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I wonder if this should be in the BP (or should be soon ::)
Interested in people's take here as I can see rates crushing the housing market.
We have eye watering inflation, the highest in the G7. Truflation has UK CPI at 13.06% (vs 8.7% government figures).
Independent, economic & financial data in real time on-chain (truflation.com) (use dropdown to select UK)
How far will the BoE need to go to tame inflation? It seems painfully obvious that they will need a recession to crush demand and tame inflation.
I am calling another 75bps before everything breaks and housing plunges 25-30%.
Last edited by proby24; 22nd June 2023 at 10:58.
I wonder if this should be in the BP (or should be soon :
“ Ford... you're turning into a penguin. Stop it.” HHGTTG
I removed the Brexit reference @martyn!
Even the BoE don't know the answer to that Qs, so you'll not get it here.
This will be a painful lesson for many, but people need to start taking responsibility and living within their means. Oh, and we need a GE.
An official quarter of negative growth can't be far away...
Looking at that, for the UK truflation is listed as 13.06% but scrolling down and breaking it down by category there isn't a single category anywhere near 13%, so I am not sure where that 13% headline figure comes from?
Originally Posted by proby24
As the effects are lagged I reckon they go with another .25 today and then maybe one more later in the summer data dependant. Remember human behaviour drives a lot of economics and inflation is the new hot topic so folk are already adapting their spending/borrowing habits.
FWIW I'm of the same view.
A month ago I didn't think we would get another rate rise as I felt like the market was at breaking point but here we are and we may end up with .50% Today.
I was set for the big dream house move about 18 months ago but our house sale fell through and I normally only fix for 2 years so would have been looking at a world of pain potentially coming in 6 months.
I still have 2 mortgages on the SVR right now so it still smarts a little but it's nothing compared to where I would have been.
I can't see past this causing real hardship for hundreds of thousands of people as they come off their deals and have to find an extra £1k a month or so.
Surely this will hit the UK property market hard?
I am already seeing drops in prices over the last 6 months or so, how much further do people think they will drop 15-20%?
No chance. BoE on the ropes. They need a firm message.
We will see in 20 mins.
5%
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Good call.
Not sure how targeting the poor is going to help?
Hitting the property market hard is the whole point imo. Bring prices down 20-30%. A reset in a way for the next decade of “recovery”.
Typed Recovery in inverted commas (not showing for some reason)
Last edited by Toshk; 22nd June 2023 at 12:31.
If most people lived within their means, they wouldn't be living, merely existing, and probably homeless.
If you consider that most people need a place to live, and consider sky high rents and now mortgage rates, the only way to get a roof over your head is to live on a knife edge of your means. That's without allowing for the rising cost of just about everything. Living within their means for an awful lot of people means living without the fundamental basics.
I've no sympathy for the 'three new cars on lease' households taking long-haul holidays every year on the never, never, but the reality is a lot of careful folks are going to find themselves royally screwed as well.
Not sure a GE will solve things.
Up to 30% you say. Where has that been mentioned before, tee hee.
Isn’t that normal, but not in a good way.
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Not everywhere I’d say. But definitely many overrated overinflated areas.
That link that proby shared shoes UK inflation at 13.06% but that's half of what it shows it to be 12 months ago so suspect we'll get on top of it and rates will be much lower in a couple of years.
I can see increasing pressure on the Government to intervene if the BoE keep hiking the base rate up each month and it, still, having zero effect on inflation..........as it has for the past 13 increases.
Surely not allowing 0% credit cards and buy now pay later schemes would have an immediate effect on inflation, are they hoping for a recession instead?
Aiming for it, a recession I mean...iirc Hunt essentially said so just a week or so ago.
Be careful what you wish for, I'm thinking, given the state of play post you know what. The idea of a short sharp recession to reset the system might now be a forlorn hope, we've changed the milieu we exist in to such a degree, reshaped the conditions that formerly pertained.
Last edited by Passenger; 22nd June 2023 at 13:22.
Dunno what all the fuss is about, I remember when I took my first mortgage out in the late 70s they were 15%.
The income to mortgage differential is a lot different now. 5% on the loans people have now is a lot more than 15% then.
Aye but 'ouse then was only 10 shillings. and you still had change for t' bag of chips, scraps an 'all
Nowadays I understand you practically need a second mortgage to treat family to a fish supper!
Just did my own mortgage rate of 1.29% against 5.5% to see the difference. Monthly difference was quite a lot but the big shock was total interest payable went from £139k to £716k. Chucking a watch or three in as an overpayment suddenly looks very tempting.
Rates back to exactly where they were when I took out my mortgage.
Aye but 'ouse then was only 10 shillings. and you still had change for t' bag of chips, scraps an 'all
Nowadays I understand you practically need a second mortgage to treat family to a fish supper!
In most ways it was a lot harder back then because we had sweet FA to start with. Try and tell the kids of today they won’t believe you.
Ive never understood having a mortgage debt and thousands wrapped up in watches!
You need just one watch and no mortgage.
RIAC
Agreed, problem is lots live beyond their means. Big mortgage, car on PCP yet a fancy watch strapped to the wrist!
Cheap finance when interest rates are 0.5%, makes much more sense than a credit card.
Deleted
Aye, drop more Chateau de Chasselas?
Just kidding.
But I wouldn´t want to be trying to come up now, not from the same start I had, as most of the things that really helped me, like a proper local library, 11- plus, free Grammar school, the University educational grant, decent local health care- dentistry, don´t exist any longer, not in that location. Plus factor in the size of deposit now required, which explains why the average ftb age approaches 35...it´s a whole different world.
Nothing on a credit card here and no finance on the car, just the mortgage.
Got to have a hobby Kerry. Always nice to take a cruise down the rabbit hole and end up with N+1 for all sorts - bicycles, motorcycles, watches, you name it
What's the consensus on when rates will decrease? US is pencilled in for another increase and then decreases from Q1 next year. I guess we'll follow afterwards
You are right, me also no way would I want to start over. Been retired two years no mortgage or debt for the last ten years, but if things go tits up for my daughters it might be help out time.
There won't be any cuts until things break badly. So I guess it depends when you think that will happen.
Experts expect rates to climb to 6% next year before falling towards the end of 24. If they do go to 6% there will be a whole lot more pain for house owners. People have to stop spending.
I’d stop making predictions on interest rates, Ryan :-)
I agree but I personally did all the expensive and indulgent stuff once mortgage free. Prior to that I was frugal and didnt have anything I couldn't afford that I didnt need. I knew the days of buying shit i dont need to impress people I dont like would come eventually and when it did it was quite disappointing
RIAC
£450k left on the mortgage here so if I went frugal till that was paid off I'd be hitting the ADs only on my 70th Birthday!
I know where you're coming from but effectively your whole life is leveraged with the mortgage. Every holiday or even slight indulgence is financed by it, so why not a watch?
There is an odd time for us all when we’re comparing A Vs B and measuring the difference in pleasure gained between them only to realise they both give the same level of satisfaction/reward regardless of cost.
I used to buy a new watch and never take it off for weeks but I’ve been in the office a bit this week and wearing a Seiko. I stare at the Seiko just as much as I stare at Rolex or AP. 4th most worn watch last year and current at 4 so far this year too.
More and more it’s the chase rather than the watch. Never used to believe it when people said that but becoming more true with every watch bought, every allocation box ticked. I’ll still be in for another PRX in a few weeks though.
This question from the BBC website was the one I wondered about There will be a large swathe of the population who are just making do and not able to spend anyway. The well of end it makes no difference to either way in fact they may well make money from it.
The next question is from Duncan Roberts - he asks how does putting up interest rates stops the massive rises in the cost of basics, such as gas, electric and food which people can’t avoid paying for?
We have received lots of calls about this during phone-ins at the BBC on this subject.
In short, if rates are supposed to cut our spending and bring down the rate of price rises, how can this happen if all our budgets are taken up by essentials?
The counter argument is that some are getting decent pay rises and can tighten their belts. Many economists say the Bank of England doesn't have many tools to cut inflation, but interest rates is the best one, and it affects more than just consumers.
The Bank's governor, Andrew Bailey, says that inflation needs to be dealt with now, or it could get worse.
In other words, a high rate of rising prices is the greater evil.
So hit the ADs now and pay off your mortgage on your 80th birthday.
You know they are just expensive trinkets, right?
Certain constituents will make up a higher percentage of people’s spending, so each category will be weighted I reckon.
So the overall inflation can be higher than the highest individual constituent,
You're going to have to explain that version of maths to me! If it was 100% weighted to the highest value, the outcome would equal that value. Everything else just dilutes it!
If bread/cheese/butter/milk together have gone up 11.5%
and say Petrol has gone up 7.3%
There can be a weighting applied to each based on the total percentage of disposable income - the weighting on the foodstuffs could be 2.1, the weighting on petrol might be 1.1. Then - the final scores are divided by (I’d need a pencil) to give a more representative indicator of what ‘real’ inflation it is.
It would negate some tosser adding Rolex watches to the inflation figures - as the weighting would negate it to pretty much zero, (unless you had a 6-fig salary - not starting with a ‘1’)
If that were me, and that were my salary, I’d have had that mortgage cleared by now.
Weighting those figures (multiplying inflation % by weight and dividing by the sum of the weights) gives an outcome of 10.1%.
The weighting shifts the average towards the higher weighted number, but not past it.
Last edited by gunner; 22nd June 2023 at 16:38.
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