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Post by yorkshireman on Mar 25, 2015 13:56:03 GMT
What do you think a 3% base rate would look like in the context of 2015 Britain with regard to equities, p2p, real estate, rents, employment, consumer debt, government debt and treasury bonds including pensioner bonds? Financial Armageddon for consumer debt with a surge in bankruptcies and repossessions.
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Post by davee39 on Mar 25, 2015 15:28:42 GMT
What do you think a 3% base rate would look like in the context of 2015 Britain with regard to equities, p2p, real estate, rents, employment, consumer debt, government debt and treasury bonds including pensioner bonds? Financial Armageddon for consumer debt with a surge in bankruptcies and repossessions. Nonsense. If anything, now is the time to start moving to normal rates while inflation is low and wages are expected to rise. Personal loans are at fixed rates, so no existing borrower would be affected. The majority of mortgages are at fixed rates so adverse effects would be delayed. I am sure everyone who has benefited from low rates has put the extra away just in case. There are too many bleaters, whingers and special pleaders demanding rates stay low. Many of these are demands are from the business sector which has blatantly failed to borrow to invest, but instead have borrowed to displace equity and earn tax benefits. The next recession will be on us in a few years and there are few monetary tools left to mitigate the effects. If the election result is 'none of the above' and we are stuck with a weak minority government just waiting for a minor party to trigger a fresh election I think we can expect to see a fall in Sterling. That is when rates may need to rise.
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Post by batchoy on Mar 25, 2015 15:50:14 GMT
Personal loans are at fixed rates, so no existing borrower would be affected. The majority of mortgages are at fixed rates so adverse effects would be delayed. I am sure everyone who has benefited from low rates has put the extra away just in case. Additionally anyone taking out a mortgage in the last year have had to show that they have sufficient income to cover an increase in interest rate, so the only people who will be at risk will be those who (re)mortgaged between 2009 and April 2014 and did so to the limit of their income.
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mikes1531
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Post by mikes1531 on Mar 25, 2015 16:21:37 GMT
The majority of mortgages are at fixed rates so adverse effects would be delayed. I didn't realise that most mortgages are fixed-rate these days. Does anyone know what the current fixed/variable split is? As for the fixed-rate mortgages, are there statistics indicating when the fixed-rate periods end? I am sure everyone who has benefited from low rates has put the extra away just in case. This certainly would be the prudent approach to take, but I really, really, doubt that a significant number of borrowers actually have done that. 
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sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Mar 25, 2015 17:21:06 GMT
The UK policy has always been to use interest rates to control inflation. With inflation so low they have no reason to increase rates.
The problem is that house prices are not included in the inflation statistics. Now would be a good time to include them. Then the BoE would have a reason to increase rates. It wouldn't last long, because the moment rates rise, house prices would fall, then inflation falls, so rates fall. It's the way to stop a boom-bust economy where house prices determine so much of our lives.
I've never understood why houses prices are not included in the inflation stats. Instead, they include mortgage rates in the stats, which actually has the effect of amplifying the boom-bust scenario, because mortgage rates are tied to interest rates.
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adrianc
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Post by adrianc on Mar 25, 2015 17:52:52 GMT
I've never understood why houses prices are not included in the inflation stats. But which area's house prices? Or the national average, which is pretty unrepresentative of anywhere? At least the rest of the basket used has fairly small national variations.
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sqh
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Post by sqh on Mar 25, 2015 18:28:54 GMT
I've never understood why houses prices are not included in the inflation stats. But which area's house prices? Or the national average, which is pretty unrepresentative of anywhere? At least the rest of the basket used has fairly small national variations. Interest rates are a national statistic, so use the national average. It's the rate of rise that matters, not what they start at. Currently, London is rising faster because rates are held low, keeping the pound weak, and encouraging foreign buyers.
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adrianc
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Post by adrianc on Mar 25, 2015 19:46:22 GMT
It's the rate of rise that matters, not what they start at. Exactly. One corner of the country has huge rises, other swathes have zero rise. Property prices are just too localised to make any sense for a national statistic like inflation.
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Post by yorkshireman on Mar 25, 2015 20:47:35 GMT
Financial Armageddon for consumer debt with a surge in bankruptcies and repossessions. I am sure everyone who has benefited from low rates has put the extra away just in case. I’m tempted to say nonsense to that but I can’t determine whether it is an unbelievably naïve statement or irony.
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Post by batchoy on Mar 25, 2015 20:51:52 GMT
The other issue with including house prices is that houses are not something that the average person purchases on a regular basis and once someone is a home owner they tend to trade up passing the equity released in one property onto the next, finally leaving the whole of the equity to the next generation once the die.
The various indices attempt to measure the change in the cost of living for an average individual thus the baskets include figures to represent the regular costs of renting/owning a property. Just because the value of my house increases tenfold whilst I own it my cost of living in it does not increase by the same amount.
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mikes1531
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Post by mikes1531 on Mar 25, 2015 21:36:59 GMT
I am sure everyone who has benefited from low rates has put the extra away just in case. I’m tempted to say nonsense to that but I can’t determine whether it is an unbelievably naïve statement or irony. I think I'd bet on tongue firmly in cheek!
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Post by Deleted on Mar 25, 2015 21:43:21 GMT
Financial Armageddon for consumer debt with a surge in bankruptcies and repossessions. Nonsense. If anything, now is the time to start moving to normal rates while inflation is low and wages are expected to rise. Personal loans are at fixed rates, so no existing borrower would be affected. The majority of mortgages are at fixed rates so adverse effects would be delayed. I am sure everyone who has benefited from low rates has put the extra away just in case. !!!!!!!!!!!!!!!!!!!There are too many bleaters, whingers and special pleaders demanding rates stay low. Many of these are demands are from the business sector which has blatantly failed to borrow to invest, but instead have borrowed to displace equity and earn tax benefits. The next recession will be on us in a few years and there are few monetary tools left to mitigate the effects. If the election result is 'none of the above' and we are stuck with a weak minority government just waiting for a minor party to trigger a fresh election I think we can expect to see a fall in Sterling. That is when rates may need to rise. I think Yorkshireman was bang on the money. Now imagine 8% or 12%. Impossible! I hear you cry, but the 1980s aren't so long gone. The past six years or more have been completely unprecedented. There's a reason for that: the ponzi scheme has come to the end of the line. I don't think Yorkshireman (or myself) is arguing that it's desirable to see interest rates where they are. The simple fact is, if they rise the consequences will be too severe for the Central Planners to tolerate. You are entirely right though that the next recession is due any time, which is not to say there was ever any recovery from the last one. Not on Main Street anyway. The BoE still has the printing press and is more than willing to make 'good' use of it.
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Post by 4thway on Mar 29, 2015 12:28:35 GMT
The majority of mortgages are at fixed rates so adverse effects would be delayed. I didn't realise that most mortgages are fixed-rate these days. Does anyone know what the current fixed/variable split is? As for the fixed-rate mortgages, are there statistics indicating when the fixed-rate periods end? I can't tell you the figures, but I can tell you from many years of financial research as a former financial journalist that the mortgage industry encourages borrowers to go into very short-term deals - and they're very good at it. (Not that it's difficult to convince people to focus on the short term instead of thinking of the future.) So whether the deals are fixed or not, huge numbers of people will be on two-year deals, instead of taking advantage of lowest ever mortgage rates to lock in for five or ten years.
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Post by 4thway on Mar 29, 2015 12:34:04 GMT
There have been quite a few comments about armageddon when interest rates rise. We shouldn't forget that the huge and growing debt in this country (and the inter-connected global economy) could collapse before rates rise. We don't know what will trigger it, in the end.
I think all we can do is spread our risks and lend where we see there's a huge margin of safety only. If there's no huge margin of safety left, it's time to move our money elsewhere.
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