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Dames

Case For Interest-rate Cut Falls

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Only post a snippett , cant be getting in trouble from IC :)

Michael Taylor, of Lombard Street Research, said: "There is clearly no justification for a cut in interest rates......"
.....The gap between monetary growth and base rates, at 7.5 percentage points, is now at a 17-year high. This has for years been a good predictor of rate moves in the following two years... -

and the best bit :)

......This is because strong monetary growth often leads to expectations of higher inflation and output, to which the Bank of England responds by raising rates. If the post-1986 relationship continues to hold, rates will rise to 6.75 per cent by early 2008.....

D

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Guest Charlie The Tramp
If the post-1986 relationship continues to hold, rates will rise to 6.75 per cent by early 2008.....

Oh dear. :(

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So basically we can look forward to higher HP's, higher rates, higher rents & higher everything.....

Are you listening STR's?

Listening all right. Clearly you must be joking - interest rates at 6.75% will not maker higher HP's but lower on account of mass defaults, forced sales etc.

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Guest Charlie The Tramp

Charlie, please expand?

Unless there is a real shock I would expect them not to pass the historical neutral of 6% within the next 2 years.

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Unless there is a real shock I would expect them not to pass the historical neutral of 6% within the next 2 years.

Give examples of a real shock? Agreed though I think they will stay low for several years - until China start spending.

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So basically we can look forward to higher HP's, higher rates, higher rents & higher everything.....

Are you listening STR's?

lower house prices - plenty to chose from - a better return on our savings

higher rates will affect everyone (except those whose rent includes rates - everyone I know)

higher rents? - with all those cheap houses - don't think so

higher number of reposessions - definitely

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If interest rates rise enough to cause a mass default, in turn causing a HPC. Won't the added interest make the monthly payment to service the mortgage just as expensive as it is now?

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If interest rates rise enough to cause a mass default, in turn causing a HPC. Won't the added interest make the monthly payment to service the mortgage just as expensive as it is now?

Exactly, welcome to the downward spiral!

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If interest rates rise enough to cause a mass default, in turn causing a HPC. Won't the added interest make the monthly payment to service the mortgage just as expensive as it is now?

Hi Peach

You are right, but do not forget that interest rates can fluctuate, whereas your debt (amount borrowed) will stay the same.

For example, I would much rather borrow a smaller amount at a high interest rate, than a massive amount on a low interst rate. If you borrow a large amount at a low interst rate, there is a greater risk that interest rates will rise rather than fall, and that asset prices will fall rather than rise.

Look at the early nineties, when interest rates were at 15%. I would rather buy a house for £80k @ 15%, than a house now at £240k @ 5%. For simplicities sake the initial payments might be the same, but you could expect the £80k debt to stay the same, but the interest rate reduce from 15% (as has happened), whereas, if you had bought a house in early 2004 when base rates were 3.5%, you are taking a huge risk that IRs would increase back to their historic average of 6-7%, thus having a £200k mortgage at 7% :o

Edited by Darth_Calculus

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Hmmm, higher inflation. So who in their right mind is going to be holding onto cash?

Very much depends on how the higher inflation is tackled - if it is met with rising interest rates, I would be quite happy to - if it isn't then I would look elsewhere, but it wouldn't be property as that would be falling in value both notionally and in real-terms and probably not stocks as higher inflation is not really business friendly, so what does that leave?

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Listening all right. Clearly you must be joking - interest rates at 6.75% will not maker higher HP's but lower on account of mass defaults, forced sales etc.

6.75% are we talking UK rates or US rates?...for UK I think 5.5% is feasible

...I suspect there is a big shift in tax take going on....the shift being from employer to employee.

IR's will be kept fairly low,but it will be direct and indirect tax on the individual that will be heavily raised.

....so company profits will look ok,but the uk public will be paying a vastly higher percentage of their income to the taxman while business pays less.....and the over-regulation of business will get sorted out by the tories,leaving a new 1980's style scenario in 2009(probably)

Edited by oracle

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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