Interest Rates Take Effect

Discussion in 'Current Affairs, News and Analysis' started by Sven, May 15, 2007.

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  1. Inflation fell by three points to 2.8% , should interest rates drop now?

    Article here
  2. I don't know Sven. Or really care for that matter.
    Why don't you try a economics website instead?
  3. Well, he has posted it in the "Current Affairs, News and Analysis" part of the site you knob.
  4. second that. I'm a politcal man and there are more things to worry about arrser
  5. I suggest that it does matter for those of You with a mortgage - if interest rates go just a little bit higher then many down south may not be able to afford their mortgages.

    If lots of people try to sell their houses all at once and noone can afford the interest rates and so cannot buy then prices drop - I suggest that would be relevent to most on here
  6. I doubt it. As the inflation rate is only .2% away from its upper limit it won't be safe for the Bank of England to cut it just yet. May even be a case for another raise.

    Please remember that the current interest rate of 5.5% is not that high compared to the average over the past few decades.
  7. Quite true - but You have to take into effect that people maxed out on their martgage because house prices are so high. That means that smaller interest rate rises impact harder than in previous years therefore having the same effect
  8. It's true that the Bank of England don't want to precipitate a market crash, but neither with public borrowing already at record levels do they want to encourage more spending. On balance I think that a small rise is still the most likely outcome.
  9. in_the_cheapseats

    in_the_cheapseats LE Moderator

    Simple answer is No.

    Even if the trend is downwards, if the PTB are serious about changing the populations view on debt and the need to save, both problematic areas, interest rate should stay where they are until at least the next review, IMHO.

    edited once for clarity
  10. That all depends on if you deem the current market as too high.

    If you take the market from 10, 20 and 30 years ago, how much of a households income is spent on a mortgage? May not be that different than today. Have a look at this link

    The current situation IMHO is people believing that interest rates will stay low and have not thought what would happen if interest rates rose to the level that they traditionally are in this country.
  11. Not having a mortgage I do not know at what point interest rates will have a negative effect on housing equity. Can anyone inform me please?
  12. in_the_cheapseats

    in_the_cheapseats LE Moderator

    Don't think it quite works like that, Sven. It pretty much acts as a tipping point in conjuction with other debts. I had a quick look at all the previous posts about rates in the past. The biggest difference between then and now are all the additional debts that people have these days.

    20 years ago, you had a mortgage (2-3 times earnings) and an overdraft. These days you have a mortgage (up to 8x earnings, FFS), credit cards up the ying-yang and credit agreements for far far more and the overdraft on top. Far more precarious.

    Currently, house prices are still going up. I think I saw one report saying 1.1% for last month. If this was a linear equation/comparison, rates probably have a way to go to match and make the market meet your negative effect on equity remark.

    However, take everything else in to consideration and I don't think you are too far off a world of hurt and at the minimum, a population learning to be less frivolous with its money.
  13. With other peoples money.
  14. in_the_cheapseats

    in_the_cheapseats LE Moderator

    Agreed but hopefully their own too :D
  15. Well, I still think that it is only News and Current Affairs if it involves throwing lead wasps at people.

    Oh God of battles! steel my soldiers' hearts;
    Possess them not with fear; take from them now
    The sense of reckoning,
    and let them not give a facking monkey b0ll0ck about macro economics.