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Carney Spells It Out

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http://www.bbc.co.uk/news/business-33560035

-Interest rates go up at the end 2015 or early 2016

-Rates to go up by very small increments, maybe 0.25% jumps

-The new normal is interest rates levelling off at about 2%

so much debt has been gobbled up that the belt will need to be tightened one notch at a time cautiously so not to instigate diarrhea

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It`s was only the other day they were saying low inflation/deflation would persist till the end of the year,,,,me thinks someone is talking their book

Defaltion rears its head and a talking head from the BOE starts predicting IR to rise some time next year

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Ft has posted svr rates on other thread. If they pass on all the rises I think the current average is 5% so I guess 7%. No idea where fixed rates will be. Also no idea on BTL io mortgages rates. They are outside of MMR

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Successive chancellors have claimed that Interest rate rises are "just around the corner" ever since the recession of 2009ish. It's nonsense. Interest rate rises will come only when they are forced on the government, not when inflation is at 0% and the pound is at a 12 year high against the euro.

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Why are they forecasted to rise to only 50% of historic averages ? (Historic average listed as 4%)

Historic is about 7-8%

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We'll see what the Fed does in September - probably nothing, though they're threatening to raise rates. If they don't, then Carney will trot out the usual lame excuse and not raise rates - same old same old.

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That's a 50% increase on the first jump. Got to hurt the over leveraged if it translates into actual mortgage rates.

If the bank raises interest rates as a result of strong wage growth driving consumer spending, then the over-leveraged will be able to pay the increased rate thanks to their pay rises.

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Why do they bother pretending anything other than that the US tells them what to do with the rates?

Keynesian hack Janet Yellen was up before Congress again today. Same message as Carney. Arthur Koestler might have called it synchronicity.

"Blah blah transitory... blah, blah second half... blah blah.. "

The Fed funds rate is going up from the current 0% to 0.25% range to simply... 0.25%. Meanwhile, medium- and long-term rates are expected to fall!

Thanks for that, Mrs Ack.

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Quote from a Telegraph commenter:-

"Mark Carney has been just about the worst prophet for interest rates and inflation that there's ever been."

Spot on. The guy has got it wrong every single time. If he thinks interest rates are going up in January, they aren't.

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Analysis: Robert Peston, BBC economics editor

For those of you with big debts looking for reassurance that you are not going to be financially crippled by the increase, Mark Carney has said two other things of note about the so-called Bank Rate.

First typical interest rate changes, increments, will be typically much smaller than the half of a percentage point that they used to be before the Crash of 2008 - so probably one quarter of a percentage point.

Also he has signalled that the new normal rate of interest over the medium term after a succession of rises over two or three years will be perhaps half the 4.5% over rate of the past 300 years. So nearer 2%.

What is that big debt?

I say tough shit if you over leveraged yourself to buy at bubble prices while IR were low.

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If the bank raises interest rates as a result of strong wage growth driving consumer spending, then the over-leveraged will be able to pay the increased rate thanks to their pay rises.

I was thinking more of over leveraged buy to let landlords.

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I'm inclined to think that this won't happen, particularly since the unemployment rate is up.

However, we all tend to view interest rates through the prism of debt and specifically house price debt.

Is there any other reason why the government might want to see higher interest rates? With the Fed and BOE in synch, is there some threat somewhere that could force these rate changes upon them?

Carney would have had access to the unemployment figures so he knows its not rosy. Maybe when he said that the plan could change due to prevailing economic conditions he meant the opposite of what some posters on the threads have assumed - not that they might be held lower for longer, but that they might rise faster than he thinks. The government tends to encourage the early seeding of bad news - is Carney's reference to "good news" for the cash strapped over-leveraged actually just a couple of drips to change sentiment, followed by much harder measures than expected. Rather than reassurance to the over leveraged, Carney could be telling them that its time to sell up before things go south.

After all, none of us expected Osborne to act against private landlords. So my mind is quite open to what they are up to.

And that leads me to another thought. Osborne has been removing a few props, but why is he keeping help to buy when it also distorts the market? The conclusion i come to is that he knows it won't be relevant soon and that price growth is going to go into reverse.

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Oh, they'll be fine. They'll just pass the costs on to their tenants :-)

It's the only fair thing to do, after all we owe the landlords so much, for doing so little.... I'm willing to pay double my rent to keep myself in slavery mode, I don't think I could cope with 'having a life'.... :lol:

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It does look like - as others have been saying for a while - that the government want to get this crash over as quick as possible - in order to get some form of 'recovery' in place just before the next election.

But then of course this can't be true - as the BOE are independent aren't they.....

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Analysis: Robert Peston, BBC economics editor

For those of you with big debts looking for reassurance that you are not going to be financially crippled by the increase, Mark Carney has said two other things of note about the so-called Bank Rate.

First typical interest rate changes, increments, will be typically much smaller than the half of a percentage point that they used to be before the Crash of 2008 - so probably one quarter of a percentage point.

Also he has signalled that the new normal rate of interest over the medium term after a succession of rises over two or three years will be perhaps half the 4.5% over rate of the past 300 years. So nearer 2%.

What is that big debt?

I say tough shit if you over leveraged yourself to buy at bubble prices while IR were low.

Naive (old) assumpion that Boe Base == mortgage rate.

Going forward, with all the new capital requirements, the spread over the base rate will be much. much higher than its been nthe past.

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