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Word on the street article in the Telegraph

...the market is already pricing in another increase in interest rates, at least beyond the 5.75 per cent the Bank of England lifted them to last week. This means most mortgage providers have already withdrawn their cheaper deals. Meanwhile, it's possible to get a floating rate deal which is, currently, well below the fixed rate plans.

... I suspect 5.75 per cent could actually end up being the peak for UK borrowing costs. And if the Bank raises rates to 6 per cent or - God forbid - higher still, it is likely to have to start cutting them back again quickly, perhaps within a year.

The reason is that the housing market is likely to run into a brick wall before long. Cash-strapped families simply can't justify paying so much any more. We recently published our Daily Telegraph/Lombard Street Research housing affordability index, and it showed that houses are the most overpriced in 16 years.

Furthermore, the experts at Lombard Street Research, who have one of the best records out there on the housing market, now think that prices will flat-line from the end of the year, with property inflation amounting to just zero per cent for at least a couple of years - if not worse.

This is likely to cause consumer spending to drop dramatically, which in turn could be enough to shock the Bank into cutting rates.

This article suggests taking on a floating mortgage rate on the assumption that we are close to peak interest rates. This does make sense so long as the MPC and the oil cartels are going to oblige Mr Conway. He's painting a pretty grim picture for housing, which is realistic, but I'm not certain about interest rates being cut so quickly. Anyone would think that we've hit 8%. The ship hasn't even reached the iceberg yet and it seems that the lifeboats and coastguard are already in the water! :lol:

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A whole article predicting bank of england interest rates with vaguley a mention of inflation (only house price inflation, or lack thereof), incredible.

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Word on the street article in the Telegraph

... I suspect 5.75 per cent could actually end up being the peak for UK borrowing costs. And if the Bank raises rates to 6 per cent or - God forbid - higher still, it is likely to have to start cutting them back again quickly, perhaps within a year.

What the headgehog has god to do wih interest rates...

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wishful thinking is my opinion - maintaining sky high house prices is not within the BoEs remit ( :lol: )

5.75% is the peak :lol: was this article written by nohpc

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wishful thinking is my opinion - maintaining sky high house prices is not within the BoEs remit ( :lol: )

5.75% is the peak :lol: was this article written by nohpc

IIRC this guy has just bought a place. He seems to have been bearish for a long while and then lost his conviction. He is honest though but I'm not sure his advice is sound.

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What the headgehog has god to do wih interest rates...

Cheap credit has become the religion of the over-indebted western consumer!

It is odd that people seem to forget that interest rate rises are to control inflation. Price inflation is caused by monetary inflation and monetary inflation is running high - therefore much higher interest rates on the way. If someone has taken out a loan larger than they can afford - tough!

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Just how much more debt and useless junk is the British consumer supposed to take on to keep the illusion of a buoyant economy going?

Surely it's time we started facing facts and made real jobs and a real future for each other rather than living in Never Never Land.

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... I suspect 5.75 per cent could actually end up being the peak for UK borrowing costs. And if the Bank raises rates to 6 per cent or - God forbid - higher still, it is likely to have to start cutting them back again quickly, perhaps within a year.

Interest rate markets are already well over 6%, this boys a bit behind the times.

Unless he knows more than the markets, which I doubt.

And 12 months out we're looking at closer to 6.5%.

Throw in Britain's own little sub-prime debacle later this year, and things are going to turn nasty.

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as usual, an article that presumes that house prices have to rise etc. - when will these people learn that for people to be able afford to buy, prices must fall?? - when challenged with this they then wheel out the usual shortage of supply nonsense etc., in which case, why whinge about IRs?

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There's this big assumption out there that interest rates will stop when HPI stops; call it prole pub economics. Recent history does tend to support this conjecture. I have heard many people say 'They won't raise them any further', 'It won't happen' etc. and the BoE have given them reason to believe. :huh:

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The reason is that the housing market is likely to run into a brick wall before long. Cash-strapped families simply can't justify paying so much any more. We recently published our Daily Telegraph/Lombard Street Research housing affordability index, and it showed that houses are the most overpriced in 16 years
.

I think 5.75% is probably the top. Gentle Ben can't move up anymore because of the housing crash and we are only 6 months or so behind the curve in GC2. Once Merv stops hiking watch the pound slide.

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Guest Popalot
IIRC this guy has just bought a place. He seems to have been bearish for a long while and then lost his conviction. He is honest though but I'm not sure his advice is sound.

My thoughts exactly. I suspect he has a materialistic, nesting type wife..... it si usually the reason why sensible men do something against their own better judgement - for peace.......

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Just how much more debt and useless junk is the British consumer supposed to take on to keep the illusion of a buoyant economy going?

Surely it's time we started facing facts and made real jobs and a real future for each other rather than living in Never Never Land.

I agree, but we have had 10 years or so of Gordon's miracle economics and the consequences flowing from that may take a couple of decades or more to recover from. Manufacturing has shrunk to about 12% of GDP and what is left will soon dissappear as the pound makes our exports less competeitive in the global economy where price dictates.

Bottom line: as Merv said, debt is real and house prices are opinion. That opinion is changing and its time to pay back the debt. Gordon's miracle has reached the terminus--all change.

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My thoughts exactly. I suspect he has a materialistic, nesting type wife..... it si usually the reason why sensible men do something against their own better judgement - for peace.......

He has my sympathy there. My wife only has to see a house with a nice kitchen and she wants it.

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The reason is that the housing market is likely to run into a brick wall before long. Cash-strapped families simply can't justify paying so much any more. We recently published our Daily Telegraph/Lombard Street Research housing affordability index, and it showed that houses are the most overpriced in 16 years
.

I think 5.75% is probably the top. Gentle Ben can't move up anymore because of the housing crash and we are only 6 months or so behind the curve in GC2. Once Merv stops hiking watch the pound slide.

I have to disagree. I think there's every chance of a substantial inflationary shock towards the end of this year - rates can and will rise much higher yet!

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Once Merv stops hiking watch the pound slide.

And if that happens, watch inflation take off, because we'll have to import all the Iranian oil, Kenyan carrots, Chinese ipods etc. with devalued pounds. And if inflation takes off, watch IRs do likewise.

Rising commodity prices and taxes are another inflationary factor which the Telegraph article simply doesn't take into account. I agree with all the previous comments - it assumes that HPs are the only driver of inflation and IRs.

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wishful thinking is my opinion - maintaining sky high house prices is not within the BoEs remit ( :lol: )

5.75% is the peak :lol: was this article written by nohpc

Perhaps not, but itt doesn't stop figures within Government and the BoE manufacturing debt bubbles and HPI quite by design.

http://news.sky.com/skynews/article/0,,30400-1256664,00.html

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A whole article predicting bank of england interest rates with vaguley a mention of inflation (only house price inflation, or lack thereof), incredible.

Incredible indeed. Wheat has gone from £85 a tonne a year ago to £115 now, the knock on in the food basket will hurt. Transport costs keep rising- fuel for vehicles, and privatised operating companies pushing prices ever higher on trains etc; taxes keep rising; interest rates pushing up mortgage repayments... it just goes on and on. My wholey unscientific gut feeling is that inflation for Mr & Mrs Average is running at least 8% at the moment.

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The reason is that the housing market is likely to run into a brick wall before long. Cash-strapped families simply can't justify paying so much any more. We recently published our Daily Telegraph/Lombard Street Research housing affordability index, and it showed that houses are the most overpriced in 16 years.

Furthermore, the experts at Lombard Street Research, who have one of the best records out there on the housing market, now think that prices will flat-line from the end of the year, with property inflation amounting to just zero per cent for at least a couple of years - if not worse.

I find it amazing that many financial journalists seem to have no grasp of how markets naturally work. They present the case of prices falling to a new equilibrium almost as an afterthought, if they mention it at all, to the case where prices remain static. Markets tend to take the path of least resistance regardless of what anybody does and the more the government or the VIs resist it, the faster it gets there

Best,

L

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Eric Conway is a tool, nothing more to say.

Mr Conway is the Telegraph's Economics Editor....Well on the basis of this drivel I could do his job & I got an "E" in A level Economics.

The man is a buffoon!!

The reason he belives that intrest rates will peak where they are now, is that mortage holders can't stretch any further.

Well, I got sour news for you buddy.

The interest rates are going up to combat inflation (fiddled tho' it is).

And I don't see that coming down soon, its GLOBALLY on the up.

Food Prices - UP!

Oil Prices - UP!

China's economy flying away = Inflation - UP!

But because middle England is bleating, like a bunch of scrapey infested livestock. Well, obviously the rates will peak and then be cut.

Just like the cut in 2005, that really worked didn't it.

WHAT A PLANK !!!!!

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recent bis (central bank of central banks) reports have signalled that money supply is going to slow down ie higher interest rates...

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