Inflation rises to 4%

nucastle said:
You can't keep inflation low, without increasing interest rates.

This most basic of economic theory 'rules' has been basically thrown in the bin to keep the masses from rioting on the street, so their mortgage payments could be taken out of the equation as much as possible.

..... meanwhile inflation sky rockets, and we only get to hear the 'official' number. And people wonder why everything costs more and more and more and more?! Hilarious.

The moment interest rates go up, the people will panic. Of course the 'evil tories' will be blamed for all the pain, and the fact that the country had to be put on economic life support in order to keep us from a Greek meltdown by the previous administration will all but be forgotten.

The sad thing is that people are starting to believe that mortgage rates of 0.5% are somehow 'normal'. Don't forget that Japan has been in the doldrums for nearly 20 years now - in a similar situation.

Its no wonder China became the worlds second largest economy yesterday.
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How do other countries maintain inflation when their banks offer 20 year fixed?

I'm on a 10-5 mortgage for the moment I'd say 90% of people I know are either 20 year fixed or 10-5-5 with 2% cap?

I wonder how Belgium keeps it's inflation down?
 
MatteH Oxford said:
wouldn't raising rates increase the value of the pound?. given that the UK is a net importer of most of those commodities, the prices should then actually fall as sterling gains 'value'?
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Depends if you're willing to damage exports in order to do it, and whether the other damage a rate rise would do is worth it. Currently, the BoE don't think it is, and I would tend to agree with them.
 
Admiral Huddy said:
For example, some people may be worried that mortgage rates may go up. The dilemma for those people is do I or don't I fix. That's a risk.. If they fix the mortgage and rates stay low. You loose! It's no different for the banking industry..
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Except you loose nothing your loss is virtual if you are happy with the payments.

Only the greedy would say otherwise.


The banks charge high rates of interest on the 1st 10 years of mortgage payments HUGE profits for little risk. They give you 200K the first year you pay back 12K 10K of which is interest so free profit for the bank.

The bank can then give this 10K to the next person (it cost them virtually nothing) so they only need to give 190K to the next person. The next year they make 20K free interest payments and only need to give 180K to the third person.

By the time the first person has paid the interest they have already easily been repaid the cost of their investment in interest payments alone.



If the banks can make a good profit with low risk why take the riskier option?
 
jas72 said:
Except you loose nothing your loss is virtual if you are happy with the payments.

Only the greedy would say otherwise.
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So you would still be 'happy with the payments' if you knew you could have got them significantly cheaper?

I know I wouldn't.
 
I can't say there's much to be worried about, we've just had a 2.5% hike in VAT which is the only reason inflation has hit the "scary" 4% threshold (which is, of course, historical still pretty low). Once the pricehike from the tax change is washed through, inflation will fall anyway, and internal price pressures from the cuts and mass job losses should restrain inflation.

Having said that I do think the BoE should introduce a small rise in interest rates - even if I personally benefit from them - because staying this low for this long is not healthy and will have harmful effects in the medium to long term.
 
Watching the News earlier. Apparently the 'market' has already priced in a 0.25% increase in May with rates being about 1.5% by the end of the year.
 
daz said:
Some people have tracker mortgages will will be base rate + 2% (for instance) so people will be paying very little on the interest portion of their mortgage at the moment if they have such a mortgage.
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Too right - I was rather pleased (for once) to have made the correct mortgage decision to move to a 'lifetime' tracker at 0.59% over Base Rate when my last tracker rate expired in 2009

:)
 
Selekt0r said:
Too right - I was rather pleased (for once) to have made the correct mortgage decision to move to a 'lifetime' tracker at 0.59% over Base Rate when my last tracker rate expired in 2009

:)
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Oo thats better than mine, thought 1 % lifetime tracker was a good deal, think mine was in 2008
 
If the banks had to lend money out for mortgages that they actually had, instead of money that they create out of thin air. Then they would not be able to lend out as much money. So the price of houses would come down. The banks do not have any risk in lending mortgages. So it is actually within the banks interest that the house prices increase, so that they can offer you (no risk for them) loans, that you have to put down a massive deposit on.

They take your deposit, you then pay off your mortgage and if you can't pay, they take your house and your deposit and you get nothing. If you have insurance you can survive not paying. But if the house market prices come down, like in the states, it is actually more financially beneficial to walk away from the house or you can continue paying the over priced mortgage and the banks still wins. If you walk away, the banks have no loss, they still own the property, they have all your payments and your deposit.
 
Bank of England seem to be solely looking after people with liar loans and unaffordable mortgages.

If you don't fit into that bracket then expect to pay £4 for a loaf of bread, £7 for a happy meal and so on. Despite of all that most of us will be lucky to get a pay increase in the next 5 years.
 
or alternatively, the BoE realizes that raising rates to punish these people won't help keep prices down and therefore decides it is a bad idea?
 
4%, even 5%, is hardly going to lead to people starving to death; especially as most of it is down to the record high prices of oil and petrol which are about as price inelastic as is possible. Economic growth is the main concern for the UK at the moment and the easiest (but by no means the best) way to increase demand for goods and services is by keeping interest rates low.

Low interest rates and low inflation are very nearly mutually exclusive and it was inevitable that inflation was going to increase with the base rate at 0.5%, even without major increases in oil and petrol prices. I'm more concerned with the shrinking economy and can't see interest rates rising above 2% until there is 4+ quarters of growth over 0.5%.
 
What happens to debts such as mortgages in a Zimbabwe like situation where so much money is introduced (printed) into the system, and there's hyper inflation?

eg you have a mortgage and there's massive inflation, do you get your house on he cheap?
 
Dolph said:
Indeed, which is why raising rates won't stop inflation rising unless it is done specifically to depress the already subdued parts of the economy even further, which are the very parts we need growth in...


still no doubt the usual suspects will be ignoring the labour cause of this issue...
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Dolph said:
Raising rates only works when inflation is being driven by excessive internal demand. Currently, the increases in inflation are being driven by external rises in commodity costs, which has nothing to do with changing internal demand, especially where demand is price inelastic (such as fuel).
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So which is it Dolph?

You can't have your cake and eat it.

Exactly how far along the Coalitions economic plans are Labour going to be continually blamed for the fiscal ineptness of other people?
 
Seems our Govt would rather fund a school in a remote part of Afghanistan rather than look after its own people. The money wasted in illegal wars beggars believe ......
 
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