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‘The inflation figures are worse than expected, which means the Bank of England will almost certainly hike up interest rates tomorrow. That will hit many people in the pocket.’
My mortgage comes up later in the year abut thankfully I am now in the window to be able to fix a new rate from after the current one ends, which I successfully scrambled to do yesterday before today’s hike. I’ll be paying around the current base rate.
Without going into too many specifics, I will be slightly under £200 a month worse off. My April pay rise is yet to be agreed but that should cover a fair chunk of that so I am fairly lucky really. £200 a month is a lot of money that I’d rather be spending elsewhere but it’s far from crippling. It’s going to be bloody painful for some (many?). There is only one place the blame is going to go.
Yes, rates had to come off the floor at some point, they couldn’t stay that low forever. It’s the speed with which it’s happened and continues to happen that is the issue.
“Yes, rates had to come off the floor at some point, they couldn’t stay that low forever. It’s the speed with which it’s happened and continues to happen that is the issue.”
As i’ve written on a number of occasions Bailey and the BoE have been asleep at the wheel.
The effects of an elongated QE policy in the long run, was an absolute disaster waiting to happen.
The BoE’s decision to ignore calls from cMay ’21 to start raising rates in small doses, was ignored. They were warned by Andy Haldane in May ’21 that the inflation genie was out of the bottle.
Anecdotally, i knew 12 months ago this bout of inflation was going to cause issues for a longer time than Bailey’s original comments on it likely to be temporary. Friends at a number of fin servs co.s and in our local Rolls Royce and Airbus factories were already getting inflation busting pay rises and one-off payments (from early last Summer 22). The supermarkets were handing out 3 pay rises to their employees in the 12 months to April this year.
Travel, holidays abroad and flights are back at pre-covid levels, as millions of peeps havent seen a dent in spending power.
The self employed trades peeps are charging £70/£80 per hour in these parts, for building work, plumbing, leccy jobs.
75% of mortgage holders were on fixed rate deals, so there was always going to be a lag in peeps having reduced spending power.
Cash and investment rich pensioners had plenty of ‘spare’ to keep on spending, despite travel co.s, airlines, shops, etc raising prices.As for peeps coming off low fixed rates, like Richard, prob worth just going on the variable for 6-9 months, as i reck fixed rates will start to fall come the Autumn this year.
I suspect we’re already seeing the BoE inducing a recession, but they wont want to bluntly say.
Just my thoughts from a beautiful Norway.
0.5% rise to 5% confirmed.
I read that some people are calling for the government to step in and give people help to pay their mortgages.
I wonder how those people who had to pay mortgages in the days when interest rates were 15% feel about that idea?
Bailey this lunchtime:
“We know this is hard – many people with mortgages or loans will be understandably worried about what this means for them. But if we don’t raise rates now, it could be worse later.”What an absolute tool! ” if we dont raise rates now, it could be worse later”
Shame he didnt do his job in early Summer 2021!
0.5% rise today just confirms what i posted earlier – they’re already in the process of deliberately inducing a recession.
It’s not quite as simple as that. According to people who know far more than I, once you account for other factors such as wages, house prices etc, we are not too far off the point of rates being comparable to the 15% days in real terms. That said, I do think it would be a disastrously bad idea. Perhaps the banks could dig into their pockets and help out? They expected the government to when it went wrong for them.
Wilts, I should have noted that I can take a different rate if something better becomes available before the current term is up but worst case is I have the one I took yesterday locked in. For once it’s a bit of a no-lose situation. Their variable rate was 8% (yesterday, so no doubt more now) which would have been ridiculous repayments. I will keep an eye on it though
Enjoy Norway, must be plenty of daylight there at the moment, can’t imagine it gets very dark even in the south. Funnily enough they have hiked their interest rate by 0.5% today too, albeit to 3.75%.This whole debacle could definitely have been handled better, people could have coped much better with slower rises. Government and BoE have to share the blame. Heads in the sand when the early warning signs were there.
Reeves: ” Where’s the support for people with rising mortgage cost?”
Idiot. And she’s allegedly Labour’s rising star
There’s never been govt intervention or financial support for mortgages. Back in early 90s i had to just suck it up when interest rates hit 11%.
And i see that Lewis fella is mouthing it off again. Tiresome.
Just because there’s never been support of some kind in the past doesn’t mean that the government can’t help in some way now. I mean, the Conservatives are the ones that sold off council houses and encouraged people to take out mortgages and buy their own homes.
‘And i see that Lewis fella is mouthing it off again. Tiresome.’
If you ran a poll asking who people trust more out of Conservatives, Labour, the BoE and him, I know who’d win by a landslide and it’s not the three of those who get paid large sums of money to be in charge of the economy.
That’s because people are simpletons when it comes to basic money issues. Lewis gets loads wrong and only covers bases and ignores detail where it’s needed.
His knowledge on ALL types of Pensions is very limited and he’s been caught out a number of times in the past, by bypassing necessary detail on pensions.I fail to understand why so many people of my generation cannot see how bad this is for “young” (defined by this 60yo as under 45) adults with mortgages.
Yes, rates were 15% at one point when I had a mortgage, but rates were generally higher in that era, consequently house prices were lower and you didn’t need to borrow as much.
A 10% to 15% hike resulted in a 50% higher monthly repayment and that was as bad as it ever got – 2% to 6% now would be a 300% increase, six times worse.
Many people are aspirational by nature, and young adults on the housing ladder aged 25-45 are also often in that process of morphing into becoming Tory voters in later life.
What’s happening to those people now may actually put them off the Tories for life.
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It's the "Millwall FC" of Point broadcasts: "No One Likes Us - We Don't Care"Well said Ian, it really isn’t as simple as saying ‘back in my day, rates were a million percent and we just sucked it up’. The world is a completely different place now. A mortgage will last 25-30 years, of course there is going to be turmoil along the way, that’s just how the the world works. However, we have had a triple whammy of Covid, Ukraine and, yes, Brexit (whatever those who still have their heads in the sand think, and that includes Labour to an extent, it has not helped matters. I am not saying it’s the only problem or sole cause but it’s made things worse). That level of upheaval is unprecedented in peacetime.
The Tories will be a much reduced party in the long run. There is a generation that will never forgive them. They’ve admitted as much themselves, one of them said that if we bring in PR and votes at 16 it’ll be impossible for them to gain a majority ever again (PR alone would do that, there’d probably never be a majority for anyone).
I will freely admit that I’m lucky, I come from a reasonably well off and very stable background, have a decent enough job and will almost certainly be alright Jack just about whatever happens. Perhaps an ideal candidate to become one of those who drifts to the Tories in middle age, but I can assure you that will not be happening. I really feel for those who are not in my position, Christ knows how some people cope.
Raising interest rates to curb inflation is a blunt tool predicated on the belief that higher rates will encourage the public to save rather than spend. All well and good maybe when base rate hovers around inflation rate as savings won’t be eroded in real terms; but at present base rate, despite the recent rises, is still significantly lower than ‘core’ inflation and way below RPI. Therefore it seems to me that there still remains little incentive to save, made lesser by the banks time-honoured practice of being slow to raise saving rates as base rate increases
A decade of ultra-cheap debt financed by the issuing of Goverment Bonds, basically ‘printing money’, known more politely by that splendid euphemism ‘quantitative easing’. Inflation follows – who would’ve thought it!
Drone nails it.
In this era of the pretentious euphemism – e.g. we “reach out” nowadays instead of merely contacting people – printing money has become “qualitative easing.”
Rebranding old concepts instead of actual innovation.
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It's the "Millwall FC" of Point broadcasts: "No One Likes Us - We Don't Care"Not looking too promising for Sunak. At this rate, how long before some Conservative MPs start thinking they would have been better off keeping Truss?
“‘Printing money’, known more politely by that splendid euphemism ‘quantitative easing’. Inflation follows – who would’ve thought it!”
And that money printing went off the charts during “furlough” (as did fraud).
Something all the crowd begging to be locked down earlier, longer and more severely might like to reflect on.
I’d argue we’d be in a marginally better (or perhaps slightly less bad) state if they’d skipped Truss and gone straight to Sunak. He inherited an even worse mess than Truss did and hasn’t handled it well. He was however at least smart enough to know what the Truss/Kwarteng budget would do and they did it anyway.
He is the lamest of lame ducks now, can’t make a decision for fear of upsetting various factions of the party who will all come down on him like a ton of bricks. Even if they could replace him, who with? Where is the necessary talent? They have nobody.
I agree he is a lame duck. His manner does not help his cause either. He comes across as entitled, aloof and arrogant. That would be bad enough in itself but his vast wealth makes his life experience far removed from the public’s. He has made no real connection with the public at all. Everyone knows he will disappear once he ceases to be Prime Minister, probably to America.
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