Interest rates

[Steevo]

All very well, but those who were prudent and saved for a rainy day will be mightily pissssed that their nest egg has being eroded since 2008. And yes, during the early 90's we were paying 17% interest on our mortgage at one stage, so I know how it feels.

Very true. Anyone with significant savings will be wanting to invest it into something else like land or commodities.....which will further drive inflation.

Interest rates above the level of inflation would potentially address this.....but would cripple everything in the process.

 

[Jackov Altraids]

It's only those in charge that have been fools. I fear modern life is expectations are such that the average person hasn't had a huge amount of choice about being in the position they are in.

I still don't think that's completely fair.

I consider myself exceptionally lucky that I wasn't born a few years later. I'm one of the last generation of average people who could realistically expect to 'own' their lives.
A first time home hasn't been affordable since 2000.

It is since the 90's that government have been taking money from the future to pay for today. Privatisations, bringing VAT forward a year, the ability to cash in pensions etc.
This has also encouraged big business to aggressively pursue a marketing strategy of customers financing, leasing or renting goods rather than owning them as it is much more profitable and controllable.

The general public have been largely unwittingly corralled into this present state.

 

[nelly55]

The state of everything just shows what idiots have been in power,the whole world seems to have been at the mercy of 2 countries,Russia and Ukraine for gas,oil,food.Yes things have been too cheap,but wages and income for the normal Harding working public are not keeping up with costs.Not everyone is on £50k plus ,too many on benefits ,infact too many do gooders .I really fear for the younger generation .Too many milking the poor to get rich,but that churn is now dry.

 

[DaveGrohl]

I agree but all those who, egged on by the government, took on huge mortgages at comic book rates so they could buy grossly overpriced houses might disagree. In the early 90s in a short space of time my mortgage more than doubled and while it wasn't exactly welcomed it wasn't really a big deal because the stricter lending criteria at the time meant people generally weren't in over their necks. What would happen today if everyone's mortgages suddenly doubled? Regarding inflation, a disaster has been coming down the track like a very large and very slow freight train - the time to increase rates was long ago, BOE have been asleep on the job.

The first part of your post reveals why the system used to work. The BoE simply can’t fix the problem of the disappearance of financial sense. They’re partly responsible for that disappearance but so are many others.

 

[DaveGrohl]

Very true. Anyone with significant savings will be wanting to invest it into something else like land or commodities.....which will further drive inflation.

Interest rates above the level of inflation would potentially address this.....but would cripple everything in the process.

Where do you think all the money ended up from all that money printing? QE = inflation. Just took a while to get there. That isn't a light at the end of the tunnel btw.

 

[DaveGrohl]

Considering that all of this culmination of different aspects has arrived in very large part because of the price of gas, I find myself looking at this chart from ice.com and wondering whether things are already starting to ease and we're actually past the worst in terms of gas but don't know it yet?

 

[Steevo]

If the cost of borrowing money rises, consumers and businesses have less money to spend. As demand falls economic growth slows down and in theory so should the prices of goods and services. Increasing the Bank rate is like a lever for slowing down inflation.
Just copied the above,
If energy and everything we need in our daily lives continues to increase how can we sell cheaper.
Is it just me who thinks using interest rates to cut inflation is going to cause more trouble

I would say there are quite a few businesses that have inflated costs that could be cut.

Some of the quotes I’ve had had for jobs have varied so wildly.

I think some companies think that even if they charge double, there is so much work out there that they’ll still find people willing to pay it who don’t know any better. Then other businesses see them doing it and think they are selling themselves too cheap too…..and so the cycle continues!

 

[ollie989898]

I still don't think that's completely fair.

I consider myself exceptionally lucky that I wasn't born a few years later. I'm one of the last generation of average people who could realistically expect to 'own' their lives.
A first time home hasn't been affordable since 2000.

It is since the 90's that government have been taking money from the future to pay for today. Privatisations, bringing VAT forward a year, the ability to cash in pensions etc.
This has also encouraged big business to aggressively pursue a marketing strategy of customers financing, leasing or renting goods rather than owning them as it is much more profitable and controllable.

The general public have been largely unwittingly corralled into this present state.

And this is why my kids will be encouraged to seek a career and live abroad.

 

[jerseycowsman]

They have not raised interest rates anything like enough for people to notice yet.

At 6-7 or 8% things would get interesting very quickly I would suggest.

I bet we don't see a 5% base rate for the next 10 years at least. Rates like that would cripple a lot of households, never mind businesses.

I don’t think I would be able to afford the mortgage payments for my farm if they got that high even with milk at a £1 a litre. Already gone up by £1500 a month on less than a 1% rise!

 

[jendan]

I don’t think I would be able to afford the mortgage payments for my farm if they got that high even with milk at a £1 a litre. Already gone up by £1500 a month on less than a 1% rise!

Are you sure you dont mean £150/month?

 

[jerseycowsman]

Are you sure you dont mean £150/month?

£1500, it’s several million, still interest only over base rate till December when we have to decide how much to fix it. Probably do half and half. We bought the farm 18 months ago

 

[jendan]

£1500, it’s several million, still interest only over base rate till December when we have to decide how much to fix it. Probably do half and half. We bought the farm 18 months ago

How many are you milking to service that?

 

[midlandslad]

The BOE know they can’t control the supply side driven inflation but they are very concerned about secondary inflation with inflation feeding through into wages and then back into prices and so on.

 

[midlandslad]

£1500, it’s several million, still interest only over base rate till December when we have to decide how much to fix it. Probably do half and half. We bought the farm 18 months ago

The market will already have priced in future expectations of fixed rates so you will be paying a lot more than your current rate.

 

[DaveGrohl]

I don’t think I would be able to afford the mortgage payments for my farm if they got that high even with milk at a £1 a litre. Already gone up by £1500 a month on less than a 1% rise!

How many litres are you producing a year? 50? Otherwise at £1 a litre you’d be crying about how much tax you had to pay.

 

[jerseycowsman]

The market will already have priced in future expectations of fixed rates so you will be paying a lot more than your current rate.

Yep, that’s why we’ve left it to the last minute

 

[jerseycowsman]

How many litres are you producing a year? 50? Otherwise at £1 a litre you’d be crying about how much tax you had to pay.

I was exaggerating just a little bit!

 

[jerseycowsman]

How many are you milking to service that?

300

 

[DaveGrohl]

I was exaggerating just a little bit!

I know. Soz, couldn’t resist. My interest payments have gone up a bit too but I always assumed they wouldn’t stay at thruppence a month for all eternity.

 

[Stw88]

Back when interest was in the teens of percent a million got you a big farm. Now it gets you 60 acre and a house! A good 4-500 acre farm could never pay for its self if interest gets up near 10%.