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Boe "if Interest Rates Rose By 2%....."

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When you have consumer spending driven by credit it's hardly surprising.

Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

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Someone probably spend quite a few £millions coming up with the bit of the chart saying:

"Borrowers' income would fall"

"Savers' income would increase"

At least it keeps some report drafters in employment.

They make a big point about savers' income increasing would help older people but don't seem to mention that a fall in house prices would help young people - or that young people might then have more spare money.

Edited by billybong

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Do you think they will raise interest rates just in time for the election, so that Labour has to deal with the aftermath?

They can say that low interest rates have been hard on savers (pensioners) so they want to do the "right thing" lol.

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Careful what borrowers wish for. Zirp holds the monetary base at zero, holding the monetary base at zero equals no inflation or deflation...very bad for the indebted...a life sentence.

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Someone probably spend quite a few £millions coming up with the bit of the chart saying:

"Borrowers' income would fall"

"Savers' income would increase"

At least it keeps some report drafters in employment.

They make a big point about savers' income increasing would help older people but don't seem to mention that a fall in house prices would help young people - or that young people might then have more spare money.

I think if young people=people who don't own houses (or to put it more specifically don't have mortgages) then yes.

But I think what you're missing is that an awful lot of young people do actually have mortgages.

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Do you think they will raise interest rates just in time for the election, so that Labour has to deal with the aftermath?

They can say that low interest rates have been hard on savers (pensioners) so they want to do the "right thing" lol.

I've always thought that they would raise rates before the election to make the point that the economy is in full recovery and to get the hopes of savers up. Recovery = savings income up AND house prices up, so don't risk the recovery, sort of thing. I have no doubt the BOE policy is entirely political.

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Appalling. Absolutely no mention about how this could help make housing and pensions more affordable for the young.

Conspicuous by its absence and leads into questions re its impartiality.

:lol:

What do you expect?

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What about rents increasing 2%.....they have been increasing whilst mortgage rates have been decreasing......nobody talks about that, I would suggest there are more people paying rents than have mortgages over 50% of valuation.

A least with a mortgage you are saving/gaining as you repay...........rents are what should come down big time, mortgages can afford to rise 2%, just extend the term or adjust so as part IO (rent like more and more are having to pay) and part repayment........ ;)

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I think if young people=people who don't own houses (or to put it more specifically don't have mortgages) then yes.

But I think what you're missing is that an awful lot of young people do actually have mortgages.

I'm not really missing that point as indeed quite a few young people do have mortgages. Some will always be able to take out mortgages.

I'm referring to the fact that the average age for FTBers was recently getting towards 40 so there's a huge amount of young people not owning a house or without a mortgage.

The point I was really making in my earlier post is more that the BoE chart didn't even seem to consider the issue of if the base rate increased and house prices fell.

Edited by billybong

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Appalling. Absolutely no mention about how this could help make housing and pensions more affordable for the young.

Conspicuous by its absence and leads into questions re its impartiality.

Well theyre looking at interest rates on mortgage payments/savings not asset prices. In any event house prices rise as rate rise.

It does mention higher mortgage payments being a transfer from the young with mortgages to the old with savings (in aggregate)

What interesting is how little impact 2% rise as on distress.

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note they include in the averages mortgages taken out 25 years ago.

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I'm not really missing that point as indeed quite a few young people do have mortgages. Some will always be able to take out mortgages.

I'm referring to the fact that the average age for FTBers was recently getting towards 40 so there's a huge amount of young people not owning a house or without a mortgage.

The point I was really making in my earlier post is more that the BoE chart didn't even seem to consider the issue of if the base rate increased and house prices fell.

Oh yeah - I must have missed it where you said that in your op.

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Careful what borrowers wish for. Zirp holds the monetary base at zero, holding the monetary base at zero equals no inflation or deflation...very bad for the indebted...a life sentence.

I'm sure you're right but I don;t understand what you're saying.

When you say Monetary BAse to what are you referring because of course C Bank bal sheets have exploded?

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Well theyre looking at interest rates on mortgage payments/savings not asset prices. In any event house prices rise as rate rise.

It does mention higher mortgage payments being a transfer from the young with mortgages to the old with savings (in aggregate)

What interesting is how little impact 2% rise as on distress.

From the BBC :

It said the number of households having trouble paying their home loans would increase by a third to 480,000 in the event of an interest rate hike to 2.5%, assuming household income rose by 10% at the same time.

However, this figure increases to 660,000 if pay stays the same.

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From the BBC :

It said the number of households having trouble paying their home loans would increase by a third to 480,000 in the event of an interest rate hike to 2.5%, assuming household income rose by 10% at the same time.

However, this figure increases to 660,000 if pay stays the same.

:lol: Of course it does, and that is probably a conservative estimate?

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What about rents increasing 2%.....they have been increasing whilst mortgage rates have been decreasing......nobody talks about that, I would suggest there are more people paying rents than have mortgages over 50% of valuation.

A least with a mortgage you are saving/gaining as you repay...........rents are what should come down big time, mortgages can afford to rise 2%, just extend the term or adjust so as part IO (rent like more and more are having to pay) and part repayment........ ;)

My rent in Edinburgh has flat-lined for 17 years, and with inflation, especially in house prices, I am probably paying less than I did back then for similar property. I would argue that many recent buyers will never pay off their debt, and are affectively just renting a decent (or not so decent) space to live in.

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Oh yeah - I must have missed it where you said that in your op.

Just to be clear this is what I said in my earlier post

They make a big point about savers' income increasing would help older people but don't seem to mention that a fall in house prices would help young people - or that young people might then have more spare money.

It's not that much of a stretch to my later clarification post which amplified the point I was making

The point I was really making in my earlier post is more that the BoE chart didn't even seem to consider the issue of if the base rate increased and house prices fell.

Edited by billybong

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My rent in Edinburgh has flat-lined for 17 years, and with inflation, especially in house prices, I am probably paying less than I did back then for similar property. I would argue that many recent buyers will never pay off their debt, and are affectively just renting a decent (or not so decent) space to live in.

I don't know your market....but I do know the North London and surrounding areas rental market very well.......mortgages have fallen and rents have risen, like for like.....it is only the recently purchased that will feel the pain of increased interest rates......most renters are feeling the pain, most owners are lapping it up, low repayments and capital rising above the rate of inflation........ignore rent payers at your peril. ;)

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It's all ******** anyway - any analysis that starts with 'pre tax income' is worthless, as it ignores the main fiscal drag on most earners.

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what they seem not to be able to judge is if people do have to cut back because intrest rate go up then retail item and sales go down which could result in job losses which could make the effects seem greater than just blunt view if rates go up.

As a possible first time buyer i would love rates to go up as would make saving easier , house prices lower and i would be in less debt when i do buy a house. Uou could also add if i did buy house my personal retail sales would go up as would have to buy things for a house.

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Is it just the interest rate rise effect ? I imagine there might be pipeline changes in the tax credit system. Also pension contribution increases.

Oh and the expected tax rises...

Well they are all outside of the model.

Edited by Ash4781

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what they seem not to be able to judge is if people do have to cut back because intrest rate go up then retail item and sales go down which could result in job losses which could make the effects seem greater than just blunt view if rates go up.

As a possible first time buyer i would love rates to go up as would make saving easier , house prices lower and i would be in less debt when i do buy a house. Uou could also add if i did buy house my personal retail sales would go up as would have to buy things for a house.

Thats because that particular tool to control the economy is broken..

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