Saturday, August 11, 2007

The property party is well and truely over and now it’s a long walk home in the dark with a hangover

Why yet another rise in interest rates will slaughter us

"Share prices in freefall, slaughter in Surrey, flood damage costed in the billions, a slowing housing market and a subdued high street. And yet amid all this gloom there is talk of a sixth interest rate rise in 13 months. Is there anyone else out there who thinks that all this talk of rates soaring to 6 per cent - or beyond - is pretty scary?"

Posted by catflap @ 11:40 PM (485 views)
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5 thoughts on “The property party is well and truely over and now it’s a long walk home in the dark with a hangover

  • This article makes me laugh.

    6% interest rates will slaughter us ? What about when we had 15% rates barely 15 years ago? I lived through that and am better for it. I am sorry but 6 or 7% is nothing compared to then !! Ofcourse tighter fiscal policy hurts just like a medicine is sometimes not nice to taste. The reality is the british population have borrowed up to the hilt and beyond what is sensible. ” Go one ! you deserve 3 foreign holidays and blowing massive hole in the O-zone layer while youre at it !! ”
    Silly levels of gearing, borrowing – mortgages at over 5 times salary – the party had to end sooner or later, get real !! Also i guess the goverment has to take some blame for leting M4 money supply grow the way it has in the last 3 years

    As for house prices, what this site is al about, Anyone who has sense and an understanding social cohesion knows that house price inflation beyond the long term norm is not a good thing. Many of us have children, what are they going to do ? I say this having made alot of money myself on my main residence over the last 12 years. I would gladly take a 30%+ correction if i knew it would make life easier for my children and the younger generation who are in a terrible situation at present.

    As for the equity markets, once again corrections are ” part and parcel” of the markets and gives buying opportunities for those who don’t get phased by these.
    Over the medium /longer term equity markets recover and create wealth

    The weather this year has been bad for many retailers no doubt, and I have a lot of sympathy for victims of flooding but less so for those without Insurance
    without insurance cover, less so.

    In summary, Sorry Robert Watts ( article writer ) another rate rise will NOT slaughter us and youre clearly playing the VIs tune. After many years of debt growth and rising inflation this fiscal policy instrument is the most effective

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  • waitingfor hpc says:

    even the man in the street recognses that the CPI is fudged. We all see and buy goods where inflation is much nearer 7%.

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  • david20040_0 says:

    But if CPI doesn’t go up then the BoE won’t raise interest rates.

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  • bidin'matime says:

    David – they wont need to – the banks are already pricing borrowing at market rates, leaving the BoE behind. Maybe once, in the days when all money was generated by central banks, the BoE might have been able to ‘control’ the price of money, but not any more – the base rate is like RRP – the true price is set by the markets.

    And, of course, the other side of the pincer is the availability of credit – no matter how cheap you make money, if the banks fear bad debts then they will restrict their lending, so fear of higher rates in the future can be as effective as higher rates in reducing the amount of money in the system, so being as effective in curbing spending as if rates had been raised.

    There really is no way out now.

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  • True,

    In May, I understood the markets were pricing in IR’s at 6.25% 2 years hence. That was before the BOE didn’t act quickly enough and stored up even more inflationary problems…

    7.5 % by May next year…

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