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spoon

Rate Hike Frenzy

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Turkey (175), Korea (25), S. Africa (50), Euroland (25), and India (25) have all hiked in the past 48 hours.

Coming soon, the MPC and the FED.

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Spoon.

What do you think the rates will be end of this year for US and UK.

5.75/6.00 for the US and 5.00/5.25 for the UK?

I can hear the rumble of the starter motors on the B of Japan's tightening machine.

:unsure:

Edited by BubbleTurbo

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Right now I'll say MPC - 5.00% and FED - 5.50% by year end. The risks are I have to adjust these forecasts up as the year wears on.

The weakness in housing markets has actually served to sustain economic growth and consumer confidence because the central banks have either paused or cut rates in anticipation of a real estate collapse and it's potential consequences. This has been especially true of the UK. In some ways, and I still believe in the house price crash, the soft landing we have seen till now is entirely logical. All correctives phases or crashes are generally characterised by three legs. First you have the initial sell-off, then the false low with some sideways consolidation, then finally the capitulation. That's when you buy. We are nearing the end of phase two which has lasted longer than most here expect due to the accommodative monetary policy explained above. This is now being removed.

Edited by spoon

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Guest Charlie The Tramp

We are entering an era of CBs heading towards their historical neutral rates. The fish are well and truly hooked and the party is over. The UK rates at 6% will teach the fools a lesson and no matter how many suffer, the reality of the monetarists controlling the system, those fools who believed it was free money are in for a very nasty shock. You get owt for nowt in this world but sadly debtors have not learned that lesson. ;)

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We are entering an era of CBs heading towards their historical neutral rates. The fish are well and truly hooked and the party is over. The UK rates at 6% will teach the fools a lesson and no matter how many suffer, the reality of the monetarists controlling the system, those fools who believed it was free money are in for a very nasty shock. You get owt for nowt in this world but sadly debtors have not learned that lesson. ;)

how long before a culture of risk averse conservative savers has been cultivated ? 2 years 7 years or 10 years. the pendulum has reached its highest point and the momentum of the Hawks is now building.

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We are entering an era of CBs heading towards their historical neutral rates. The fish are well and truly hooked and the party is over. The UK rates at 6% will teach the fools a lesson and no matter how many suffer, the reality of the monetarists controlling the system, those fools who believed it was free money are in for a very nasty shock. You get owt for nowt in this world but sadly debtors have not learned that lesson. ;)

Nice stuff CTT, Worthy of the Great WC.

WC Quotes

"This is not the end."

"This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning." Speech given at the Lord Mayor's Luncheon, Mansion House, London, November 10, 1942.

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Guest Bart of Darkness
Right now I'll say MPC - 5.00% and FED - 5.50% by year end.

From the current perspective, that seems about right.

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I think people tend to overestimate the impact of an IR rise. I've been extending a mortgage deal this week and noticed that the blurb warned that a 1% rise in IR will mean £22 more per month I'll have to pay.

I'd prefer to have that £22 in my pocket but it really isn't the end of the world. Personally (and I realise this isn't the same for everyone), I could absorb a much higher rate than this, as could/would most people.

If I have it right, the bear's belief is that a hike in IR will have a calamitous effect on mortgages, leading to wholesale repossessions and a plummet in prices. Hmmm. Well, a huge hike on current rates might lead us in that direction, but the way people here are excitedly waiting for news of 0.25% here and there --- LOL!

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Well, a huge hike on current rates might lead us in that direction, but the way people here are excitedly waiting for news of 0.25% here and there --- LOL!

You are forgetting about the effect that the forthcoming recession will have on rising Unemployment and repossessions and it's effect on the housing market, i.e. forced sellers.

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I think people tend to overestimate the impact of an IR rise. I've been extending a mortgage deal this week and noticed that the blurb warned that a 1% rise in IR will mean £22 more per month I'll have to pay.

Yes, and if you 'extended a mortgage deal' by such a relatively small amount with a partner, that would only be £11 a month! Quick, lets all go and buy a house right now. :rolleyes:

A £1% rise would equate to about £150 more a month for someone buying the average house.

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I think people tend to overestimate the impact of an IR rise. I've been extending a mortgage deal this week and noticed that the blurb warned that a 1% rise in IR will mean £22 more per month I'll have to pay.

Could you remind us which Bank or EA you work for? :rolleyes:

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If I have it right, the bear's belief is that a hike in IR will have a calamitous effect on mortgages, leading to wholesale repossessions and a plummet in prices. Hmmm. Well, a huge hike on current rates might lead us in that direction, but the way people here are excitedly waiting for news of 0.25% here and there --- LOL!

The last 0.25% hike started an HPC that was only averted by quickly lowering by 0.25%. IMO, 10x salary mortgages (aka unsustainably huge bank loans) result in IR hypersensitivity. "Market Sentimet" = The belief that we are in a new paradigm of low interest rates. As others have already said, the BoE experimentally tested the rate needed to correct this false sentiment and start an HPC. The experiment showed that last time 0.25% was all that was needed. Will it be different this time?

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I think people tend to overestimate the impact of an IR rise. I've been extending a mortgage deal this week and noticed that the blurb warned that a 1% rise in IR will mean £22 more per month I'll have to pay.

I'd prefer to have that £22 in my pocket but it really isn't the end of the world. Personally (and I realise this isn't the same for everyone), I could absorb a much higher rate than this, as could/would most people.

If I have it right, the bear's belief is that a hike in IR will have a calamitous effect on mortgages, leading to wholesale repossessions and a plummet in prices. Hmmm. Well, a huge hike on current rates might lead us in that direction, but the way people here are excitedly waiting for news of 0.25% here and there --- LOL!

The fact that people (not just people on here) are WORRIED about just a 0.25% rise shows just how REALLY FRAGILE the economy is.

The base rate move in 2004 from 3.5% to 4.75% killed the property market stone dead in my area (which was already characterized by very high prices and massive mortgages on lots of the property). The rest of the country still rose - distorting the overall view of the market and allowing the VIs to claim prices were still rising and everything was fine.

The fall from 4.75% to 4.5% last Autumn signalled to a lot of people 'whew, nothing to worry about, reached the top of the cycle, borrowing is going to stay cheap, let the party continue'.

IF they move to 5% it will change sentiment again (which is the main driver of the property market) and you will, at last, get some house price falls. I remain to be convinced they are going to go up again.

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The UK has continued to maintain its traditional IR premium over much of the last years and they never fell to the extremely low levels seen in the Euro area, Japan or the US. The pound remains strong, perhaps overly so and is still in effect a petrocurrency. We shall begin to see slower growth in the rest of the world as their IRs rise.

None of this points to a sharp rise in UK interest rates, perhaps a moderate tick up or two, maybe to 5%, which will probably be the peak of the next cycle. Equally, US IRs will top out soon.

I'm not relying on IR rises for an HPC, much as I'd like to see one.

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I think people tend to overestimate the impact of an IR rise. I've been extending a mortgage deal this week and noticed that the blurb warned that a 1% rise in IR will mean £22 more per month I'll have to pay.

I'd prefer to have that £22 in my pocket but it really isn't the end of the world. Personally (and I realise this isn't the same for everyone), I could absorb a much higher rate than this, as could/would most people.

If I have it right, the Bear's belief is that a hike in IR will have a calamitous effect on mortgages, leading to wholesale repossessions and a plummet in prices. Hmmm. Well, a huge hike on current rates might lead us in that direction, but the way people here are excitedly waiting for news of 0.25% here and there --- LOL!

I agree on the whole. However, a 0.25% increase makes the already uncompetitive yield from residential property almost non existent. Also, mortgage companies pass slightly more than the base rate increase to their BTL customers. Seeing as BTL has been in in competition with FTB for the past five years there will be much bailing out as these businesses no longer make money, combined with tighter monetary policy, downward pressure on prices.

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The point is not just the impact of a 0.25% hike on your next door neighbour's mortgage. Rates are being hiked everywhere. Japan in particular has a long way to go to normalise it's rates. This is the beginning of the end of easy money. Easy money has fuelled rampant speculation on the part of everyone from the wealthy Russian oligarchs to small time day traders. London and the UK will see large falls when the international investor pulls out of UK property.

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Guest

The fact that people (not just people on here) are WORRIED about just a 0.25% rise shows just how REALLY FRAGILE the economy is.

The base rate move in 2004 from 3.5% to 4.75% killed the property market stone dead in my area (which was already characterized by very high prices and massive mortgages on lots of the property). The rest of the country still rose - distorting the overall view of the market and allowing the VIs to claim prices were still rising and everything was fine.

The fall from 4.75% to 4.5% last Autumn signalled to a lot of people 'whew, nothing to worry about, reached the top of the cycle, borrowing is going to stay cheap, let the party continue'.

IF they move to 5% it will change sentiment again (which is the main driver of the property market) and you will, at last, get some house price falls. I remain to be convinced they are going to go up again.

Good to see you back to your old self, Marina.

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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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