Monday, Oct 30, 2006

Relentless...How about a 0.5% IR rise!!!

Reuters: Mortgage approvals highest in 2-1/2 yrs

Mortgage approvals hit their highest level in 2-1/2 years in September in another sign this summer's surprise interest rate hike has done little to cool the housing market and paving the way for a hike next week.

The Bank of England said on Monday approvals for home loans stood at 126,000 last month, up from 120,000 in August and the highest since February 2004.

Posted by tyrellcorporation @ 04:34 PM (595 views)
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1. harold said...

Indeed, how about a 0.5% IR rise? Well it's a good idea as we have discussed on this site already, alas the BoE are not serious about inflation, so .25 is what it will be. M2 is totally out of hand, but the gatekeepers sleep on.

Monday, October 30, 2006 05:58PM Report Comment

2. tyrellcorporation said...

I remember back in the 80's IR jumps of 1% were routine. I know things are slightly different now with BoE 'independence' but where have the balls gone? Why has the 0.25% movement become standard?

Monday, October 30, 2006 06:08PM Report Comment

3. paul said...

"but where have the balls gone? Why has the 0.25% movement become standard?"

Central bankers own property too yer know!

They have enough "sense" not to crap where they feather their beds. Interestingly, this has happened before with the introduction and repeal of the Corn Laws (1815-1846):

They were set up to protect ministers land interests (by maintaining a high price for corn) at the expense of the population. The laws were repealed eventually after being exposed for the self-interest schemes that they were.

How little we appear to have learned over the years.

Monday, October 30, 2006 06:33PM Report Comment

4. sirgoogle said...

.25 it will be on Nov, not .5 or 1%, as the MPC are playing the "boil-the-frog" tactic in the hope that the public will not change their sentiment about the marvellous property investments that everyone (except the readers of this site) has made. They are desperate not to remove the last pillar of the economy (the Housing market). If the public do realise the game that is being played then most probably a lot more than the HPC will come down when everyone who can sell will.

Monday, October 30, 2006 08:51PM Report Comment

5. markd said...

Where is Uncle Tom?

Monday, October 30, 2006 08:55PM Report Comment

6. tyrellcorporation said...

He's probably bought a luxury pad in Chelsea and is keeping a low profile! ;)

Monday, October 30, 2006 09:07PM Report Comment

7. Sam said...

I think that they wouldn't dare put them up by .5. esp since it so close to christmas.

Monday, October 30, 2006 10:01PM Report Comment

8. Nohpc said...

I disagree that an interest rate hike of 0.5% is a good idea (unless the idea is to provoke a house price crash of course which it is not).
The reason why they are changing rates at a 0.25% incremement is because the british economy, house price index plus other things I am sure are extremely sensitive to rate changes in the current climate. The bank will raise interest rates as high as they need to go but the gently gently approach seems to be working extremely well so far.

Monday, October 30, 2006 10:58PM Report Comment

9. tyrellcorporation said...

NoHPC, the gently, gently approach has had little or no effect so far at dampening demand for housing or inflationary pressures... is this what you mean by 'working extremely well so far'?

Tuesday, October 31, 2006 08:09AM Report Comment

10. Nohpc said...

Funny how you lot say it's all VI when people say there is increased demand for houses and house price inflation is increasing but when somebody says they are high and interest rates should be raised as a result you suddenly change your mind and agree with the VI stuff. Make up your minds please.

Inflationary pressures will be dampened with one or at the very most two more interest rate rises.

Tuesday, October 31, 2006 09:20AM Report Comment

11. monty said...

From the BoE website -

"A target of 2% does not mean that inflation will be held at this rate constantly. That would be neither possible nor desirable. Interest rates would be changing all the time, and by large amounts, causing unnecessary uncertainty and volatility in the economy."


"We cannot be precise about the size or timing of all these channels. But the maximum effect on output is estimated to take up to about one year. And the maximum impact of a change in interest rates on consumer price inflation takes up to about two years. So interest rates have to be set based on judgments about what inflation might be – the outlook over the coming few years – not what it is today."

Tuesday, October 31, 2006 09:31AM Report Comment

12. devil's advocate said...

Markd quote "Where is Uncle Tom?"

Was going to ask exactly the same thing, the problem with this site is that when people have a change of heart they just disappear from the site. Has her become a buyer?

I remember discussing in May about buying a property and they talked me into holding out for a while but setting a date when I would take the plunge. Pretty sure it was he that said he would wait and see till October, either him or another of the regular posters.

A few regulars seem to have gone!!

Tuesday, October 31, 2006 09:43AM Report Comment

13. harold said...

Monty, inflation well over target today = they've set IRs too low over the past few years (i.e., screwed up by their own reckoning) = cheap money = bubble. Well done MPC.

Of course, if they had set IRs too high we might have deflation and the MPC members would be swinging from lampposts. However, in the words of Ludwig Von Mises, "There is no way to avoid the collapse of a boom brought on by credit expansion." Either way, sooner or later this bunch will hang.

Tuesday, October 31, 2006 09:53AM Report Comment

14. harold said...

DA, hmmm, wonder if you'll skulk off when it goes t*ts up?

P.S. If you are really taking life-changing advice from a blog, ANY BLOG, then you need help.

Tuesday, October 31, 2006 09:59AM Report Comment

15. monty said...

Yes harold, that's exactly what I've said before on this forum. Calling for an 0.5% or 1% IR increase because today's CPI inflation is over 2% is pointless. IR is an incredibly blunt tool with which to attempt to manipulate an economy. There is a lag effect. As any pilot will tell you, "never chase the needle."

Tuesday, October 31, 2006 10:09AM Report Comment

16. Nohpc said...

Harold your arguement would hold apart from one small flat. There is no bubble. And please don't quote people like Ludwig Von Mises. And of course DA won't skulk off if it goes t*ts up but any money he saves if it does do that will only be in keeping with the money he has lost out on in the past by listening to people like you. And about your P.S coment about needing help. crp again. People come here for advice on the property market. Little do they realise that the advice is dished out by ill informed sold to renters (possibly) like yourself.

Tuesday, October 31, 2006 10:12AM Report Comment

17. george monsoon said...

devil's advocate said..."A few regulars seem to have gone!!"

Not me pal, I have nowhere to go until I can afford...

Tuesday, October 31, 2006 10:40AM Report Comment

18. devil's advocate said...

Harold, I won't be skulking anywhere, in fact i'll happily buy everyone a beer if theres a HPC. And, are you telling me your opinions are not changed by the debate that goes on on this site.
Personally I had a belief that a HPC would happen given the economic indicators, this site and some of the people have over the past years reinforced that belief. (you'll see I say would happen and not will, have no idea anymore). Nad it not just believing what you read but through debate around the facts.

So having said that I don't think I need help. A lottery win perhaps but not help.

Doesn't change the fact that Uncle Tom has jumped ship.

Tuesday, October 31, 2006 01:09PM Report Comment

19. bidin'matime said...

Nor me - I've been busy moving into a really nice house - loads of room, peace and quiet, sea views from the balcony - for less rent than the net interest on the sale proceeds of my last house, which was right on the main road on the way out of town!

I'm still.... bidin'matime!

Tuesday, October 31, 2006 01:16PM Report Comment

20. devil's advocate said...

Sounds good, I live in Greenwich and rents are rising here. Far too many immigrants coming into London at the moment pushing up the rents. Very few properties on the market simply because landlords don't need to sell and everyone else can't afford to move up the ladder.

The government needed to apply a direct tax on BTL gains (over and above CGT) that would have stopped it.

Tuesday, October 31, 2006 01:20PM Report Comment

21. tyrellcorporation said...

Not much chance of that when most politicians have extensive property portfolios!

Tuesday, October 31, 2006 02:05PM Report Comment

22. inbreda said...

Just a note of statistical caution...

mortgage approvals could include MEWing as people become more and more desperate.

Mortgage approvals have hit a 2.5 year high FOR NEW HOUSING - i.e. for properties that need to be shifted as the owners gain no benefit from holding an empty house and need the cash flow. These are the first people to become desperate and to start offering holidays/cars or reductions on their properties. Therefore the last few mugs in the game will be buying new houses that - to all intents and purposes - are cheaper than their second-hand alternatives.

I'm not renowned for being a positive person, but I see only encouragement in all of the VI spin currently. Desperation to find VI statistics to support their viewpoint are becoming more and more perverted.

I honestly think that we'll all be smiling by mid 2007.

Except for NoHPC

Tuesday, October 31, 2006 02:09PM Report Comment

23. harold said...

DA, yes, no man is an island and the comments here are opinion forming - but not as much as the articles to which they refer (sorry guys).

As for UT, it is a shame he is not contributing at present as his comments were usually to the point and savvy. But that's the nature of blogs, they're a 'floating' community - people come and go for no particular reason.

Tuesday, October 31, 2006 03:07PM Report Comment

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