Interest rates and asset prices

Robw54

Member
Location
derbyshire
Well its on the cards for Nov and I might well have to eat my hat as I thought nothing till post brexit. Bank will lose their last bit of credibility if it does not follow through.

What if anything will it do to asset prices? Taking inflation into account in our area assets haven't risen that much since 2007. Rates of over 2% now achiveable on cash and looking at the yield on let's it wouldn't take much more than a couple percent to make cash in the bank a better bet.

Doesn't bode well when these prices were supported by 5% rates in 2007 and I can't see the market standing it today. Much higher inflation on the way?
 

Martin Holden

Member
Trade
Location
Cheltenham
It's inflation that the bank is concerned about. Seems the memory of the 2008 crisis has been forgotten and credit/borrowing has risen too sharply again. I dread to think of the negative equity that could appear if rates moves up by 1-2 points over the next couple of years. Also their is unsubstantiated feelings that Brexit will cause inflation. Sure if the £ stays where it is there will be as already witnessed. However all this sabre rattling by the EU is counter productive as they need us like we need them. There is also the rest of the world to trade with. (I voted remain but the majority - just, didn't, so there we have it)
 

Robw54

Member
Location
derbyshire
It's inflation that the bank is concerned about. Seems the memory of the 2008 crisis has been forgotten and credit/borrowing has risen too sharply again. I dread to think of the negative equity that could appear if rates moves up by 1-2 points over the next couple of years. Also their is unsubstantiated feelings that Brexit will cause inflation. Sure if the £ stays where it is there will be as already witnessed. However all this sabre rattling by the EU is counter productive as they need us like we need them. There is also the rest of the world to trade with. (I voted remain but the majority - just, didn't, so there we have it)

We must be getting to the point where the currency inflation is now baked in? Unless there's capacity issues it won't continue and surely would reverse if the £ strengthened. They must see a capacity issue...
 

Steevo

Member
Location
Gloucestershire
I am no expert in economics but why the Hell do they pee about moving rates by a quarter of one percent? If there is a need for a shift in rates then why not one percent, or at least half a percent!

It’s a signal. A bit like you get a verbal warning, then a written warning.

We’re going to raise rates. Get your house in order now to make sure you don’t suffer too much from bigger/continued rises.

Too big a shock without warning would not help.
 
It’s a signal. A bit like you get a verbal warning, then a written warning.

We’re going to raise rates. Get your house in order now to make sure you don’t suffer too much from bigger/continued rises.

Too big a shock without warning would not help.
With base rate at a quarter of one percent folk shouldn't need a warning, they should be making hay while the sun shines, paying down debt as quickly as possible when something is on the bottom there's only one way it can go,
 

DeeGee

Member
Location
North East Wales
With base rate at a quarter of one percent folk shouldn't need a warning, they should be making hay while the sun shines, paying down debt as quickly as possible when something is on the bottom there's only one way it can go,

Yes, totally agree. Interest rates have been ridiculously low for a decade now: it's high time they went up.

As you say anything between 5 and 10% should be manageable, but bear in mind that many people have only known 0% finance and rock bottom rates of interest.

When rates do rise it will be a massive shock to many people, especially so to a generation who have never experienced proper rates of interest.
 

Robw54

Member
Location
derbyshire
It’s a signal. A bit like you get a verbal warning, then a written warning.

We’re going to raise rates. Get your house in order now to make sure you don’t suffer too much from bigger/continued rises.

Too big a shock without warning would not help.


They've been been warning for years which is why I don't think they can't follow through.

I've just done a remortgage and it's less than 3 years ago by a big margin. It's mixed signals and makes it very hard to plan.

If it hits 5 would people just start parking cash in the bank again instead of stocks, houses and land?
 
Average house mortgage is now £125000
Back when rates were over 10%,it was £50000 or less
An interest rate rise could be catastrophic to Joe Public

You have to look at the other side of the equation, what were average earnings when average mortgage was 50k compared to now?

The bit I don't get is that a lot of the consumerism credit is done on credit cards etc, where the rates can be high up in the teens,or personal loans with better, but still quite high rates and neither are really governed by the base rate.
So raising the base rate WILL have an effect on mortgage payers and business borrowing but will have little short term effect on consumerism and inflation.
 

tje

Member
Mixed Farmer
Location
North Hampshire
The whole country really .....Given the debt the government has 5 % interest rate would just about finish it ...

FFS, all this talk of interest rates is getting ridiculous, anything under 5% base is cheap, under 10% ought to be manageable. If you think otherwise you're living beyond your means....................it seems that could apply to an awfull lot of folk.
 

Wombat

Member
BASIS
Location
East yorks
It’s a signal. A bit like you get a verbal warning, then a written warning.

We’re going to raise rates. Get your house in order now to make sure you don’t suffer too much from bigger/continued rises.

Too big a shock without warning would not help.

If people couldn't stand a 1% rise then they are seriously on a knife edge.

5% maybe but 1% should be easy
 

Martin Holden

Member
Trade
Location
Cheltenham
Even with a couple of points or half point rises, rates will still be low in the general scheme of things. As to the currency inflation factor, no I don't believe we've seen the full impact of this yet as many have tried hard to soften the blow of the near 20% change in the rate against the Euro in the last 18 months.
 
I think most familys are on a knife edge your right 1% is very little,but its the car they got on the knock
oh! and the tv and couch,thens theres the holiday thats on the credit card to pay!
Joe public have no idea of economics,its only when you are in buisness and have seen bad times that you have some real reserves to cover interest hikes and hard times.
In other words, living beyond their means.
No point pussy footing around, might as well say what I mean.
 
Many people just spend every bit of income they have then economise when rates go up
Raising rates will reduce people ability to spend
But if the rate rise is because of inflation fear due to the economy reaching capacity some workers will get more overtime and have more income .some firms will produce more with the same number of staff

I know one firm who have got increased orders ordered a machine that will not be delivered till next June they will work more hours till then and pay more overtime as they cannot get more workers who can do the job
 

jendan

Member
Mixed Farmer
Location
Northumberland
They've been been warning for years which is why I don't think they can't follow through.

I've just done a remortgage and it's less than 3 years ago by a big margin. It's mixed signals and makes it very hard to plan.

If it hits 5 would people just start parking cash in the bank again instead of stocks, houses and land?
Would you care to share what rates you have got? and who do you think are the best to approach.Im trying to do a big farm deal due to expansion renting more land and more holiday lets etc.
 

jendan

Member
Mixed Farmer
Location
Northumberland
Even with a couple of points or half point rises, rates will still be low in the general scheme of things. As to the currency inflation factor, no I don't believe we've seen the full impact of this yet as many have tried hard to soften the blow of the near 20% change in the rate against the Euro in the last 18 months.
I dont think the BOE base rate is as crucial as it was.Its the main high street banks margin over that is the thing.It used to be just 1% or 2%,some are now 5-10% over to restore their balance sheets after the crash.
 

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