Tuesday, Dec 22, 2015

What happens when plunging Brent Crude sends rates negative?

Market Oracle: UK Mortgage Interest Rates Recap of 2015

The year of 2015 will been seen by many as the year of the mortgage: competition increased until it reached boiling point, with all sectors of the market becoming embroiled in a fight for borrowers. As a result, rates plummeted until they eventually reached new all-time lows.
Indeed, calculations from Moneyfacts.co.uk based on the average two-year fixed rate mortgage show that a new borrower would now be £805.44* a year better off than they were a year ago.

Posted by libertas @ 10:57 PM (7506 views)
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13 Comments

1. libertas said...

GDP just downgraded, interest rate rise further pushed back.

Soon they will speak of NIRP.

Wednesday, December 23, 2015 11:50AM Report Comment
 

2. jack c said...

Assuming they do move to zero or near zero interest rates in the UK what major difference will it make?

Wednesday, December 23, 2015 12:10PM Report Comment
 

3. libertas said...

I would save 4k a year if rates went to zero. This would significantly shift yield patterns for investors and affordability for buyers, causing prices to rise.

Wednesday, December 23, 2015 07:53PM Report Comment
 

4. icarus said...

That's a saving of 333 a month on a mortgage of 931 a month (previous thread) - all for a tiny drop in base rate (assuming mortgage rate dropped in line with base rate)????

Wednesday, December 23, 2015 09:34PM Report Comment
 

5. mountain goat said...

All very delusional just a week after IR started rising again in the US, the economic cycle we are most aligned with.

Unfortunately those who extended themselves too much will lose their homes when IR rise. A stubborn confirmation bias won't help in facing this pain.

Wednesday, December 23, 2015 10:00PM Report Comment
 

6. jack c said...

Libertas, unless I'm mistaken you elected to take a fixed rate mortgage? in which case a drop in interest rates isn't what you were anticipating nor would you save any money on a monthly basis. Without wishing to be rude your posts are often littered with errors and inconsistencies.

Thursday, December 24, 2015 09:33AM Report Comment
 

7. vinrouge said...

Simple - the government will introduce a tax to ensure negative rates do not reach the man in the street.

Thursday, December 24, 2015 07:23PM Report Comment
 

8. libertas said...

Jack. I have a variable rate to benefit from falling rates, but no early repayments so I can overpay and jump onto a fixed rate at the drop of a hat if situations changed and we now own 40% of the property, up from 30% a year ago due to prices rising and us over-paying so can fix at very good rates. Without wishing to be rude, you are being a little forgetful of late.

Friday, December 25, 2015 05:24PM Report Comment
 

9. libertas said...

vinrouge, that is not possible. The tax you refer to would be deflationary in the long run, leading to further interest rate collapse. In reality, if rates go negative, government make cash on the national debt and will be forced to cut taxes or spend to deal with excess cash reserves.

Friday, December 25, 2015 07:33PM Report Comment
 

10. libertas said...

vinrouge, that is not possible. The tax you refer to would be deflationary in the long run, leading to further interest rate collapse. In reality, if rates go negative, government make cash on the national debt and will be forced to cut taxes or spend to deal with excess cash reserves.

Friday, December 25, 2015 07:33PM Report Comment
 

11. icarus said...

"Liabilities are the new assets".

Sunday, December 27, 2015 03:11PM Report Comment
 

12. mister ed said...

@11

Stands to reason, dunnit.

What we need to do is get more in debt and then make interest rates negative, and then we'll all be rich.

Why don't regular economists come up with these ideas when it's obvious the solution is so simple?

Makes you want to weep.

I had an estate agent from Enfield in the back of the cab once.

Monday, December 28, 2015 03:15PM Report Comment
 

13. libertas said...

Icarus, Gilts are technically an asset class. They are underwritten by BOE and are a statutory requirement for baking, insurance provision, etc. Pension funds are required to hold a number of them. They are something of a protection racket in a way, but one that is tolerated due to BOE's lender of last resort function. To pay a fee rather than get income for buying this indulgence will not dissuade institutional investors from purchasing them.

Thursday, December 31, 2015 10:42AM Report Comment
 

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