[Finance] 'Possible' BofE Base Interest Rate Rise this Thursday .....

[Blue Valkyrie]

Tuition fees are paid because there are so many more kids now who have the opportunity of a university education. You can’t have it both ways. There has never been a blank cheque for free tuition for everyone who wanted it. Either you restrict the numbers (and thereby restrict educational opportunity) and don’t charge fees like in the old days or you give that opportunity to everybody and charge fees. Moaning about the fees whilst ignoring the opportunity given is entitlement. Regarding benefits received in the holidays you are right. We all claimed it and spent it on a two week holiday on the beach in Spain or Greece. It was a joke. Had to sign on on a Thursday so flew out the next day and spent the lot. We were entitled kids wasting public money. It was stopped pretty soon after I left uni in the 80s.

I don't want it both ways

I haven't "moaned"

 

[zefarelly]

"What are you still hanging around here for, making the place look untidy, why aren't you out buying a house at age 25 like I did...?"

I left home at 17, my parents moved to Hastings, I had a job and a band locally

I know of a few people who downsized in order to force the kids to leave home!

I suggested to a mate once, who asked how I got my first flat . . . . ask your dad to lend you 5-10k for a deposit, or you'll never leave home. . . . it worked, in about 24 hours

not sure where we'll be with my son, I don't have £10k . . . suppose I could give him a car which he could sell for a deposit . . .

 

[Neville's Breakfast]

I don't want it both ways

I haven't "moaned"

Sorry, I meant ‘one’ but typed ‘you.’

 

[beorhthelm]

0.25% increase. not helped the £, falling over 1% and that weakness will feed in to a bit more inflation

 

[Paulie Gualtieri]

I left home at 17, my parents moved to Hastings, I had a job and a band locally

I know of a few people who downsized in order to force the kids to leave home!

I suggested to a mate once, who asked how I got my first flat . . . . ask your dad to lend you 5-10k for a deposit, or you'll never leave home. . . . it worked, in about 24 hours

not sure where we'll be with my son, I don't have £10k . . . suppose I could give him a car which he could sell for a deposit . . .

Or live in?

 

[zefarelly]

Or live in?

I've slept in my old subaru wagon a fair few times . . . good call, I'll keep the Cortina and the house

 

[nicko31]

0.25% increase. not helped the £, falling over 1% and that weakness will feed in to a bit more inflation

The issue is more strong USD, looks like they are raising more aggressively. They could be up to 2.5% quite quickly. Too much QE for too long...

 

[Barnet Seagull]

The government will only give lip service to preventing inflation, it suits them given the defecit and desire for a low wage economy.

 

[rigton70]

I've posted this before

flat 1992 4x salary
cottage 1999 3.5 times salary
house 2003 - 4 times joint salary
same house now 8 x joint salary ( house has tripled in value and some, my salary hasn't changed!!!, thankfully Mrs Zefs has! )

Out of interest what cottage and was this in Shoreham.

 

[Swansman]

No. Sorry, our generation grew up in a world where a house was genuinely affordable at 3.5x salary, which is what the mortgage lender would give you, and we had largely functioning infrastructure around us, including education and health.

We can’t sit there having had the opportunity to buy a house at £30k with a deposit of 3k and complain about “entitled” kids who work just as hard as we did, but see starter homes going in the 250k to 300k price bracket.

These guys have paid for prescriptions all their lives, these guys have paid for dentistry all their lives, they’ve paid for university and childcare and they’re both expected to hold down full time jobs, be brilliant parents, often while caring for their own parents. They’ve paid market rate rents, often for poorly maintained property, and the rents have kept going up diminishing their chances of getting the deposit together to get onto the housing ladder to start with.

And where does their money go? To our generation who decided property looked cheap and bought five.

I’ve no quarrel with anyone doing well, but I’ve got no respect for those among us who’ve made sure that they’re all right and then pulled up the drawbridge and walked away with no thought of those coming after.

I remember the time of 15% interest rates (another Conservative success story) and I’m not trying to diminish the sacrifices that you and your wife had to make, but those were different times when social housing was available so low earners didn’t have to pay market rates, the state paid for far more than the modern state, and there was, in short, a better safety net if the worst were to happen. Everything is stretched so tight atm, with so little slack anywhere in the system, that even a small worsening in people’s situations can potentially be disastrous for them. The moaning is legitimate fear.

Spot on.

Pandemic: got SEISS

Energy: Got house insulated to modern standards when we had extensions built. Locked in an Energy provider a couple of years ago on a fixed tarriff.

NI: I'm still working, the NI increase is actually piffling when you look at it.

Sorry that we have looked at our finances over the years and have managed them...

this isnt the first time in history there's been inflation, an energy price surge, or "cost of living crisis". after two decades of low interest rates there was always going to be rises at some point in the future, artifically suppressd for long enough. anyone not planning for that is being irresponsible.

It really isn’t. As has been mentioned; interest rates of 10 to 15 % ! My wife and I had no furniture for 6 months when we bought our first house. Final salary pension, that’s a joke. Only happens in the public sector. Like many others I also did not have a free uni education. Grants were means tested and my parents who scrimped and saved and sacrificed had to pay. Thousands of others didn’t even get a uni education as only a small proportion of kids went to uni. So yes, the moaning is entitlement.

Absolutely deluded.

Tuition fees are paid because there are so many more kids now who have the opportunity of a university education. You can’t have it both ways. There has never been a blank cheque for free tuition for everyone who wanted it. Either you restrict the numbers (and thereby restrict educational opportunity) and don’t charge fees like in the old days or you give that opportunity to everybody and charge fees.

It works fine here, why wouldnt it work for you? Its not like you are some third world country.

 

[Swansman]

The situation is similar here. Historically interest rates has been used as a tool to fight inflation but this tool was lost a long time ago. The in the last decades inflation has been "hiding" in property prices and mortgages and this eventually destroyed the interest tool as you couldnt raise it without destroying a lot of household economies. This was never sustainable and since 2008 we've always been one crisis/instability away from the bubble bursting, inflation spilling over into every aspect of our lives. Raising the rates like in most European countries the last months really isn't possible... but its also not possible not to do it.

But its just a band-aid solution... sooner rather than later either the economical system needs to be pretty much completely remade, or disaster awaits.

 

[Neville's Breakfast]

The situation is similar here. Historically interest rates has been used as a tool to fight inflation but this tool was lost a long time ago. The in the last decades inflation has been "hiding" in property prices and mortgages and this eventually destroyed the interest tool as you couldnt raise it without destroying a lot of household economies. This was never sustainable and since 2008 we've always been one crisis/instability away from the bubble bursting, inflation spilling over into every aspect of our lives. Raising the rates like in most European countries the last months really isn't possible... but its also not possible not to do it.

But its just a band-aid solution... sooner rather than later either the economical system needs to be pretty much completely remade, or disaster awaits.

It’s a shame that your wonderful Welsh/Swedish education system hasn’t given you a sounder grasp of economics.

 

[Swansman]

It’s a shame that your wonderful Welsh/Swedish education system hasn’t given you a sounder grasp of economics.

Well, maybe you can expand your reply with what you were taught in the 1920s/1930s that makes you feel this way.

 

[Neville's Breakfast]

Well, maybe you can expand your reply with what you were taught in the 1920s/1930s that makes you feel this way.

1920s/30s ! cheeky sod !
I just meant that the relationship between interest rates and spending has not disappeared. Central banks can and will increase interest rates and the current generation will have to get used to that idea just like us oldies had to.

 

[Swansman]

1920s/30s ! cheeky sod !
I just meant that the relationship between interest rates and spending has not disappeared. Central banks can and will increase interest rates and the current generation will have to get used to that idea just like us oldies had to.

Of course the relationship is the same/similar but the system requires some kind of margin between how much people earn and how much they pay for necessities. The median monthly salary in the UK is £2,061, the average monthly mortgage payment £753, the median monthly rent £755. And then people need to eat, shower and also electricity etc. There's not much room to increase any costs without people having to choose between paying their rent or eating.

 

[WATFORD zero]

1920s/30s ! cheeky sod !
I just meant that the relationship between interest rates and spending has not disappeared. Central banks can and will increase interest rates and the current generation will have to get used to that idea just like us oldies had to.

It hasn't disappeared but it has changed completely in the last 30-40 years, some significant reasons for the change being eloquently explained here

My understanding (mainly gained from blindly reading around the subject trying to understand 2008’s cluster****) is below. It’s such a massive subject and I’m writing between jobs, so apologies for rambling:

Historically, low interest rates were supposed to encourage businesses to borrow and grow, and individuals to spend. High interest rates were supposed to encourage consumers and businesses to wind their necks in and save, cooling consumer spending and (over time) inflationary pressures.

The issue with that is that from the 1980s onward businesses and consumers have become far more debt-financed (and have remained so)

In the past, a sensible individual would see saving rates higher than inflation and would say “I’ll put my money in a savings account and it will grow.” The economy would cool a bit, hopefully slow down without the wheels falling off, and inflation would usually slowly reduce. Then, consumers would have money in their pockets when inflation had cooled, and rates could be reduced to stop saving and encourage spending.

When using debt to finance business and individual life became increasingly normalised, the paradigm changed. Because the cost of servicing debt increases with interest rate rises, the consumer or business is not putting their excess money into any form of savings or consolidation, they’re using it to service increased debt costs.

Historically that would just be the mortgage, but many people now have multiple credit cards, and even some loans are still at variable rates. As such, a major tool that has worked for economists now has a different effect, in that even coming out of a period of high interest rates, consumers haven’t built up a pot of money to spend, they’ve just (hopefully) continued affording to service existing debt.

Similarly for business, many modern takeovers are financed by taking out loans on the business being bought, (leveraged buyouts) they are almost entirely debt financed. If their projections didn’t forecast increased interest rates, they can find themselves in trouble when it’s time to refinance the debt.

Inflation is feared by governments for a variety of reasons. The most obvious is that your pound buys less than it did before. (Unpopular) But also it makes economies less predictable, people hoard, bring purchases forward or forgo them, and forces people to make do and mend.

Norman Lamont once stated “Rising unemployment and the recession have been the price that we've had to pay to get inflation down. That is a price well worth paying.” (It wasn’t a popular statement) - there’s no indication Rishi feels any differently though.

Inflation reduces wealth as well as income, and is therefore more unpopular than tax rises for those with wealth, as they can’t dodge inflation as easily.

The government has limited or no control over most of the factors that have caused inflation. Nor have the British population who are just trying to get along. What the government needs to consider is taking action on the things that are under their control, to mitigate the worst effects of this inflation and corresponding interest rate rises.

So sorry for the state of this post.

 

[Bold Seagull]

1920s/30s ! cheeky sod !
I just meant that the relationship between interest rates and spending has not disappeared. Central banks can and will increase interest rates and the current generation will have to get used to that idea just like us oldies had to.

Didn’t you ‘oldies’ go on mass general strikes, riots, winters of discontent etc?

 

[Neville's Breakfast]

It hasn't disappeared but it has changed completely in the last 30-40 years, some significant reasons for the change being eloquently explained here

The post you quote is indeed a decent analysis. I’m just not sure things have changed, rather people have either forgotten or unsustainable risk has been taken because Government policy for a generation has been to seek short term economic growth through low interest rates (which under values risk) and ever increasing labour supply (which depresses wage inflation). I appreciate there is a generation out there who have never seen the interest rate tool in action but it is there and the consequence of not using it at the moment would be inflation running out of control. We lost money on our first house (which was in London) because interest rates were used to dampen spending and house prices. Many people suffered negative equity. This hasn’t happened for a long time but it may be coming because risk needs to be correctly priced.

 

[Neville's Breakfast]

Didn’t you ‘oldies’ go on mass general strikes, riots, winters of discontent etc?

Yep, and faught two world wars and won the Charity Shield. Busy times

 

[Bold Seagull]

Yep, and faught two world wars and won the Charity Shield. Busy times

Don't forget landing on the moon.