cold on rates someone is making a lot of money trading currencies etc. It's like betting on a race but it's already been decided the night before which horse is going to win.

Share this post


Link to post
Share on other sites

And this man is supposed to be up there with the few best money men in the western world, no wonder its fooked.

Either he knows exactly what he is doing and is deliberately confusing the hell out of everyone so we don't know where things stand, which indicates just how fooked we are, or he has absolutely no idea, which indicates just how fooked we are.

Share this post


Link to post
Share on other sites

And this man is supposed to be up there with the few best money men in the western world, no wonder its fooked.

His reputation is built on three things:

Being in the right place at the right time

Not screwing up while there

Getting out at the right time

But reputation is all that's needed. Someone with enough points built up they can stand in front of cameras and mumble this non specific crud which intimates "we are solvent enough we could raise rates if we wanted to and might even do so quite soon!" (Laughs up sleeve) long enough to keep our creditors and the markets from bending us over and giving us the "mini van".

The same as osbournes non austere "austerity ". Playing for time while we inflate.

Share this post


Link to post
Share on other sites

Either he knows exactly what he is doing and is deliberately confusing the hell out of everyone so we don't know where things stand, which indicates just how fooked we are, or he has absolutely no idea, which indicates just how fooked we are.

Or he might have 'no idea' and is deliberately confusing the hell out of everyone. Actually, I think this most likely... with a policy of transparency and forward guidance - but, where only unexpected moves have any effect, the only game is to provide guidance that can't be fathomed - so, even if a policy has been announced, it is still a shock when it is introduced.

Share this post


Link to post
Share on other sites

Either he knows exactly what he is doing and is deliberately confusing the hell out of everyone so we don't know where things stand, which indicates just how fooked we are, or he has absolutely no idea, which indicates just how fooked we are.

Thing is he seems to have been gifted a fairly large window of opportunity before the markets eventually turn on Britain and he is making a pigs ear of it.

Which will make 2 economies out of 2 that he has contributed to ruin.

Edited by Corruption

Share this post


Link to post
Share on other sites

The debts are so big that the rates required to manage the monetary policy transmission mechanism are incredibly slight.

In fact all they have to do is talk about it and the market does the rest with the rates it is in charge of, as expectations are first managed one way and then the next.

+1

Exactly.

Pre-crisis the BoE ramped the base rate from 5.5% to 7.5% as the boom still rolled on - that's up 36%. If you want to go up 36% from 0.5% you go to 0.68%.

It's the perverse logic of the zero rate bound. Once you go there in the hope that people will lend/borrow once you are there, how do you leave? You went there because of your fear of debt deflation but any lending made once you are there will blow up once you try to 'normalise' rates, giving you the debt deflation that you were hoping to avoid. If you allow people to think that the emergency rates are permanent then they re-price assets bought with credit (e.g. houses) accordingly and take on a load of debt.

Was it fiscal measures (war, Keynesian demand management) that pulled the Western economies out of the Great Depression, or was Friedman right? I'll take Keynes's pragmatism over Friedman's ideology. TINA (There Is No Alternative) 'expansionary austerity' will be a long wait for a train that doesn't come for the median household, and the median household have to pay the rent, or the mortgage, on the median house. Watch this space.

Share this post


Link to post
Share on other sites

His reputation is built on three things:

Being in the right place at the right time

Not screwing up while there

Getting out at the right time

But reputation is all that's needed. Someone with enough points built up they can stand in front of cameras and mumble this non specific crud which intimates "we are solvent enough we could raise rates if we wanted to and might even do so quite soon!" (Laughs up sleeve) long enough to keep our creditors and the markets from bending us over and giving us the "mini van".

The same as osbournes non austere "austerity ". Playing for time while we inflate.

And looking rugged, don't forget rugged.

Share this post


Link to post
Share on other sites

+1

Exactly.

Pre-crisis the BoE ramped the base rate from 5.5% to 7.5% as the boom still rolled on - that's up 36%. If you want to go up 36% from 0.5% you go to 0.68%.

It's the perverse logic of the zero rate bound. Once you go there in the hope that people will lend/borrow once you are there, how do you leave? You went there because of your fear of debt deflation but any lending made once you are there will blow up once you try to 'normalise' rates, giving you the debt deflation that you were hoping to avoid. If you allow people to think that the emergency rates are permanent then they re-price assets bought with credit (e.g. houses) accordingly and take on a load of debt.

Was it fiscal measures (war, Keynesian demand management) that pulled the Western economies out of the Great Depression, or was Friedman right? I'll take Keynes's pragmatism over Friedman's ideology. TINA (There Is No Alternative) 'expansionary austerity' will be a long wait for a train that doesn't come for the median household, and the median household have to pay the rent, or the mortgage, on the median house. Watch this space.

The BOE's chance to stop the emergency rate becoming a poison chalice has been missed by several years. Carney knew this and that is why he started by saying that he was going to be an open book and so markets should relax. Its the one thing that he should have not been as now they are hanging off every word.

Share this post


Link to post
Share on other sites

Damn Carney, people need to know if the monthly cost of their care home fee instalment plan is going to go up or not.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   205 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.