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[Finance] Base rate increase.



Pavilionaire

Well-known member
Jul 7, 2003
30,970
As I understand it they voted 7-2 in favour of a rate rise but couldn't agree on how much, with an even split for 0.25%, 0.5% and 0.75%, so they agreed on 0.5%.

I find it concerning that 2 thought no need for raise, while 3 think it should have been 0.75%.
 




Westdene Seagull

aka Cap'n Carl Firecrotch
NSC Patron
Oct 27, 2003
21,329
The arse end of Hangleton
As I understand it they voted 7-2 in favour of a rate rise but couldn't agree on how much, with an even split for 0.25%, 0.5% and 0.75%, so they agreed on 0.5%.

I find it concerning that 2 thought no need for raise, while 3 think it should have been 0.75%.
I find it concerning that 9 people have millions of peoples financial lives in their hands and all it comes down to is a vote.
 




schmunk

"Members"
Jan 19, 2018
9,820
Mid mid mid Sussex
I didn’t say that I don’t see the problem now, as I certainly do. I was just giving my own experience of being a first time buyer. My salary was low at the time as I was on the ladder to a senior position after qualifying. It increased x 5 by 1985.
[Not targeting you, just using you as a worked example]

The modern you just wouldn't be able to buy a house at all - nobody would lend.

Perhaps you could rent instead? Looking again at Rightmove, that'd cost you about £1,100/month, or: 99% of your net pay... 😞
 


Uncle Spielberg

Well-known member
Jul 6, 2003
42,994
Lancing
Bank base rate should peak at 4.50% to 4.75% and maybe come back down a bit in a couple of years time. A 5 year fixed rate is now edging down towards 4.00% - 4.50% depending on the loan to value which is the new normal
 




The Antikythera Mechanism

The oldest known computer
NSC Patron
Aug 7, 2003
7,941
[Not targeting you, just using you as a worked example]

The modern you just wouldn't be able to buy a house at all - nobody would lend.

Perhaps you could rent instead? Looking again at Rightmove, that'd cost you about £1,100/month, or: 99% of your net pay... 😞
Just looked at the second house I bought. It was in Upton Road, Tarring. 3 bed semi £30k in 1982, now £450k. Unbelievable.
 


Shropshire Seagull

Well-known member
Nov 5, 2004
8,614
Telford
I really fail to understand how this curbs the current inflation problem. Inflation is not being driven by things that an interest rate rise will impact. It will stop spending certainly because this just makes a terrible situation for people that are already struggling far worse.
Firstly, an apology if any of the below comes across as condescending to my fellow learned NSCers - not my intention ....

Raising interest rates to combat rising [or high] inflation has always been a method of modern Keynesian economics used by all flavours of government over the years.
In May-97 Gordon Brown [with Tony Blair as PM] handed control of base interest rate setting over to the [independent] Bank of England who have been responsible for setting the rate these last 25 years..

By raising interest rates, this takes cash out of the economy, which makes many items [goods & services] less attractive / unaffordable [depending on product's propensity to consume].
When interest rates rise: if you have debt, more of your income is spent on the interest, leaving less available for other things. It intends to also discourage further increasing borrowing.
If you have surplus income [lucky you], then higher savings rates make it more attractive to save than to spend, again taking cash out of the economy.
So the overall effect of an interest rate rise is to cool the economy and when this happens, inflation will come down as less goods and services are consumed.

I agree, it is a terrible situation for many, but having less cash [or disposable income] available, generally curbs spending, forcing folk to cut their cloth accordingly.
I may be naïve, but I trust our welfare state to support those who are in genuine hardship.
For the rest of us: tighten our belts, buckle-up and do our best to ride out the storm.
 


Horses Arse

Well-known member
Jun 25, 2004
4,571
here and there
It's amazing how 4% now seems high. Sadly I'm old enough to have had mortgage in the 80's when I had a 5 year deal at 8% and inflation was poor then too. How times change.
Rose to 15% in the late 80s, absolutely crushed people, further fuelling the benefit society after their unemployment drive in the early 80s.

I find it incredible that today's tory party bemoans the 'benefit scroungers' that they created.
 




Horses Arse

Well-known member
Jun 25, 2004
4,571
here and there
Just looked at the second house I bought. It was in Upton Road, Tarring. 3 bed semi £30k in 1982, now £450k. Unbelievable.
I bought a 2 bed maisonette in Surbiton for £64K in 94, last time I bothered looking it was £550k. Couldn't get a mortgage now for what I bought back then, insane.
 


Horses Arse

Well-known member
Jun 25, 2004
4,571
here and there
Mine, for a few months under hopeless Major/Lamont, peaked at 15.75%. It was awful.

But the differences then - house prices were 1/6th of those now in Brighton and lending multiples were almost always more sensible.
Multiples weren't sensible though, that's what helped create the crash. Folk stretching themselves to buy, then getting crushed with out of control tory economic rule.
 


Horses Arse

Well-known member
Jun 25, 2004
4,571
here and there
Firstly, an apology if any of the below comes across as condescending to my fellow learned NSCers - not my intention ....

Raising interest rates to combat rising [or high] inflation has always been a method of modern Keynesian economics used by all flavours of government over the years.
In May-97 Gordon Brown [with Tony Blair as PM] handed control of base interest rate setting over to the [independent] Bank of England who have been responsible for setting the rate these last 25 years..

By raising interest rates, this takes cash out of the economy, which makes many items [goods & services] less attractive / unaffordable [depending on product's propensity to consume].
When interest rates rise: if you have debt, more of your income is spent on the interest, leaving less available for other things. It intends to also discourage further increasing borrowing.
If you have surplus income [lucky you], then higher savings rates make it more attractive to save than to spend, again taking cash out of the economy.
So the overall effect of an interest rate rise is to cool the economy and when this happens, inflation will come down as less goods and services are consumed.

I agree, it is a terrible situation for many, but having less cash [or disposable income] available, generally curbs spending, forcing folk to cut their cloth accordingly.
I may be naïve, but I trust our welfare state to support those who are in genuine hardship.
For the rest of us: tighten our belts, buckle-up and do our best to ride out the storm.
Interesting and informative summary. But yes, very naieve thought/hope towards then end. Welfare state has had the life squeezed from it after 12 years of this lot, as has the NHS. They simply don't care unless it makes them and their pals even wealthier
 








Machiavelli

Well-known member
Oct 11, 2013
17,187
Fiveways
US based, but well put. It's the wealthy who prosper from raising interest rates and it isn't just wages that are a factor.


Two consecutive top posts.
Other than stopping (or, better, slowing down) spending, there are multiple other reasons to tax the wealthy. At some point, sufficient people will come to realise that. We can live in hope.
 




nicko31

Well-known member
Jan 7, 2010
18,023
Gods country fortnightly
Wouldn't be surprised if rates were held this month after what has passed in the last few days
 




nicko31

Well-known member
Jan 7, 2010
18,023
Gods country fortnightly
Well after yesterday's higher than expected inflation, another rise...
 










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