Simhadri Posted February 16, 2019 Share Posted February 16, 2019 https://www.telegraph.co.uk/business/2019/02/14/no-rate-rise-uk-world-economies-pick-says-mpc-member/ MPC member Gertjan Vlieghe said "a lot needs to go right" in the UK and world economies for his prediction of one interest rate hike per year to come true Quote Link to comment Share on other sites More sharing options...
Simhadri Posted February 16, 2019 Author Share Posted February 16, 2019 https://www.ft.com/content/ace1af70-260e-11e9-8ce6-5db4543da632&psig=AOvVaw1A_so6gAxbv-LqQr7jn05b&ust=1550443766231980 Interest rates on higher-risk fixed mortgages fall Quote Link to comment Share on other sites More sharing options...
warrior88 Posted February 19, 2019 Share Posted February 19, 2019 On 16/02/2019 at 22:51, Simhadri said: https://www.ft.com/content/ace1af70-260e-11e9-8ce6-5db4543da632&psig=AOvVaw1A_so6gAxbv-LqQr7jn05b&ust=1550443766231980 Interest rates on higher-risk fixed mortgages fall Fixed rate mortgages are based on swap rates which in turn are linked to treasury yield so for now all this is going down. Quote Link to comment Share on other sites More sharing options...
b_real Posted February 19, 2019 Share Posted February 19, 2019 On 16/02/2019 at 22:51, Simhadri said: https://www.ft.com/content/ace1af70-260e-11e9-8ce6-5db4543da632&psig=AOvVaw1A_so6gAxbv-LqQr7jn05b&ust=1550443766231980 Interest rates on higher-risk fixed mortgages fall Firewall. Anyone got some key extracts for us poor folk? Quote Link to comment Share on other sites More sharing options...
bear.getting.old Posted February 19, 2019 Share Posted February 19, 2019 41 minutes ago, warrior88 said: Fixed rate mortgages are based on swap rates which in turn are linked to treasury yield so for now all this is going down. Yes but the overall trend is still up, let's wait and see Quote Link to comment Share on other sites More sharing options...
zugzwang Posted February 19, 2019 Share Posted February 19, 2019 3 minutes ago, bear.getting.old said: Yes but the overall trend is still up, let's wait and see Overall trend? There's been one quarter point hike in ten years! ? Quote Link to comment Share on other sites More sharing options...
warrior88 Posted February 19, 2019 Share Posted February 19, 2019 6 hours ago, bear.getting.old said: Yes but the overall trend is still up, let's wait and see On the contrary , mortgages rates have been going down and down for the last 4 years with some minor bumps. Quote Link to comment Share on other sites More sharing options...
Confusion of VIs Posted February 20, 2019 Share Posted February 20, 2019 On 19/02/2019 at 17:24, bear.getting.old said: Yes but the overall trend is still up, let's wait and see At their recent select committee appearance a BoE representative (cannot remember who, it wasn't Carney) described their likely response to a no deal Brexit, in brief it was - provide liquidity, restart QE and a very extended period of near 0% interest rates. Quote Link to comment Share on other sites More sharing options...
dugsbody Posted February 21, 2019 Share Posted February 21, 2019 (edited) On 19/02/2019 at 17:24, bear.getting.old said: Yes but the overall trend is still up, let's wait and see lol Brexiters really are deluded Edited February 21, 2019 by dugsbody Quote Link to comment Share on other sites More sharing options...
crouch Posted February 21, 2019 Share Posted February 21, 2019 On 19/02/2019 at 17:24, bear.getting.old said: Yes but the overall trend is still up, let's wait and see The neutral rate of interest (an unobservable rate that is based on an equilibrium between growth and inflation at around 2%) has been falling for years, many years. The debt burden is too high, and getting higher, for rate rises. The BOE will not raise rates unless they are absolutely forced to, and I mean absolutely. If they raise rates the house of cards will collapse. A recent thread asked what the level of interest rates might be at the end of 2019. I said 0.1%. I stick by that. Quote Link to comment Share on other sites More sharing options...
zilly Posted February 21, 2019 Share Posted February 21, 2019 2 minutes ago, crouch said: The neutral rate of interest (an unobservable rate that is based on an equilibrium between growth and inflation at around 2%) has been falling for years, many years. The debt burden is too high, and getting higher, for rate rises. The BOE will not raise rates unless they are absolutely forced to, and I mean absolutely. If they raise rates the house of cards will collapse. A recent thread asked what the level of interest rates might be at the end of 2019. I said 0.1%. I stick by that. Yes so if speculators attack sterling post-Brexit, we've now no mechanism to defend it. Hobson's choice will/would be massive debt defaults and recession/depression or massive inflation (due to our over-dependence on imported goods after it was decided for us that we no longer need to manufacture to prosper) and recession/depression. Better hope those currency speculators are feeling kind, had we not. Quote Link to comment Share on other sites More sharing options...
crouch Posted February 21, 2019 Share Posted February 21, 2019 7 minutes ago, zilly said: Yes so if speculators attack sterling post-Brexit, we've now no mechanism to defend it. Hobson's choice will/would be massive debt defaults and recession/depression or massive inflation (due to our over-dependence on imported goods after it was decided for us that we no longer need to manufacture to prosper) and recession/depression. Better hope those currency speculators are feeling kind, had we not. Well, there has been talk of negative rates. If that happened on any scale there would be mayhem. The housing market has been boosted by low rates for many years but low rates, together with a move frm DB schemes, has sent private pension provision down the toilet. Negative rates would complete the job. All those people who are rubbing their hands at having paid the mortgage off early due to low rates and can now contemplate early retirement will be shocked when they realise how little pension they will receive. House prices rises are immediate; pension falls are a slow burn issue but arguably much more important. Quote Link to comment Share on other sites More sharing options...
warrior88 Posted February 21, 2019 Share Posted February 21, 2019 34 minutes ago, crouch said: The neutral rate of interest (an unobservable rate that is based on an equilibrium between growth and inflation at around 2%) has been falling for years, many years. The debt burden is too high, and getting higher, for rate rises. The BOE will not raise rates unless they are absolutely forced to, and I mean absolutely. If they raise rates the house of cards will collapse. A recent thread asked what the level of interest rates might be at the end of 2019. I said 0.1%. I stick by that. Just out of curiosity, what the the reasoning behind 0..1%? Are you assuming certain events such as soft-brexit? P.S. I agree with the rest of the statement. Quote Link to comment Share on other sites More sharing options...
crouch Posted February 21, 2019 Share Posted February 21, 2019 9 minutes ago, warrior88 said: Just out of curiosity, what the the reasoning behind 0..1%? Are you assuming certain events such as soft-brexit? P.S. I agree with the rest of the statement. Because they wiil go down to the absolute minimum. Negative rates are a real step into the dark and may involve, for instance, banning cash ( because people will keep cash in a mattress rather than be charged for keeping it in a bank). The BOE will hesitate to go below 0%; quite rightly. That won't prevent house prices from falling, however, but the effect on pensions will continue. The "my house is my pension" brigade may be disappointed as their house will go down in value but their pension will not increase commensurately. Quote Link to comment Share on other sites More sharing options...
zugzwang Posted February 21, 2019 Share Posted February 21, 2019 6 minutes ago, zilly said: Yes so if speculators attack sterling post-Brexit, we've now no mechanism to defend it. Hobson's choice will/would be massive debt defaults and recession/depression or massive inflation (due to our over-dependence on imported goods after it was decided for us that we no longer need to manufacture to prosper) and recession/depression. Better hope those currency speculators are feeling kind, had we not. Don't rule out another sovereign debt downgrade from Standard & Poor's/Moody's. Quote Link to comment Share on other sites More sharing options...
darkmarket Posted February 21, 2019 Share Posted February 21, 2019 34 minutes ago, zugzwang said: Don't rule out another sovereign debt downgrade from Standard & Poor's/Moody's. "It's just like making a rough estimate, giving a credit rating to a country is nothing but a board game." - Jerome Fons (Former Director of Moody's). Quote Link to comment Share on other sites More sharing options...
Locke Posted February 21, 2019 Share Posted February 21, 2019 35 minutes ago, crouch said: banning cash ( because people will keep cash in a mattress rather than be charged for keeping it in a bank) Just going to jump in here and point out that this is not the case. When coins were not tokens (i.e. their value was derived mostly from their precious metal content), you would find it reasonable to pay someone to keep your coins safe in a vault and guarantee to return your coins by taking out insurance (i.e. a bank). This represents a negative interest rate. You could earn interest by permitting them lend your money out, but then you would have to accept a risk that the loan would fail. The more interest, the more risk of losing your capital. If you store your cash at home "for free", you run the risk of being robbed. So yes, natural negative interest rates are possible, even without banning cash. Quote Link to comment Share on other sites More sharing options...
crouch Posted February 21, 2019 Share Posted February 21, 2019 7 minutes ago, Locke said: Just going to jump in here and point out that this is not the case. When coins were not tokens (i.e. their value was derived mostly from their precious metal content), you would find it reasonable to pay someone to keep your coins safe in a vault and guarantee to return your coins by taking out insurance (i.e. a bank). This represents a negative interest rate. You could earn interest by permitting them lend your money out, but then you would have to accept a risk that the loan would fail. The more interest, the more risk of losing your capital. If you store your cash at home "for free", you run the risk of being robbed. So yes, natural negative interest rates are possible, even without banning cash. I believe in Japan they have had shortages of home safes precisely because people were hoarding cash. Whilst negative interest rates are possible without banning cash are they likely? If rates are -0.1% then you probably wouldn't have to ban cash. But what if they were perceived to have to be at -5% to have any effect? Do you really think that banning cash would not come up for consideration in this situation? Quote Link to comment Share on other sites More sharing options...
Locke Posted February 21, 2019 Share Posted February 21, 2019 11 minutes ago, crouch said: I believe in Japan they have had shortages of home safes precisely because people were hoarding cash. Whilst negative interest rates are possible without banning cash are they likely? If rates are -0.1% then you probably wouldn't have to ban cash. But what if they were perceived to have to be at -5% to have any effect? Do you really think that banning cash would not come up for consideration in this situation? I'm saying natural negative interest rates are possible. Interest rate is a natural product of economic conditions and even people's propensity towards crime and fraud. You are less likely to be robbed today than 500 years ago, so I guess the negative rate you would accept before storing it yourself is less extreme (closer to 0) Anyway, the overall point is that these distortions are a direct result of the government's pervasive level of control over the currency. Quote Link to comment Share on other sites More sharing options...
crouch Posted February 21, 2019 Share Posted February 21, 2019 2 minutes ago, Locke said: I'm saying natural negative interest rates are possible. Interest rate is a natural product of economic conditions and even people's propensity towards crime and fraud. You are less likely to be robbed today than 500 years ago, so I guess the negative rate you would accept before storing it yourself is less extreme (closer to 0) Anyway, the overall point is that these distortions are a direct result of the government's pervasive level of control over the currency. Absolutely. Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted February 21, 2019 Share Posted February 21, 2019 47 minutes ago, Locke said: I'm saying natural negative interest rates are possible. Interest rate is a natural product of economic conditions and even people's propensity towards crime and fraud. You are less likely to be robbed today than 500 years ago, so I guess the negative rate you would accept before storing it yourself is less extreme (closer to 0) Anyway, the overall point is that these distortions are a direct result of the government's pervasive level of control over the currency. Which is something they would not be able to do if we were in the Euro. Quote Link to comment Share on other sites More sharing options...
Locke Posted February 21, 2019 Share Posted February 21, 2019 1 minute ago, Bruce Banner said: Which is something they would not be able to do if we were in the Euro. Yeah Draghi stealing from me is so much better than Mark Carney. Why don't you go fellate your local MEP or something Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted February 21, 2019 Share Posted February 21, 2019 19 minutes ago, Locke said: Yeah Draghi stealing from me is so much better than Mark Carney. Why don't you go fellate your local MEP or something It certainly is because it's not targeted at national asset bubbles like the UK housing market. Quote Link to comment Share on other sites More sharing options...
crouch Posted February 21, 2019 Share Posted February 21, 2019 1 hour ago, Bruce Banner said: It certainly is because it's not targeted at national asset bubbles like the UK housing market. I'm not sure it is targeted at housing bubbles; I know many people believe that but if we'd had much higher rates we'd have had much lower notional growth and asset classes would have collapsed and yes, we'd have lower house prices. But all assets would have collapsed not just housing. I'm not justifying the low rate policy because I think it's put us between a rock and a hard place but there would have been much wider economic problems had we had higher rates, notwithstanding the fact that higher growth was little more than the spending of borrowed money. Quote Link to comment Share on other sites More sharing options...
zugzwang Posted February 21, 2019 Share Posted February 21, 2019 9 hours ago, crouch said: Because they wiil go down to the absolute minimum. Negative rates are a real step into the dark and may involve, for instance, banning cash ( because people will keep cash in a mattress rather than be charged for keeping it in a bank). The BOE will hesitate to go below 0%; quite rightly. That won't prevent house prices from falling, however, but the effect on pensions will continue. The "my house is my pension" brigade may be disappointed as their house will go down in value but their pension will not increase commensurately. There's now > $ 10 trillion in sovereign debt worldwide carrying negative yield. Moreover, both the ECB and BoJ have dropped their respective interest rates on excess reserves into negative territory in a vain attempt to encourage lending. The idea that the BoE wouldn't follow suit seems highly improbable to me. Quote Link to comment Share on other sites More sharing options...
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