Saturday, October 7, 2017
BoE is limited
"The cost of taking out a fixed-rate mortgage has started to rise, even though the Bank of England has kept base rates at a record low." Exactly! Interest on savings comes from the opposing debt, BoE has issued QE which is mainly interest free hence the UK banks have more in deposits than they do in debts i.e. the interest paid by the debtors cannot cover the interest earned by the savers because they don't match up anymore. Going forward the BoE can tighten by increasing capital requirements, any regulation that reduces credit expansion, but they can't meaning fully increase interest rates because no way rates can rise for savers unless QE is withdrawn. So more QE for deflation, micro-management of credit availability for inflation.