Bank of England expected to hike interest rates to new 13-year high

[Badhairday]

29 minutes ago, scottbeard said:

Honestly no, because it's come from discussions with family.  Perhaps they exaggerated a little because a quick Google can only come up with figures that suggest a 600% rise over the decade, from £4,000 to £20,000:

https://www.sunlife.co.uk/articles-guides/your-money/the-price-of-a-home-in-britain-then-and-now/

But again - let me stress the main point of my comment - this is a decade where inflation went through the roof, peaking at 25%pa, and interest rates hit about 14%.

And house prices went up 600%.  Not crashed, went up 600%.

4000 gbp to 20,000 gbp is an increase of 400% which i believe puts it in line with the inflation of the time. So not really a profit.

I personally don't believe house prices will fall (maybe in the short term), but over the next few years they will keep up with inflation. However, if you want to beat inflation, I would put my faith in commodities.

[Badhairday]

38 minutes ago, scottbeard said:

Honestly no, because it's come from discussions with family.  Perhaps they exaggerated a little because a quick Google can only come up with figures that suggest a 600% rise over the decade, from £4,000 to £20,000:

https://www.sunlife.co.uk/articles-guides/your-money/the-price-of-a-home-in-britain-then-and-now/

But again - let me stress the main point of my comment - this is a decade where inflation went through the roof, peaking at 25%pa, and interest rates hit about 14%.

And house prices went up 600%.  Not crashed, went up 600%.

Thanks for the link. It was fascinating.

I always thought of the 1988 HPC as the holy grail, but honestly the 20% crash, was not a huge deal now I have learned that houses had been rising for many years prior, and went up by 16% in 1987 and 25% in 1988. 

[scottbeard]

1 hour ago, Badhairday said:

4000 gbp to 20,000 gbp is an increase of 400% which i believe puts it in line with the inflation of the time. So not really a profit.

I’m having a nightmare with the maths today! Agreed 400%

And to be absolutely clear I never said it was a real terms profit or anything like that just that high inflation and high interest rates don’t necessarily lead to nominal falls. 

[Flat Bear]

10 hours ago, BaldED said:

£ 1 @ $1.21 today

Tomorrow it will be <$1.20

It is $1.195 now

I would expect support at 1.2 so we should see it supported for at least until thursday when we hear the rise in interest rate figure.

It should stay steady if the FED raised by 0.5% and the BOE follow suit.

[Flat Bear]

3 hours ago, scottbeard said:

Honestly no, because it's come from discussions with family.  Perhaps they exaggerated a little because a quick Google can only come up with figures that suggest a 600% rise over the decade, from £4,000 to £20,000:

https://www.sunlife.co.uk/articles-guides/your-money/the-price-of-a-home-in-britain-then-and-now/

But again - let me stress the main point of my comment - this is a decade where inflation went through the roof, peaking at 25%pa, and interest rates hit about 14%.

And house prices went up 600%.  Not crashed, went up 600%.

It must be remembered that the 1970s was generally a period of boom with record employment figures and shortages. It was an inflationary boom.

The early 1980s saw an extremely painful recession and I am still feeling the affects today.I would not want anyone to suffer such a period but unfortunately it is inevitable.

The inflation we are seeing now is much worse than the 70s and we all thought at the time it was only temporary, everyone thought that. It took around 10 years before people realized it was serious and not temporary.

It peaked at just 25% which isn't that high really. It is bound to be much higher this time around, although there are a lot of soft landing posters who will disagree I am sure.

We are only at the very beginning of this inflationary episode and there are still many things at the end of the chains that have only very marginally actually risen in price.

I will think back to all the things we started to take for granted and are likely to start happening again. Remember it is always different and each time certain sectors are hit much harder than others. In the 1980s it was the manual labourer, tradsmen or anyone who uses their hands that suffered most, this time it is likely to be the exact opposite.

There were a lot of strikes on a local level as well as a countrywide level and the cost of anything imported shot up as the value of our currency became more and more worthless. Businesses were few and far between and everyone was watching the pennies in their pockets that could buy less and less daily.

It was a very slow progress where we actually began to become more productive individually and collectively which was the only way out of the economic malaise that was the early 1980s.

By 1987/88 everything was hunky dory again and it was all forgotten about. A new breed of hungry greedy moneymaker emerged. From working in the city to working on the building site (loads-a-money Harry Enfield)

[Sour Mash]

9 hours ago, Flat Bear said:

It must be remembered that the 1970s was generally a period of boom with record employment figures and shortages. It was an inflationary boom.

 

Nope, the 1970s are an example of stagflation:

https://www.economicshelp.org/blog/601/unemployment/economics-of-the-1970s/

 

Of course, the overall debt load (public and private) was much lower and there was generally a lot more employment than there is today (loads of stuff still 'Made in Britain'), so ironically in many respects it actually looks decent compared to the situation we are entering now.

 

[winkie]

8 minutes ago, Sour Mash said:

 

Nope, the 1970s are an example of stagflation:

https://www.economicshelp.org/blog/601/unemployment/economics-of-the-1970s/

 

Of course, the overall debt load (public and private) was much lower and there was generally a lot more employment than there is today (loads of stuff still 'Made in Britain'), so ironically in many respects it actually looks decent compared to the situation we are entering now.

 

Agree then we're entering into globalisation, today more protectionism........shame we sold much of what we owned then  (needed and spent the proceeds) so could say we are more vulnerable now than we were then?

[NoHPCinTheUK]

People who went into shares in the 70s made a killing in the 80s and 90s and early 00s. 
 

Microsoft from 10c to $10 in 10 years in the 90s
 

Coca Cola from 50c to $10 same time

GE from $5 in the early 80s to $450 at the peak of the dot bubble. 
 

There’s no way the housing market can beat stocks in the long run. No way. 

 

 

[winkie]

4 minutes ago, NoHPCinTheUK said:

People who went into shares in the 70s made a killing in the 80s and 90s and early 00s. 
 

Microsoft from 10c to $10 in 10 years in the 90s
 

Coca Cola from 50c to $10 same time

GE from $5 in the early 80s to $450 at the peak of the dot bubble. 
 

There’s no way the housing market can beat stocks in the long run. No way. 

 

 

If have a few pounds spare each month have plenty of time ahead of you, nothing wrong with drip feeding over the long-term in low cost Isa tracker..... a home, pension, low risk market diversification....they say about buying low, use it when need the money, new opportunities always come from falls.....do what can in financial climate find self in...... excess consumerism/consumption is high risk and short-term gratification.......all in moderation........ everything can go up or down or disappear completely.

[scottbeard]

10 hours ago, Flat Bear said:

Remember it is always different and each time certain sectors are hit much harder than others. In the 1980s it was the manual labourer, tradsmen or anyone who uses their hands that suffered most, this time it is likely to be the exact opposite.

A great observation.

In 2022 the truck driver is king; the accountant can be outsourced to India.

[70PC]

On 6/14/2022 at 4:04 PM, scottbeard said:

Starbucks employees are amongst the lowest earners in the country, so not really comparable to the average house price...but that's really a digression.

In the 1970s we literally saw an extra zero added to everything.  So IF THAT REPEATS (and I'm not saying it will - in fact i don't think it will - but some people do and they might be right) that means we will see the average UK wage rise from £30k to £300k, and the average house price could indeed be about £2 million.

If you think that sounds silly, that has already happened in the UK as recently as the 1970s, when houses that cost £3,000 ended up costing £30,000.

Germany had hyperinflation in the 1920's which did not turn out well for anyone. If you are suggesting global hyperinflation, it is anyone's guess where that might end up. We live in a more connected financial world. My guess is that a £500k house today will be the same in 20 years time or possibly less. House prices are closely linked to interest rates. The US put interest rates up by 0.75% last week. The UK matched this with a 0.25% increase. This is a case of pay now or pay later. 

[scottbeard]

3 hours ago, 70PC said:

Germany had hyperinflation in the 1920's which did not turn out well for anyone. If you are suggesting global hyperinflation, it is anyone's guess where that might end up. We live in a more connected financial world. My guess is that a £500k house today will be the same in 20 years time or possibly less. House prices are closely linked to interest rates. The US put interest rates up by 0.75% last week. The UK matched this with a 0.25% increase. This is a case of pay now or pay later. 

No I’m not suggesting global hyperinflation, but I am suggesting it’s POSSIBLE that we are in a repeat of the 1970s - a decade when house prices increased by orders of magnitude, not crashed, and yet many posts I read now are than a nominal HPC is a certainty. It isnt.

[spyguy]

31 minutes ago, scottbeard said:

No I’m not suggesting global hyperinflation, but I am suggesting it’s POSSIBLE that we are in a repeat of the 1970s - a decade when house prices increased by orders of magnitude, not crashed, and yet many posts I read now are than a nominal HPC is a certainty. It isnt.

Orders of magnitude??

[anonguest]

1 hour ago, scottbeard said:

No I’m not suggesting global hyperinflation, but I am suggesting it’s POSSIBLE that we are in a repeat of the 1970s - a decade when house prices increased by orders of magnitude, not crashed, and yet many posts I read now are than a nominal HPC is a certainty. It isnt.

No they did not.

By many multiples, yes. But, overall, not an order (less still orders!) of magnitude.

[EnglishinWales]

On 13/06/2022 at 16:55, scottbeard said:

There has been billions in QE and furlough payments paid in recent years.  Lenders are still giving 4x salary to anyone who turns up. Credit cards are shoved in your face everywhere. There is no shortage of money to be borrowed.  Paying it back, now that’s not so easy. 

Currency is not money.

[Flat Bear]

1 hour ago, EnglishinWales said:

Currency is not money.

Well currency has no intrinsic value.

Money has intrinsic value until it does not.

The BOE has money in the form of GBP sterling (currency) which has no intrinsic value? Because it is FIAT. Currency is just the medium this money (or value) is exchanged.

It is a Sarah John (chief cashier) who promises to pay on demand the £20 I have a £20 promisary note for in my hand.

But how much is £20? It is not set against anything tangible?

If the currency is trashed what money you hold in the form of that currency will also be trashed.

Money is just a means of exchange and the currency is a particular form of that value.

There are many threads many miles long where people have disappeared up their own rectums discussing this.

Keep it simple. Currency is a form of exchange of money.

I believe what you are getting at is that the government and BOE are giving out currency which has no intrinsic value. The problem is a lot of people do believe this currency does have value and thus the money (currency) in their pockets is worth actually worth something.

It is only over the past 12 months many of us are beginning to doubt this. Unfortunately it is very difficult to use any other forms of exchange domestically.

So for the use of language on this thread money and currency (pound sterling) are interchangable.

Note

It is always worth remembering that this FIAT currency we hold does not have any intrinsic value and its value is fluid.

[Flat Bear]

We are in frightening times

China has many banks shut down and people and businesses are unable to get access to their money (currency)

This was originally happening for a few days but now it has been weeks for many. Many will go bust. Many will refuse to release any funds. There are many new laws restricting peoples access to their accounts.

We are witnessing the biggest fall in house prices ever and the whole sector of property developement is going bust. 

Other sectors are doing very badly and it looks like China will go into a very deep recession.

I honestly do not know the degree of financial contagion but it will be the start of the biggest credit crunch we have ever seen.

China was always the very large Elephant in the room and we will see the consequences over the next decade in the form of skyrocketing prices and shortages.

China is the most important country financially in the world by a long long way.

[turtle]

4 hours ago, Flat Bear said:

We are in frightening times

China has many banks shut down and people and businesses are unable to get access to their money (currency)

This was originally happening for a few days but now it has been weeks for many. Many will go bust. Many will refuse to release any funds. There are many new laws restricting peoples access to their accounts.

We are witnessing the biggest fall in house prices ever and the whole sector of property developement is going bust. 

Other sectors are doing very badly and it looks like China will go into a very deep recession.

I honestly do not know the degree of financial contagion but it will be the start of the biggest credit crunch we have ever seen.

China was always the very large Elephant in the room and we will see the consequences over the next decade in the form of skyrocketing prices and shortages.

China is the most important country financially in the world by a long long way.

Interesting post. I hadn’t realised what was going on in China. Likely as I only watch bite size chunk of news on the TV when I can. 
 

btw in an earlier post you said you were still scared from the 80s. Are you able to explain a bit more of what and why? 
 

 

[scottbeard]

12 hours ago, spyguy said:

Orders of magnitude??

Ok that’s hyperbole 😜

The point is just - high interest rates don’t necessarily make for low house prices of wage skyrocket 

[spyguy]

BoE will be regretting its lack of balls - 

Fed official supports 0.75 percentage point rate rise in July

Christopher Waller expects inflation data to warrant a back to back jumbo increase

https://www.ft.com/content/85f9d719-ed62-451b-9506-f3f0eb559874

 

[NoHPCinTheUK]

At this pace we will be around 5% by the end of the year. And it probably won’t be enough to match the inflation rate, that is going to just go mental when the cold months arrive. 
 

However I still see a more interesting place the treasury and gilt markets: these are the rates the economy is set on. 
 

My guess: 

US 10y above 4% by the end of the summer 

UK 10y gilts around 3% 

Then all bets are off, if energy prices continue to go up the shorter maturities could seriously see heights in the high single digits. 
 

This will probably mean we will se the cheapest 2y LTV 90% for FTB at 4% by September, and I won’t be surprised if the US 30y fixed would touch 8%. 
 

At these rates the housing market will collapse. 

Edited June 19, 2022 by NoHPCinTheUK

[steve99]

16 hours ago, scottbeard said:

No I’m not suggesting global hyperinflation, but I am suggesting it’s POSSIBLE that we are in a repeat of the 1970s - a decade when house prices increased by orders of magnitude, not crashed, and yet many posts I read now are than a nominal HPC is a certainty. It isnt.

House prices increased from a very low base. Now prices are maxed out vs wage multiples and increasing interest rates. Also workers have less pricing power than the 70s when we had  more unions, no offshoring and less flexible immigration. (Still got high immigration which is not mentioned in the mainstream tory/brexit press)

[Flat Bear]

11 hours ago, turtle said:

Interesting post. I hadn’t realised what was going on in China. Likely as I only watch bite size chunk of news on the TV when I can. 
 

btw in an earlier post you said you were still scared from the 80s. Are you able to explain a bit more of what and why? 
 

 

There is a lot of information on the subject but for some reason it is not main stream?

 

[Flat Bear]

11 hours ago, turtle said:

 

 

btw in an earlier post you said you were still scared from the 80s. Are you able to explain a bit more of what and why? 
 

 

I was not the only one.

It saw the demise of the male working class in many ways with the whole world changing and many men feeling worthless

 

 

[TheResponsibleHouseBuyer]

They messed up Thursday's IR increase badly:

https://www.telegraph.co.uk/business/2022/06/19/bank-englands-credibility-now-severely-compromised/