Thursday, Aug 03, 2006

BoE raises interest rate!!

Bank of England: Bank of England Raises Bank Rate by 0.25 Percentage Points to 4.75%

The Bank of England's Monetary Policy Committee today voted to raise the official Bank rate paid on commercial bank reserves by 0.25 percentage points to 4.75%.

Posted by webmaster @ 12:02 PM (529 views)
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40 Comments

1. paul said...

The BBC has egg on it's face.

Thursday, August 3, 2006 12:07PM Report Comment
 

2. Surfgatinho said...

Whaaaaa Hoooo!
Lets hope its just the start

Thursday, August 3, 2006 12:08PM Report Comment
 

3. denzil said...

Tom if you were a batsman you would be getting a standing ovation from the crowd.

This month was a tough call.

Thursday, August 3, 2006 12:09PM Report Comment
 

4. harold said...

At last a step in the right direction - the markets had been expecting it.

Thursday, August 3, 2006 12:09PM Report Comment
 

5. Time To Raise Petrol Prices said...

Burn baby, burn.

Thursday, August 3, 2006 12:11PM Report Comment
 

6. Thesqueeze said...

that .25 is going to feel like .5 for a lot of people with the huge LTV's......

Thursday, August 3, 2006 12:13PM Report Comment
 

7. autopilotengage said...

Tom, can i just say, you stuck with August all year and then buckled at the last minute, in "University Challenge" style, i'll be accepting your first answer!!

Thursday, August 3, 2006 12:20PM Report Comment
 

8. Manjip said...

Tom for MPC membership, but I don't think Gordon will go for it.

Thursday, August 3, 2006 12:24PM Report Comment
 

9. harold said...

UT, yes that's right you had been predicting August for a long time - the vote split of the MPC will be interesting.

Thursday, August 3, 2006 12:25PM Report Comment
 

10. tyrellcorporation said...

Yep, it'll be interesting to see which way the new guys in the MPC swung on the vote... This may give an indication on future decisions

Thursday, August 3, 2006 12:37PM Report Comment
 

11. uncle tom said...

Sackcloth - ashes - woe....

There were no advance hints, no leading speeches, no split vote last month, dovish minutes...

And the city was not expecting it.

Although it was the right decision, I can only think that something must have rattled them badly at the eleventh hour, and that something was probably the inflation projections that they had advance sight of..

Oh well - 40 is not a bad innings, I suppose!

Next move? Up probably, and probably before the end of the year - better than evens chance of 5% at year end - higher is not impossible.

Thursday, August 3, 2006 12:40PM Report Comment
 

12. paul said...

This is going to hurt the economy for a while, but the pain is a good thing.

An IR stay of execution would have seemd incongruous though - the ECB has the same inflation target but raised rates a few times already.

Uncle Tom has been remarkably reliable, and like Rosie Ruiz on the home strait, I've claimed a phyrric victory.

"Phyrric" is today's word of the day, BTW.

Thursday, August 3, 2006 12:40PM Report Comment
 

13. paul said...

Amusing to see how critical the BBC is being about the deicision. Quoting EEF Director General Martin Temple (don't know who he is either) to bandy around the phrase "Jumping the gun".

Desperate.

Thursday, August 3, 2006 12:45PM Report Comment
 

14. sebastian said...

I just want to say, IN YOUR FACE BBC!!

Thursday, August 3, 2006 12:58PM Report Comment
 

15. uncle chris said...

This may not seem much, but for those who have overstretched themselves, with say a 200,000 mortgage, it's an extra 45 per month - on top of council tax rises, fuel rises, food rises. The question is whether the masses will wake up to the fact that they cannot continue with the lifestyles thay have borrowed so heavily to support.

Thursday, August 3, 2006 01:05PM Report Comment
 

16. denzil said...

paul said:
>>Amusing to see how critical the BBC is being about the deicision. Quoting EEF Director General Martin Temple (don't know who he is either)

I'm surprised they have not got Howard Archer the Global Insight bloke to give his tuppence worth.

Thursday, August 3, 2006 01:09PM Report Comment
 

17. bidin'matime said...

Hallelujah!! I was beginning to sweat on the possibility that the powers that be were planning to ease their inflation targets to buy themselves some more time. Having all ones equity in the building society is not a good idea if inflation takes off

This increase should put the lid on the BTL market I shall look forward to giving more capital gains tax advice as they decide to sell up

And Uncle Tom well done on your past record, but the fact that this one caught you out must be a good sign if it caught you out, it must be a major shock to everyone else the bigger the shock the better.

Thursday, August 3, 2006 01:14PM Report Comment
 

18. Blindleadtheblind said...

A sensible decision if I may say so, and I suspect there is a wiff of panic in the air. Lots of banks raising rates cos they see inflation after telling us for long enough it was dead, and all this while THEY injected new money into the system at a rate that could do nothing other than to cause inflation. This is only the start, the rises will be 50 basis points at a time very soon.

Thursday, August 3, 2006 01:18PM Report Comment
 

19. paul said...

I don't think its a shock at all.

But I would say that.

Thursday, August 3, 2006 01:24PM Report Comment
 

20. bidin'matime said...

Okay - everyone except Paul. But it's the would-be FTBs and BTLs that count in this game and if the shock stops them in their tracks, then we could see the impact very soon.

Thursday, August 3, 2006 01:31PM Report Comment
 

21. inbreda said...

The Guardian are being very 'BBC' about their reporting of this rise:

"The Bank of England today delivered a blow to homeowners .."

"Today's rise could mean trouble for households at a time when debt has reached record levels, with Britain's big banks this week reporting a large increase in bad debts."

"The Centre for Economics and Business Research had earlier urged the Bank to be careful about lifting interest rates given this background."

In my view this is a damn fine reason to have prevented the borrowing binge before it reached proportions where it is such a massive concern - seemingly overriding the threat of inflation. IR rises sooner rather than later seem to be sensible.

Thursday, August 3, 2006 01:35PM Report Comment
 

22. bidin'matime said...

Well I'm lovin' it! With all that extra interest, I might even go looking for a nicer house to rent!

Thursday, August 3, 2006 01:40PM Report Comment
 

23. harold said...

Inbreda, yes the Guardians response is draconian, a .25 increase is hardly the four horsemen of the apocalypse. It just goes to show how critical the debt problem is perceived to be in the UK.

Thursday, August 3, 2006 01:43PM Report Comment
 

24. kpjcomp said...

The poor BBC, what about all these programs like "Under the Hammer", what are they going to replace them with.. ?

Thursday, August 3, 2006 01:45PM Report Comment
 

25. bidin'matime said...

But Harold, perception is reality. What we want is everyone perceiving that things are getting much worse and they will stop buying. I dont care how they get the message.

Thursday, August 3, 2006 01:47PM Report Comment
 

26. Lloyd said...

Lets get things into perspective, 0.25% is hardly a shock! Or is it?
This softly, softly approach is holding the house of cards like sticky back plastic. Cant wait for the crash! This wait is stressing me out!!

Thursday, August 3, 2006 02:16PM Report Comment
 

27. Onlyme said...

" "Under the Hammer", what are they going to replace them with.. ? "

More programmes about individual debt problems, although I do find these quite amusing :)

Thursday, August 3, 2006 02:41PM Report Comment
 

28. The Bald Man said...

This had to happen to maintain confidence in the currency (I realise this is not the direct remit). With inflation raising its head again (whatever thei ndex says) and rates rising internationally I can only believe this is the start of an upward cycle.

Thursday, August 3, 2006 02:47PM Report Comment
 

29. paul said...

This is a clear signal that cheap money is no more. Bidin, you're right this is all to do with perceptions.

Thursday, August 3, 2006 03:04PM Report Comment
 

30. Nnails said...

"The poor BBC, what about all these programs like "Under the Hammer", what are they going to replace them with.. ?"

maybe they will replace it with "Under the Fly over?"

Thursday, August 3, 2006 03:06PM Report Comment
 

31. waitingfor hpc said...

bring it on.. Interest rate should be 5.5% to keep pace with dollar & other currency movements.... and we do have rampant inflation led by fuel and commodities.

Thursday, August 3, 2006 03:20PM Report Comment
 

32. uncle tom said...

The people who will really notice this are the BTL 'portfolio' brigade.

Suppose you have two million pounds of loans outstanding on fifteen BTL's. By neglecting and putting off maintenance (as most newbie landlords seem to do) and managing the properties yourself, you run the show without too much cash input to make up the shortfall between the rent you actually get, and the interest and expenses you have to pay.

This increase will have just spoiled your accounts to the tune of 5000 p.a. -

- and it's only one little hike!

Thursday, August 3, 2006 03:29PM Report Comment
 

33. sirgoogle said...

Yes !

Thursday, August 3, 2006 04:04PM Report Comment
 

34. indiablue19 said...

Had to add kudos for UT. A wonderful run, Unc Tom, you've lost no credibility.

Yes, let's hear it for the BTL crowd. I know several who have made all the classic mistakes, as you say. This is going to be a kick in neck. From where I sit, a lot of BTLers are renting primarily to students and can't adjust to substantially increased costs with substantially increased rents. The government isn't suddenly going to up its investment in bursaries and loans just to cover these amateurs anyway. Not a pretty sight.

Thursday, August 3, 2006 04:13PM Report Comment
 

35. Thesqueeze said...

Remember it is not just mortgages, it is re-mortgages, all that cheap money just got a little bit more expensive. Hopefully another raise before the end of the year?

What about my 100% record! I predicted no raise today, my first ever prediction, and I was wrong by 100%.... not bad, beat that Uncle Tom.

Thursday, August 3, 2006 04:26PM Report Comment
 

36. Ben2014 said...

" "Under the Hammer", what are they going to replace them with.. ? "

A new programme from Kirsty and Phil: "Repossession, Repossession, Repossession"

Thursday, August 3, 2006 04:27PM Report Comment
 

37. John_coller said...

>BTLers are renting primarily to students and can't adjust to substantially increased costs with substantially increased rents.

BTL can't pass the expenses onto renters - the market sets the rental yeald. If a BTL increases the rent the tennants will just move out and it will sit empty.

The real kick in the teeth is yet to come ... when house prices decrease to reflect that they are now less affordable.

Thursday, August 3, 2006 07:00PM Report Comment
 

38. Bubbles. . . said...

Historically house prices have been 3-3.5 times income! This means at an average of 25K average house prices should be under 100K..
Are you frightened out there punters??

Thursday, August 3, 2006 11:22PM Report Comment
 

39. Bubbles. . . said...

Look forward to feasting on the corpses of the undead and as I move out from my mum n dads house only 32 years old!!! I expect my brother who is 40 to sell his house to me for the average 100K it should be. But no escape for mum n dad cos he will move back in with them Plusachange! all things stay the same...! Bonjour les enfants...bureax de change....

Thursday, August 3, 2006 11:26PM Report Comment
 

40. indiablue19 said...

John....
Yes, take your point as well, if the tenants have a choice to simply change locale. Where we live, there are massive numbers of flats -- nearly an entire City full -- let to students of six or eight local Unis and Academys. That's a major industry here and one that keeps prices inflated. And the BTLers, who own most of the buildings either as individuals or as corporations, will simply not be able to absorb their losses by passing on costs to students. Students can only pay what they are granted/loaned for housing expenses -- not much -- and are already stretched with the average shared flat single room going for 350-400 quid a month. If the BTLers start to lose their shirts on related mortgages, I'm sure the government has no plans to make up any difference by funding students more extravagantly. So, I imagine, any BTLer who can't cope will lose their flats and you will see flat prices go through the floor.

Friday, August 4, 2006 12:55AM Report Comment
 

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