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Si1

Mortgage rates are still ludicrously low

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ZIRP forever, I'm afraid. Or at least until the country is bankrupt. It's obvious that Carney still doesn't have a clue.

https://bankofenglandfutureforum.co.uk/post/781050?forPhase=27430

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andu 3 weeks ago

With the prolonged 10 year period of near 0% Interest rates and the various QE programs used by central banks around the world. In your opinion, how likely is a large spike in Inflation in the near future?

 

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Mark Carney 5 days ago

In my view, the performance of advanced economies over the past decade has shown that these policies were the right response to an extremely dangerous economic crisis.

The 2008 financial crisis threatened depression and mass unemployment, with the least well-off most exposed. Fiscal policy in advanced economies quickly came under severe strain as tax revenues plunged, the costs of social benefits rose sharply, and the huge bills for too-big-to-fail banks came due. In the face of severe headwinds to growth, that meant monetary policy was “the only game in town” for providing support to our economy.

What if the MPC had not acted? Simulations using the Bank’s main forecasting model suggest that the Bank’s monetary policy measures raised the level of GDP by around 8% relative to trend and lowered unemployment by 4 percentage points at their peak. Without this action, real wages would have been 8% lower, or around £2,000 per worker per year, and 1.5 million more people would have been out of work. In short, monetary policy has been highly effective.

Without this support from monetary policy, we risked getting stuck in a situation of deficient demand, leading to inflation that was too low – not too high, and to unemployment that was unacceptably high.

The prolonged period of near 0% interest rates has also been a necessary response to structural developments in the global economy.

A set of powerful forces are currently depressing what economists call the ‘equilibrium’ interest rate – the policy rate that, if allowed to prevail for several years, would place economic activity at its potential and keep inflation low and stable. These forces include demographic change, slower potential growth, higher credit spreads, lower desired investment, a lower relative price of capital, greater income inequality, sustained private deleveraging and lower public investment.

So in other words, low policy interest rates are not the caprice of central bankers, but rather the consequence of powerful global forces. Setting real interest rates higher over the past decade would, in time, have generated rising unemployment and falling prices.

Many of the structural factors currently weighing the global equilibrium interest rate are likely to persist for many years to come. That’s why the MPC expect that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.

 

 

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Interesting international comparison of mortgage interest rates - 

Russia  20%

Australia  3.62%

United States  3.375%

Ireland  2.99%

Japan  2.475%

UK  1.49%

Germany  1.07%

See - https://www.deposits.org/world-home-loans.html

So US mortgage rates are more than double the UK's.  If you do a Google search on 'best buy' mortgages, you'll see that pattern confirmed.  And the US economy seems to be roaring along compared to ours (albeit not without its problems).  

Also, it looks like Australia has 'breathing space' compared to us to cut interest rates, if its property / banking sector collapses.  But it is likely to become, like us, a zombie economy as a result.  

Edited by Ballyk
Putting countries in order

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2 minutes ago, Ballyk said:

Interesting international comparison of mortgage interest rates - 

Russia  20%

Australia  3.62%

United States  3.375%

Ireland  2.99%

Japan  2.475%

UK  1.49%

Germany  1.07%

See - https://www.deposits.org/world-home-loans.html

So US mortgage rates are more than double the UK's.  If you do a Google search on 'best buy' mortgages, you'll see that pattern confirmed.  And the US economy seems to be roaring along compared to ours (albeit not without its problems).  

Also, it looks like Australia has 'breathing space' compared to us to cut interest rates, if its property / banking sector collapses.  But it is likely to become, like us, a zombie economy as a result.  

I wonder if we've discovered a new kind of liquidity trap, or at least previously unidentified.

One where there's too much liquidity being generated and it's uneven social results lead to stifling of economic activity and so more liquidity is produced by Central Bank with ever decreasing results.

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10 minutes ago, Si1 said:

I wonder if we've discovered a new kind of liquidity trap, or at least previously unidentified.

One where there's too much liquidity being generated and it's uneven social results lead to stifling of economic activity and so more liquidity is produced by Central Bank with ever decreasing results.

I don't know, but I'd be very wary about buying a property / taking on a mortgage at such low interest rates.  Especially in the UK where short terms are the norm.  Personally I'm going to wait until rates go over 3% at the very least.

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23 minutes ago, Ballyk said:

Interesting international comparison of mortgage interest rates - 

Russia  20%

Australia  3.62%

United States  3.375%

Ireland  2.99%

Japan  2.475%

UK  1.49%

Germany  1.07%

See - https://www.deposits.org/world-home-loans.html

So US mortgage rates are more than double the UK's.  If you do a Google search on 'best buy' mortgages, you'll see that pattern confirmed.  And the US economy seems to be roaring along compared to ours (albeit not without its problems).  

Also, it looks like Australia has 'breathing space' compared to us to cut interest rates, if its property / banking sector collapses.  But it is likely to become, like us, a zombie economy as a result.  

The mortgage rate is so low because of BOE hesitates to hike rate. Fed had been hiking rate but the Austrian school of economists, would suggest that they are not aggressive enough. 

QE and historically low interest rate, would only lead to one thing, Inflation. Inflation in goods, services and assets prices. 

The boom plants the seed for future destruction.

 

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I was paying over 16% for a time when I had a mortgage. Every month the bank would send me a letter asking me to up my standing order, which I did. When they started to send letters asking me to reduce the standing order, I ignored them, so the mortgage was paid off rather quickly.

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1 hour ago, Ballyk said:

I don't know, but I'd be very wary about buying a property / taking on a mortgage at such low interest rates.  Especially in the UK where short terms are the norm.  Personally I'm going to wait until rates go over 3% at the very least.

I imagine loads of FTB would take on their new HTB mortgages @ 3.375% if it was a 30 year fix. Where is the risk apart from loss of job. If you can make the payments any inflation in wages just makes your life easier and easier.

Last year I took a 5 year fix @ 2.3% 2 months before the BOE IR rise. Had I not my previously cheaper tracker rates would have cost me £30pcm more than my new fixed rate, which was on a £15 pcm increase. 

But you try getting a cheap rate on a 10 year fix in the UK, and I don't believe a 30 year fix exists? I have never seem one and if a specialist broker can do one it will be nowhere near 3.37%. 

I'm not sure how the penaltys for early exit apply on 30 year USA fixes but if they are the same as my 5 year fix god al mighty it would be expense to finish a mortgage early. They must all be fully portable? 

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7 hours ago, Ballyk said:

Interesting international comparison of mortgage interest rates - 

Russia  20%

Australia  3.62%

United States  3.375%

Ireland  2.99%

Japan  2.475%

UK  1.49%

Germany  1.07%

See - https://www.deposits.org/world-home-loans.html

So US mortgage rates are more than double the UK's.  If you do a Google search on 'best buy' mortgages, you'll see that pattern confirmed.  And the US economy seems to be roaring along compared to ours (albeit not without its problems).  

Also, it looks like Australia has 'breathing space' compared to us to cut interest rates, if its property / banking sector collapses.  But it is likely to become, like us, a zombie economy as a result.  

Zombie economy - we are already there - an ecomony based on money printing and ever increasing immigration isnt an economy - its a ponzi.

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8 hours ago, zugzwang said:

Mark Carney 5 days ago

In my view, the performance of advanced economies over the past decade has shown that these policies were the right response to an extremely dangerous economic crisis.

I hope this worm is sill in the country when it all goes down.

7 hours ago, reginekierkegaard said:

Fed had been hiking rate but the Austrian school of economists, would suggest that they are not aggressive enough.

The boom plants the seed for future destruction.

Indeed.

Asking an Austrian economist how to get out of a Keynesian mess is like asking the pilot how to get back in the plane after you have jumped out.

There is only one way this ends.

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It is only the practically zero interest rates that keep people borrowing so much......spending tomorrow's future, tomorrow's money yet to be earned....the economy is built on debt......it causes inflation, and it requires inflation it causes to repay it, even inflation now will not repay it, the fine balance required has tipped too far.😉

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There's an article about Ivanka 'hpeping out' with the next World Bank CEO.

https://www.ft.com/content/49504db8-1849-11e9-9e64-d150b3105d21

Comments are the usual collection of leftwing/economist loons who seem to populate any FT article mentioning Trump or Brexit.

Top rated ones:

That Ivanka, with zero experience in anything than selling bags and shoes online is even mentioned in an article about the World Bank, speaks volumes about the dysfunctional nature of the Trump White House.


And Im ,like, hold on. The  90s saw a load of Economist decide that countries monetary policy was best decided by 'professionals' meaning economists/technocrats/whatever.

Who, esp in the UK, then went to oversee - I use oversee in the loosest possible way - the biggest credit bubble the UK has seen, choosing to 'blow a bit of a bubble, just to help over a bit of slowdown'

So, after 200 odd years of Politicians being in charge of monetary policy, in less than 10 years the BoE managed to oversee 90% of the UKs banks blowing up, UK debt doubling, growth collapsing.

 

 

 


 

 

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1 hour ago, winkie said:

It is only the practically zero interest rates that keep people borrowing so much......spending tomorrow's future, tomorrow's money yet to be earned....the economy is built on debt......it causes inflation, and it requires inflation it causes to repay it, even inflation now will not repay it, the fine balance required has tipped too far.😉

but debt does not disappear take it from the pockets of where the debt has gone. 

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12 hours ago, zugzwang said:

ZIRP forever, I'm afraid. Or at least until the country is bankrupt. It's obvious that Carney still doesn't have a clue.

https://bankofenglandfutureforum.co.uk/post/781050?forPhase=27430

 

Carney does knows what he is doing. He knows this is dangerous in the long-term but he wants his salary and pats on the back for the short term.

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Who takes any notice of what Carney says?  Is this a joke?  When have any of his forecasts ever been correct?

Be in no doubt the intention is to inflate asset prices and further enrich the wealthy.  Look at the outcomes.

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2 hours ago, longgone said:

but debt does not disappear take it from the pockets of where the debt has gone. 

It does disappear when the house was built at it a cost of £500 a few years ago costing a  few years income, then later down the line turns into a weeks wages.

Or a mortgage of £100k turns into a mortgage of £500k for the same house that cost £500 to build.;)

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7 hours ago, Locke said:

I hope this worm is sill in the country when it all goes down.

Indeed.

Carnage will be back in Canada living in big comfortable house by the time the shtf in the UK. <_< 

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8 hours ago, winkie said:

It does disappear when the house was built at it a cost of £500 a few years ago costing a  few years income, then later down the line turns into a weeks wages.

Or a mortgage of £100k turns into a mortgage of £500k for the same house that cost £500 to build.;)

only if the same person stays in the same house. any change of ownership will require new funds 

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There was never, ever any intention from Carney and his paymasters to raise interests rates from ultra low levels, under any circumstances.  A BOE that had a long term plan for the future, once the imminent danger of  the financial crisis had passed, and the economy began to recover, would have had the intention to raise rates gradually, in a signalled manner, to a low  level of around 2 percent over a couple of years. Brexit was just a convenient excuse among others not to do this. 

I think we can tell from HTB, even the whiff of a correction frightens them, for electoral reasons, and genuine fear of popular discontent from a crash in these troubled times. When rates are so low, debt levels and prices are so ridiculously high, they would also be terrified that any attempt to responsibly  cool the housing market off would lead to a full blown crash. 

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10 hours ago, longgone said:

only if the same person stays in the same house. any change of ownership will require new funds 

Yes a million pounds or more could be borrowed for the same house over time......all the fees and taxes one home can generate for intermediates, all the jobs it supports.....currency it attracts......buying and selling property and the services attached to it makes up a huge part of the economy, that is why having a property ladder is so important, a healthy turnover of housing......living in the same home repaying/killing debt for many years, passing it to family to continue using is not so 'building an strong economy' friendly......

For a growing number their debt is now not being repaid by enough inflation especially income inflation, they are maxed out on sustainable repayable debt, they would choose to move up the ladder but the ladder has been taken away from under their feet😉.......

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25 minutes ago, winkie said:

Yes a million pounds or more could be borrowed for the same house over time......all the fees and taxes one home can generate for intermediates, all the jobs it supports.....currency it attracts......buying and selling property and the services attached to it makes up a huge part of the economy, that is why having a property ladder is so important, a healthy turnover of housing......living in the same home repaying/killing debt for many years, passing it to family to continue using is not so 'building an strong economy' friendly......

For a growing number their debt is now not being repaid by enough inflation especially income inflation, they are maxed out on sustainable repayable debt, they would choose to move up the ladder but the ladder has been taken away from under their feet😉.......

Yeah the ladder needs the pavement it sits on removed also. 

What is it they say ? never walk under ladders. 

Always walk around them.:rolleyes:

 

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1 hour ago, longgone said:

Yeah the ladder needs the pavement it sits on removed also. 

What is it they say ? never walk under ladders. 

Always walk around them.:rolleyes:

 

Walk around a ladder that no longer exists!.....can only hope the foundations of the pavements are stable and the road ahead is not blocked.😉

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  • 296 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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