Wednesday, Jan 14, 2015

Whilst people bet on the next rate rise, others are cashing in on rate cuts

Mortgage Introducer: Nationwide cuts 10-year fixes (Again)

Sweet, I save another £20 a month, after saving £88 a month on the mortgage last month. Second re-mortgaging since October. Don't you love these zero fee, no early repayment charge tracker loans?! Never did my rent ever fall, not once.

Posted by libertas @ 12:12 AM (16250 views)
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19 Comments

1. libertas said...

Overnight, 2yr bonds fell to 0.38%. As said, once they fall much below 0.25%, and sustain it, with inflation at 0.5% (expected to be 0.3% next month), BOE now need a "crisis" or something like that to show that their next cut to 0.25% was due to "situations beyond their control". I wonder what the crisis will be, and whether it will be real, engineered or just a publicity stunt?

Or maybe, the new narrative is simply that the interest rate cut is #longtermeconomicplanworking - better than expected.

And so we enter the new election with a Goldilock economy?

Clearly, a strong Tory win, but did they do it?

Austerity is starting to look pointless now given that government will soon be receiving cash for deficit spending and national debt via negative rates!!

Wednesday, January 14, 2015 07:17AM Report Comment
 

2. taffee said...

The only reason they would take this risk is lenders are selling the default risk elsewhere to hedge their
Bets

Otherwise it makes no sense with rate rises clearly very possible

Good luck people miss payments in the future....Good luck with forebearance

Wednesday, January 14, 2015 07:30AM Report Comment
 

3. libertas said...

Taffee, they are not taking a risk. Wholesale interest rates are plummeting, and competitive forces are forcing lenders to pass on the savings.

They all KNOW FULL WELL that BOE's next move is down in rates, but play with the narrative to sucker more folk into expensive long term fixed rates.

Wednesday, January 14, 2015 07:57AM Report Comment
 

4. hpwatcher said...

Another day, more of the same old boasting from Libby, must think he's a genius by now......


Once it's clear that low / negative interest rates are simply not providing any sort of recovery, the only option will be to raise them - that may actually do a lot more, as it's a more effective way of getting money into the economy.

Wednesday, January 14, 2015 08:46AM Report Comment
 

5. khards said...

I wonder what the Boomers pension annuities are looking like?

Wednesday, January 14, 2015 09:07AM Report Comment
 

6. hpwatcher said...

I wonder what the Boomers pension annuities are looking like?

And if they choose to cash em' in any major way, they will be hit for CGT.

Wednesday, January 14, 2015 09:09AM Report Comment
 

7. khards said...

Can't say i'm going to lose any sleep over pensions entitlements being less than what they promised themselves. The only thing that worries me is good companies shovelling profits in to keeps schemes alive, but then I guess new companies will spring up and undercut these dinosaurs with massive unfunded pension schemes (Tesco).

Wednesday, January 14, 2015 09:11AM Report Comment
 

8. p. doff said...

@5 ... I wonder what the Boomers pension annuities are looking like?

My pension is partly made up from interest on capital. Some of it invested longer term and getting about 4% but some in cash currently getting about 1.5% (variable). I am definitely feeling the squeeze now. If rates get any lower I'll have to consider joining the BTL brigade!

P. Doff boomer.

Wednesday, January 14, 2015 10:29AM Report Comment
 

9. khards said...

Have you thought about rate setter or Zopa, you will get a better return than 1.5%, but it's not instant access however you receive your capital back monthly over the term so it may be useful if you are living off and spending your savings. Is there much point preserving capital in retirement? I guess if your'e 65 you will want to spend, spend spend but by the time you reach 75/80 your unlikely to be able to and all you will need is a TV license and money for heating & cups of tea.
Most pensioners are in denial about ageing and believe that they will continue to be healthy and tomorrow will be like yesterday. Hence they want to preserve capital.

Wednesday, January 14, 2015 11:18AM Report Comment
 

10. britishblue said...

The almost unbelievable has happened, which is after unleashing millions of pounds into the financial systems over the world, inflation is getting lower and lower across the world. If house prices were related totally to interest payments then in some places in Europe, where the interest rate is down to 0% or a minus, then there would be no reason why a 500k house didn't sell for a million or 2 million, etc. I am wondering if there is any historical inflection points on inflation, where were very low or deflation kicks in, people with non liquid assets like housing try an divest into more liquid forms?

Wednesday, January 14, 2015 02:02PM Report Comment
 

11. hpwatcher said...

The almost unbelievable has happened, which is after unleashing millions of pounds into the financial systems over the world, inflation is getting lower and lower across the world.

The money is sitting in banks; most of which will never hit the market. This is due to requirements on banks to hold money, in case of financial crisis.

It's not normal times, and it definitely isn't going to well end for anyone either.

Wednesday, January 14, 2015 02:22PM Report Comment
 

12. taffee said...

The only real example in recent history is what happened after Japan's credit bubble burst..try google it

People excluded from credit saved for stuff they didn't need only to find they did without it while they saved
And also it had gone down in price so they kept saving

It's a mind set which doesn't fit in with modern banking and debt fuelled economic policy

Traders and banks borrowed money from Japan at near zero rates and gambled it on shares which helped
Full the dotcom boom

Japan debt kept increasing even today they still keep printing and kids left to country and population
Dropped....Property is still seen as a bad investment over 20 years later

Wednesday, January 14, 2015 02:23PM Report Comment
 

13. Brickit said...

@ 5 khards "I wonder what the Boomers pension annuities are looking like?"

Is it Baby Boomer Bashing season?

Wednesday, January 14, 2015 04:09PM Report Comment
 

14. clockslinger said...

Japan and Japanese houses! It is a bit of a feature on this site; using Japan as a model of what will happen here is a sweeping generalisation that doesn't get into the details. Don't rely on it! Japanese houses are like those built by the first two little pigs. It would be a rare Japanese person who lived in a house built in 1890 or 1900 or even 1950. Land prices increased rapidly, true, but really insane levels only applied in certain parts of central Tokyo and in those locations, to get a decent amount of space, you will still pay something approaching London prices. Check out the websites for japanese property; say a reasonably sized attractive apartment in Ebisu.
In the Japanese equivalent of East Bumfuck(probably 東バんファク) things are certainly cheap, but then I go home to the north of England and it is just as cheap there. Check out Redcar and Middlesboro and compare with Saitama or Gunma.

Wednesday, January 14, 2015 07:23PM Report Comment
 

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16. libertas said...

Britain IS NOT Japan, for the simple reason that UK population levels are booming. Japan is having a similar financial situation BUT a collapsing population, as are many European countries. We are one with Japan in some ways, but as U2 put it, we are not the same.

Wednesday, January 14, 2015 09:39PM Report Comment
 

17. taffee said...

Of course it's not EXACTLY the same but it had a huge credit bubble that burst and despite props and money
Printing they had huge asset price deflation

Some prime London is comparable to insane prices in Tokyo late 80:-/early 90s

Thursday, January 15, 2015 06:44AM Report Comment
 

18. hpwatcher said...

Of course it's not EXACTLY the same but it had a huge credit bubble that burst and despite props and money
Printing they had huge asset price deflation

Some prime London is comparable to insane prices in Tokyo late 80:-/early 90s


Not so much population that did it for Japan, just the cheaper and more competitive markets of China, Korea, India and Russia opening up. Simply put, it's cheaper to live in those areas, living costs are rather cheaper so wages can be lower. Japan had better standards of living and a higher cost of living too. Simply beyond it's means to pay for.

Same as in the UK. Govt are trying to cushion the drops, but the downward trend is very clear. The dropping cost of oil, is the final nail in the coffin. That's kept UK afloat for decades, and now looks like it might be coming to an end.

In the future money will be very, very tight for UK government, which will could limit their ability to support UK house prices.

Thursday, January 15, 2015 09:43AM Report Comment
 

19. Nicyg200 said...

Our credit bubble burst about 8 years ago. When did Japan's hoping start deflating after there bubble burst?

Thursday, January 15, 2015 11:12PM Report Comment
 

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