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I've read alot of the posts on this forum, listened to the logic. I have believed for years that house prices were over priced and a correction was inevitable.

I've followed the threads about interest rates and how these have fuelled the boom. Rates are rising in the Usa, Japan has just decided to change its policy etc

That UK rates need to go up is very obvious.

However I was talking to a bank manager yesterday and he said he believed IR would remain static for a long time. His reason was that long term borrowing rates were low therefore those that set them don't think much is going to change in the future.

He cited the level of debt as the main reason IR's wouldn'r rise. He also said that USA rates going up is not as important as it use to be.

Then this morning I listened to Business news on radio 4, again the expert was very nonchalant about IR's

Now I am confused. Which 'world' do I listen to?

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This is more or less what Merv at the BoE has said. IRs more or less static and then it could unwind itself as the Chinese and Indians start improving their standard of living and inflation starts to edge up.

But at the end of the day, you pays your money and you takes your choice.

:)

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IR's will not raise unless they have to, there are too many ways this decision may be affected..

Will we have to wait for the "Low Inflation" impact to kick in?

Don't forget personal economic failures are rising exponetially..

I think that people are getting scared of debt, they see the economy shuddering...

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I was considering this – getting a 10 year fixed at 5%ish only to find that interest rates get reduced to European rates to protect borrowers – then just as the 10 years Finnish rates unwind and I’ll be paying 105%ish Ir.’s

Or get a variable rate so that if they go down I will be flexible – but it will probably unwind immediately I sign and will be paying 9%

Sods law is in force

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I was considering this – getting a 10 year fixed at 5%ish only to find that interest rates get reduced to European rates to protect borrowers – then just as the 10 years Finnish rates unwind and I’ll be paying 105%ish Ir.’s

Or get a variable rate so that if they go down I will be flexible – but it will probably unwind immediately I sign and will be paying 9%

Sods law is in force

Ahh, but it could be more complicated than that. Say, for example, in 10 years your salary is higher and your debts have been inflated (even moderately away). What could you do to protect yourself? Perhaps a cunning plan would be to pay off a chunk of the debt owed on the mortgage?

Also, in 10 years time, do you think prices in nominal terms will be lower than they are today...unlikely IMO.

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Yes. We probably are.

The bbc news bloke today was talking to the economics guy about poverty and how they've not got the policies to fix it but it depends how you measure poverty...

Then a bit later they said about rates prob not changing because the housing market is risisng slightly and inflation is under control...

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"However I was talking to a bank manager yesterday and he said he believed IR would remain static for a long time. His reason was that long term borrowing rates were low "

haha

Excuse me, but he hasnt a clue.

Globally, long term rates are rising now. 10-year rates in the USA have just broken out to the upside.

I have to agree with the good Dr, your average high street ban manager will know little about economics. The pound, all be it by a small amount so far, has begun to loose value already. If the FED and ECB continue to raise rates (which has been strongly hinted at), the momentum at which the pound will loose value will increase. A deflating pound against another currency will increase the amount we pay for imports in that currency, increasing UK inflation in the process.

We need to look at who we import from before we take the word of anyone esp. a high street bank manager but also even the Governer of the BOE.

For instance, where do we buy oil and gas from? I believe some of our Gas comes form Europe?

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The most important thing for us all is to weight the information received from all sources.

I pay little heed to non verified info on the internet from a bunch of strangers. Yes, it may give me reason to go away and check independently. But that's as far as it goes.

Similarly from a VI - I learnt whilst at school that everyone has an agenda.

Also family and friends, they typically know less than nothing about specifics and often will use platitudes which are, by definition, meaningless.

So, the "Ignorant Steve methodology", soak up all information possible and check it using first principles. Anything dubious from any source taints that source for the future so the weighting drops.

Simple. Bit like me really.

Edited by Ignorant Steve

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His reason was that long term borrowing rates were low therefore those that set them don't think much is going to change in the future.

He cited the level of debt as the main reason IR's wouldn'r rise. He also said that USA rates going up is not as important as it use to be.

Then this morning I listened to Business news on radio 4, again the expert was very nonchalant about IR's

Now I am confused. Which 'world' do I listen to?

Why are long term borrowing rates low ?

This is the 'conundrum' that Alan Greenspan talked about last year and the answer lise in the VAST sums of petrodollars sloshing around in the hands of OPEC producers. All this money is looking for a home. One only has to look at all the crazy building in Dubai to see the place is awash with money. Currently investors are willing to accept very low returns on very high risk investments as it provides (potentially) some yield.

This environment is entirely dependant upon the strength of the US dollar. If (as most predict) the dollar slides and finds it true level (some 30% lower) then there will be a race to offload the dollar.

Long term interest rates will return to their long term average (ie. greater than short term repo rate) when oil producers and those that buy US treasuries (exporters such as Japan and Germany) curtail their demand.

Don't belive the hype - If you need to borrow you should now be looking at fixed rate terms around 5.5%.

There is pent up inflation in the system and the only way for IR's is up.

Potential triggers this year

1. US Housing market peak --> lower US consumption --> this is currently driving the world economy

2. Ultimately at stake is the reduction in the power of the US Dollar as the worlds reserve currency. Anything that threatens this wil be challenged by the US of A. Iranian Oil Bourse March 26 2006

3. Unwinding of the Yen carry trade . If boJ raises rates faster than Fed reserve then many positions will be threatened.

Western central banks have done all they can to offset the deflationary pressures of globalisation for the last ten years. This is what has flooded the world with liquidity but these positions have been artificial.

I would expect US and UK Irs to both be at least 5.25% 12 months from now.

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The most important thing for us all is to weight the information received from all sources.

I pay little heed to non verified info on the internet from a bunch of strangers. Yes, it may give me reason to go away and check independently. But that's as far as it goes.

Similarly from a VI - I learnt whilst at school that everyone has an agenda.

Also family and friends, they typically know less than nothing about specifics and often will use platitudes which are, by definition, meaningless.

So, the "Ignorant Steve methodology", soak up all information possible and check it using first principles. Anything dubious from any source taints that source for the future so the weighting drops.

Simple. Bit like me really.

I think I actually agree with you :blink::blink::o

Most people talk rubbish and regurgitate things they've heard.

How many people really KNOW or UNDDERSTAND what they are saying.

I myself am no economics genius, but I'll do my research and make my decisions, not listen to some bloke down the pub (or bank manager) who tells me low rates are here to stat.

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I've read alot of the posts on this forum, listened to the logic. I have believed for years that house prices were over priced and a correction was inevitable.

I've followed the threads about interest rates and how these have fuelled the boom. Rates are rising in the Usa, Japan has just decided to change its policy etc

That UK rates need to go up is very obvious.

However I was talking to a bank manager yesterday and he said he believed IR would remain static for a long time. His reason was that long term borrowing rates were low therefore those that set them don't think much is going to change in the future.

He cited the level of debt as the main reason IR's wouldn'r rise. He also said that USA rates going up is not as important as it use to be.

Then this morning I listened to Business news on radio 4, again the expert was very nonchalant about IR's

Now I am confused. Which 'world' do I listen to?

Should you listen to the real world, or the virtual world?

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I've read alot of the posts on this forum, listened to the logic. I have believed for years that house prices were over priced and a correction was inevitable.

I've followed the threads about interest rates and how these have fuelled the boom. Rates are rising in the Usa, Japan has just decided to change its policy etc

That UK rates need to go up is very obvious.

However I was talking to a bank manager yesterday and he said he believed IR would remain static for a long time. His reason was that long term borrowing rates were low therefore those that set them don't think much is going to change in the future.

He cited the level of debt as the main reason IR's wouldn'r rise. He also said that USA rates going up is not as important as it use to be.

Then this morning I listened to Business news on radio 4, again the expert was very nonchalant about IR's

Now I am confused. Which 'world' do I listen to?

OMG. You are being suckered by the new paradigm stuff.

New low inflation economy.

Interest rates will stay stable for ever.

Global interest rates not as important as they used to be.

This is the real world and it is just as unpredictable as it always was. Anyone who makes these sweeping statements is talking horse****.

If they could make predictions of the global economy, then they wouldn't be talking to you because they'd be so f****g rich. Think about it.

Warren Buffet makes his money by realising that there are no new paradigms. The old ideas are still as valid today as they were years ago, but they get forgotten often.

Edited by karhu

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The real world is best determined looking to the past as there is truly nothing new under the sun. That said, there are some immutable laws of economics that ALWAYS apply:

1. Nothing remains constant.

2. The economy runs in cycles.

3. Value finds its own level.

How to apply the immutables to current events:

1. IR will change, they always do.

2. The current economic cycle shows IR moving up worldwide.

3. House prices are an overvalued assett and will come down relative to everything else.

What to do given the above:

1. Invest in things that are not overly intererest rate sensitive.

2. Avoid houses as the down cycle only began a year ago and its in its early stage.

3. Sell houses (unless you live in one and want to stay put for 5 years or more).

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"However I was talking to a bank manager yesterday and he said he believed IR would remain static for a long time. His reason was that long term borrowing rates were low "

haha

Excuse me, but he hasnt a clue.

Globally, long term rates are rising now. 10-year rates in the USA have just broken out to the upside.

As for US and for that matter Japaneses IR not being as important as they used to be....... he reveals in that once sentence his utter incompetance and ignorance of even basic economics.

You should have asked the Melon where the suit & shoes he was wearing/ car he drove/ TV he watched/ Bed he slept in/ computer has was using etc. were all manufactured.

.....what a tit.

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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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