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canbuywontbuy

0.5% Base Rate At Any Other Time Would Create A Boom

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...right? Set 0.5% base rate in the 40s, 50s, 60s, 70s, 80s, 90s or early 2000s - BOOM! People would feel flush. People would buy property left right and centre. Building boom. No BTL, just OO. High streets pollinated. Wider economy enjoying the disposable income. DIY stores doing well. Even the banks doing well with high volume of mortgages. Savers might moan, but most would be home owners - or if you were a saver and didn't own a property......well, you could always buy one (at affordable price).

Not now. 7 years of ZIRP and the country is still in an economic mess. Why? House prices were set way too high. It just turned us all into renters, or people paying down huge mortgages regardless of the low lending rate.

It's all deliberate. I don't know the "why", but it's so obvious that the current predicament is deliberate.

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...right? Set 0.5% base rate in the 40s, 50s, 60s, 70s, 80s, 90s or early 2000s - BOOM! People would feel flush. People would buy property left right and centre. Building boom. No BTL, just OO. High streets pollinated. Wider economy enjoying the disposable income. DIY stores doing well. Even the banks doing well with high volume of mortgages. Savers might moan, but most would be home owners - or if you were a saver and didn't own a property......well, you could always buy one (at affordable price).

Not now. 7 years of ZIRP and the country is still in an economic mess. Why? House prices were set way too high. It just turned us all into renters, or people paying down huge mortgages regardless of the low lending rate.

It's all deliberate. I don't know the "why", but it's so obvious that the current predicament is deliberate.

It's deliberate because it suits most of the electorate, the property owning ones, and even those with starter homes probably wouldn't welcome a correction even if they gained from a bit of pain in the long term. Certainly suited me owning a house in the nineties during the crash because it reeled in the more expensive houses I was to later buy.

It's going to be a long time before house prices and the rest of the economy come into line, we really could have done with a reset John Major style in the late noughties which handed a dream economy to Blair, now I doubt we will have any sort of price discovery with all the messing from politicians with an eye on their seats.

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...and now...it's stopping a collapse.

When anyone asks me why I am not buying a house.

I say...I'll buy when the crash is over.

Then they say, the crash ended in 2009

Then I say....so why are IRs still at 0,5%.

There is only one answer to that.

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Partly,

But seeing as a group with money to spend are savers, and savers are cautious, low interest rates make them spend less, paradoxically.

Always been a believer in low interest rates compounding deflation and a slow economy that has lasted nearly a decade now and is similar to the Japanese experience. Normalising of interest rates as opposed to QE would have seen a much needed assets rest, inter-generational fairness and an economy normalised by now. But politicians not brave enough to bite the bullet or too much self interest with Blair style BTL family trusts.

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...and now...it's stopping a collapse.

When anyone asks me why I am not buying a house.

I say...I'll buy when the crash is over.

Then they say, the crash ended in 2009

Then I say....so why are IRs still at 0,5%.

There is only one answer to that.

Then they say 'but house price have gone up x! You are missing the boat! and anyway that nice Mr Carney says that IR will stay low forever' :P

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Then they say 'but house price have gone up x! You are missing the boat! and anyway that nice Mr Carney says that IR will stay low forever' :P

Then I say...since 2007 has your house price kept up with inflation ?

Then they say no.

Then I say, my savings and investments, less rent, is well above.

I sometimes add, so shove that up your a**e you moronic cretin.

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I say...I'll buy when the crash is over.

Then they say, the crash ended in 2009

We haven't had the crash yet. In house prices or the economy in general.

That joy is still to come.

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Always been a believer in low interest rates compounding deflation and a slow economy that has lasted nearly a decade now and is similar to the Japanese experience. Normalising of interest rates as opposed to QE would have seen a much needed assets rest, inter-generational fairness and an economy normalised by now. But politicians not brave enough to bite the bullet or too much self interest with Blair style BTL family trusts.

I think it makes a bipolar economy. Low interest rates favour debt while causing cash to be stored. They'll be a hole in the middle.

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Then I say...since 2007 has your house price kept up with inflation ?

Then they say no.

Then I say, my savings and investments, less rent, is well above.

I sometimes add, so shove that up your a**e you moronic cretin.

Then they look at you blankly and say 'What's inflation? Isn't it that number that's 0.1, or something. I bought my house for x and now it is x+y. I don't understand your investments? They sound risky. Don't they go down a lot when bad things happen, like in 2008! Why do you want to pay rent when a mortgage is cheaper' :P

I know, I've had these chats. It's such a waste of time. I stay quiet now and just let them think I am stupid, no skin off my nose!

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Then they look at you blankly and say 'What's inflation? Isn't it that number that's 0.1, or something. I bought my house for x and now it is x+y. I don't understand your investments? They sound risky. Don't they go down a lot when bad things happen, like in 2008! Why do you want to pay rent when a mortgage is cheaper' :P

I know, I've had these chats. It's such a waste of time. I stay quiet now and just let them think I am stupid, no skin off my nose!

Many ex-public sector employees with preserved pensions linked to CPI will have had zero increase in their pension this year as CPI last September was -0.1%. That, to people who always expect an increase year on year, will have come as a shock, and will also add to sentiment I suspect.

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Sainsbury's just been interviewed on the Radio 4 saying that they are being squeezed because people are not spending on groceries; they cited houseprices. Sainsbury's said they anticipate further deflation in grocery prices this year.

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Many ex-public sector employees with preserved pensions linked to CPI will have had zero increase in their pension this year as CPI last September was -0.1%. That, to people who always expect an increase year on year, will have come as a shock, and will also add to sentiment I suspect.

So right, there is a degree of entitlement amongst the superannuated masses and they are the first to moan when increases are tiny or non-existent.

I guess it comes down to what your personal inflation level is.

When I was living in Doncaster in 2006 Greggs retailed the Derby scone (actually a small square Easter/ Shrewsbury biscuit) for 22p...I am paying 50p for the same thing ten years later if i can justify being bent over a barrel by Greggs hyper inflation policy. Meanwhile I guess Doncaster house prices have fallen by about 10% over the last decade.

If we think retail prices will never make equalibrium with houses I guess Greggs are doing their damdest to catch up, in the north of England anyway.

I guess a Martian observing Doncaster this last decade would be puzzled by housepricecrash and would be wondering why we are not commenting on Greggspricecrash since they seem to increase their prices by three or fourfold inflation every year.

Edited by crashmonitor

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BoE base does not equal banks costs of capital.

The post 2007 rule-f-thumb of base rates +1-2% no longer applies.

Going forward, the cost of cpatial for residential is going up. A lot.

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...right? Set 0.5% base rate in the 40s, 50s, 60s, 70s, 80s, 90s or early 2000s - BOOM! People would feel flush. People would buy property left right and centre. Building boom. No BTL, just OO. High streets pollinated. Wider economy enjoying the disposable income. DIY stores doing well. Even the banks doing well with high volume of mortgages. Savers might moan, but most would be home owners - or if you were a saver and didn't own a property......well, you could always buy one (at affordable price).

Not now. 7 years of ZIRP and the country is still in an economic mess. Why? House prices were set way too high. It just turned us all into renters, or people paying down huge mortgages regardless of the low lending rate.

It's all deliberate. I don't know the "why", but it's so obvious that the current predicament is deliberate.

Yes, I also reckon the predicament to be deliberate. In fact, I understand the current fiat currency system to be a deliberate means of extracting the wealth of the majority of a population (sometimes called the working classes) to benefit the elite (sometimes referred to as upper classes). It's a massive heist on the poorest in society by the wealthiest in society. There are many variables in the game, and these are subject to 'policy' changes, but ultimately the theft foisted on the 99% by the 1% will be maintained until such time as we see a complete change, namely the end of the fiat currency system and, its replacement with something backed by something tangible like gold, or possibly an energy unit. We need to control our sweat equity and stop having it robbed through taxation and fraudulent conterfeiting monetary systems.

bB

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