Brexit thread - what happens next

[malachi]

Interest rate dropped, first wake up sign to some that Brexit is a reality.

 

[Burnsy2023]

I guess it's all scaremongering though isn't it?

The the best data available shows a slowdown in the economy since the Brexit vote, so no, it's not scaremongering.

Looks I'll be paying for a bank to look after my ISA before long.

 

[Freakbro]

It wasn't just an interest rate cut, but also some more QE and a new Term Funding Scheme (Designed to force banks to pass on the 0.25% cut)

And the £ weakened slightly again, but that's to be expected with an interest rate cut

 

[Mr Jack]

I wonder what impact the 0.25% is likely to have in reality.

Sweet FA, I think. I'm getting less than extra £10 a month, I believe. Whoop-de-do let me get right on that spending spree! The base rate cut is more about signalling than anything else, I think, the other measures are more significant as is any potential action by the government. The 5% VAT stimulus being called for by various Labour figures, for example, would have a much bigger impact on the economy.

 

[datalol-jack]

Welp, we're here now: at least Carney can no longer be fobbed off as a shill in collusion with George Osborne, now that he's actually putting the BoE's analysis and planned responses into use.

 

[Schlong&Stable]

Welp, we're here now: at least Carney can no longer be fobbed off as a shill in collusion with George Osborne, now that he's actually putting the BoE's analysis and planned responses into use.

I'm not sure today's move changes that. Not that I am saying he's a shill, but there are some who would argue a rate cut is the exact opposite of what the economy needs as it will further dampen productivity. Those same people might argue that the BoE is applying this cut for political reasons rather than economic prudence.

 

[doodah]

I'm no economist but come again........?

......and the Bank of England’s Governor Mark Carney, provoked the fury of pro-Leave campaigners when he warned that a “technical recession” was a possible consequence of a Brexit vote in the referendum campaign

Truth hurt much?

 

[StriderX]

Sweet FA, I think. I'm getting less than extra £10 a month, I believe. Whoop-de-do let me get right on that spending spree! The base rate cut is more about signalling than anything else, I think, the other measures are more significant as is any potential action by the government. The 5% VAT stimulus being called for by various Labour figures, for example, would have a much bigger impact on the economy.

Would a VAT cut really be useful for the short term?

Most people wouldn't realise it in the first place surely... And we'd be having to borrow to make up for he losses.

We need Negative rates to force the piles of cash people are sitting on to be used, simple as.

But that is going to really aggravate the Americans, as they've been vitriolic to Japan about it.

 

[glenimp617]

Mortgages will get cheaper, due to lower interest rate. Oh hold on, no the banks fudge the interest rate higher in our contracts, no change then.

Yeah, the problem is that if you don't have a BoE tracker then you won't benefit. Every time I've taken a mortgage out, the consensus is to fix as the rates will go up. Never has

I know though, if I don't fix and rely on the base rate, interest rates will sky rocket.

 

[Mr Jack]

Yeah, the problem is that if you don't have a BoE tracker then you won't benefit. Every time I've taken a mortgage out, the consensus is to fix as the rates will go up. Never has

Fixing is more likely to be a mistake than not, regardless of the current economic conditions. The only circumstances under which you should fix if you really can't afford any increase. Otherwise, stick the big savings from a discount mortgage into saving or investments and use them to pay for any future rise above the fixed level and, much more often than not, you'll come out ahead of a fixed rate. A fixed rate is you paying the bank to bare the risk of changes in interest rates.

 

[Zethor]

I wonder what impact the 0.25% is likely to have in reality.
Those that have money wont be persuaded to spend based on this
Those relying on savings to generate an income will be hit a bit, but savings rates are so pitiful they cant drop much more
Those living beyond their means probably wont see any difference as card companies and lenders probably wont move rates
Mortgage rates will probably move for some, but from what i can tell most people linked to rates that directly link to base rate are taking this opportunity to use the low rate to overpay
Some government debt will be affected but surely thats not the key driver
From what i can tell there isnt a liquidity issue now, but maybe they expect it could turn into one and hence trying to avoid this with the rate drop?

It won't have a meaningful impact. It's a message to investors that basically says 'We have a problem and we are starting to adress it'.

 

[Mr Jack]

Would a VAT cut really be useful for the short term?

It worked reasonably well last time. It's not a complete answer it itself but it's a better form of stimulus than a quarter point base rate cut.

Most people wouldn't realise it in the first place surely... And we'd be having to borrow to make up for he losses.

We would, but failing to stimulate growth is more costly in the medium to long term. Much of the reason that we're in such a pickle now is that Osborne's mismanagement of the economy has meant we've recovered poorly and so we're not in a position of strength to deal with the coming recession.

 

[glenimp617]

Fixing is more likely to be a mistake than not, regardless of the current economic conditions. The only circumstances under which you should fix if you really can't afford any increase. Otherwise, stick the big savings from a discount mortgage into saving or investments and use them to pay for any future rise above the fixed level and, much more often than not, you'll come out ahead of a fixed rate. A fixed rate is you paying the bank to bare the risk of changes in interest rates.

Yeah, I'm the type of person who tries to remove any and all risk with his finances....but more often than not ends up working out more expensive.

Hindsight eh?

 

[Chuk_Chuk]

Would a VAT cut really be useful for the short term?

Most people wouldn't realise it in the first place surely... And we'd be having to borrow to make up for he losses.

We need Negative rates to force the piles of cash people are sitting on to be used, simple as.

But that is going to really aggravate the Americans, as they've been vitriolic to Japan about it.

I thought VAT cuts where mainly for business and not for consumers. For example when the VAT went down to 15% I'm pretty certain prices never changed and businesses pocketed the extra cash.

 

[Burnsy2023]

I thought VAT cuts where mainly for business and not for consumers. For example when the VAT went down to 15% I'm pretty certain prices never changed and businesses pocketed the extra cash.

You have a short memory. Most business did pass on the tax cut, my own finance data shows that.

 

[Chuk_Chuk]

You have a short memory. Most business did pass on the tax cut, my own finance data shows that.

Edit just realised how dodgy my original question sounds.

What I'm trying to say is that for things below £100 there didn't seem to be much of a change in price

 

[scorza]

I still don't see why the government can't print money ala QE, but instead of giving it to banks use it to fund infrastructure projects. We could use it to fund the £8bn hole in the Hickley C reactor now we've come to our senses on China.

 

[Darujhistan]

I still don't see why the government can't print money ala QE, but instead of giving it to banks use it to fund infrastructure projects. We could use it to fund the £8bn hole in the Hickley C reactor now we've come to our senses on China.

Let's hope we have indeed come to our senses on Hinckley C. A wholly ludicrous and irresponsible scheme.

 

[willems]

Mortgages will get cheaper, due to lower interest rate. Oh hold on, no the banks fudge the interest rate higher in our contracts, no change then.

santander first bank to say they'll pass on rate cut to holders SVR

 

[PlacidCasual]

As to infrastructure funding, the BBC had an article suggesting that in Australia nearly all infrastructure projects were carried out by the Government and then sold on to pension firms when complete. The rationale being pension funds couldn't justify the risk associated with the build phase but often made very good corporate owners. The Government ensured necessary projects progressed by owning the risk then released the capital invested by selling it on allowing it to be used for the next project. It meant the Government wasn't sitting on vast amounts of debt/capital.

[sarc on]In other news Phillip Hammond is going to turn the economy "up to 11" following Bank of England's rate cut.[sarc off]