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Fairyland

Is Ir Hike On It's Way

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Pillars of HPI:

1. BTL - ever increasing rent, tax relief, IO mortgages

2. Housing benefit

3. Low IRS

4. HTB

First two are taken care of, from an HPC perspective.

Suspect something is brewing re #3. There have been some media articles talking in terms of when IR rises, increasing infation, wage hikes and of course the promised increase in national minimum wage contributing towards inflation.

The most evil of them, HTB, a source of 20%+ HPI in less than a years' time is yet to be addressed though. Wonder if rise in IR will somehow neutralise effect of HTB? Or, other way round i.e HTB was designed to soften IR hike impact?

Edited by Fairyland

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Quite a lot of news coverage on the fact that Carney really ought to be hiking before Yellen...looks like we might see 3% growth in 2015 and indeed topping the G7.

This Greece farce has probably postponed any rate hike until the middle of 2016, but then Carney is unlikely to want to spoil the party even then.

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No no no.

Why do people still think there will be an interest rate rise in the foreseeable future? It will not happen - just wishful thinking.

Personally I feel there will be a crash, severely exacerbated by BTL tax relief reduction. But IR rise - FORGET IT!

We could not compete with the Germans at 1.15 Euros to £. It is now 1.40 and the manufacturing plant where I work is now 25% more expensive than our continental plants and are close to the edge. Do you really think the Gov want to increase £ further ?

No way

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Agree with your sentiments entirely - but don't shoot the messenger - it's just the way it is.

You can also blame Goldman Sachs man Draghi and the international financiers for engineering a weak Euro, so they could buy cheap continental stocks.

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Yes of course.

FED arent far off. Doesnt much matter the precise day thats just a media obsession.

All this "japanese" stuff is nonsense. Anyone positioning for that is stupid.

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Understand the strong pound argument but there may be something beyond that which not visible yet. Otherwise why the wage inflation talk?

Who would have thought Osbourne will pull the plug on BTL.

Edited by Fairyland

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Yes of course.

FED arent far off. Doesnt much matter the precise day thats just a media obsession.

All this "japanese" stuff is nonsense. Anyone positioning for that is stupid.

I've moved from the deflationary camp to not sure. Energy prices are now masking inflationary trends and the oil price come 2016 is anybody's guess. One thing for sure the labour market here is the tightest in Europe and we have found novel ways of boosting demand like unlimited immigration and building no houses. Pack em in and let us fight over supply.

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Uk inflation is about zero (admittedly that's the discredited official statistics) and interest rates are unlikely be increasing at least while that's the official level of inflation.

They might increase them when/if inflation reaches say the upper bounds (2%+1%) on the pretend basis of having things under control so they don't have to allow higher inflation (like soon after the economic collapse) but it's unlikely before then.

Edited by billybong

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About things turning Japanese:

I thought lessons were learnt from Japanese QE experiments. Correct me if I am wrong

1) US has already ended it's QE.

2) UK has ended bond buying

3) Japan still in QE phase?

Was the same logic 'turning Japanese, unlimited QE' used before end of QE?

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Uk inflation is about zero (admittedly that's the discredited official statistics) and interest rates are unlikely be increasing at least while that's the official level of inflation.

Doesn't take much time/effort excuse to change inflation level. Media already counting £9 hour min wage contributing to inflationary pressures.

http://www.telegraph.co.uk/finance/economics/11735064/Investors-beware-Raising-interest-rates-could-still-come-as-a-shock.html

The prospects for inflation will clearly have a major bearing on what happens to UK rates. As things stand, it looks as though the inflation rate will be rising quite sharply in the second half of this year, although still falling a good way short of the 2pc target by the year-end. The move towards a £9 per hour national living wage will surely add to the inflationary pressure.

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About things turning Japanese:

I thought lessons were learnt from Japanese QE experiments. Correct me if I am wrong

1) US has already ended it's QE.

2) UK has ended bond buying

3) Japan still in QE phase?

Was the same logic 'turning Japanese, unlimited QE' used before end of QE?

Isnt the UK still providing liquidity to the banks...QE by another name ?

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Recovery takes hold: Resurgent UK households and firms borrow more

Loan applications have taken off since the election, Bank of England figures show, as individuals want more mortgages and businesses want more credit.

Households borrowed an additional £2.1bn in secured loans in May, compared with £1.7bn in April. The relatively strong figure is up from an average of £1.9bn a month in 2014, £1.1bn a month in 2013, and £0.9bn a month in 2012.

Meanwhile, small businesses’ demand for credit surged in the three months to June, registering the first sharp rise in a year.

The proportion of banks reporting a rise in demand outweighed those reporting a fall by a margin of 19.6pc – a big turnaround compared with the previous three quarters.

The increase represents the fastest rise in demand for credit from small- and medium-sized enterprises (SMEs) since 2013.

Banks also said they are increasingly willing to approve loans to SMEs. A net balance of 26.6pc of banks - which reflects the percentage of lenders reporting rising loan approval levels less the proportion reporting falling levels - said they approved a greater proportion of SME loan applications in the second quarter of the year compared with the first quarter, the fastest increase in lending for five years.

Economists said the data indicate the UK economy is on the right track.

“It is also encouraging to see that default rates fell across all sectors in the second quarter – on mortgage borrowing, unsecured consumer credit and on corporate lending, especially for small businesses," said Howard Archer, chief economist at HIS Global Insight.

"This is clearly a reflection of recent sustained healthy UK growth as well as the help to consumer finances coming from negligible inflation, rising earnings growth and higher employment.

“Low interest rates are also clearly a help. However, consumers and businesses need to allow for the fact that interest rates are likely to start rising from early on in 2016, even if the increase should be gradual and limited compared to past norm.”

Retail deposit levels have also stabilised in the past six months, ending a period of rapid growth, according to the Bank of England’s study of banks’ liabilities.

Between 2012 and 2014 bank deposits grew in almost every quarter as cautious consumers chose to save more. But this trend started to reverse in the final quarter of 2014 and continued into first quarter of 2015, with lenders reporting declining deposit levels.

While deposits have risen slightly in the second quarter, most banks expect savings to fall again in the third quarter, as households grow more confident and are able to spend more.

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