You're projecting now - I never said interest rates don't curtail inflation. I said in this situation one of the variables in the equation you threw-up is being nailed disproportionately by things mutually exclusive to cheap money.
Mortgage Rate Rises
- Thread starter glenimp617
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Caporegime
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We have lived in our house 13 years and had to do none of that. Boiler maintained and still works fine (Mid 00's). Roof is original 1970, a couple of tiles replaced. PVC doors and windows will last centuries tbh. The shed is the only part that is on its last legs but I re-felted the roof and it is dry for now although it has a mouse inside it. My deceased cat would have sorted that out but instead I have gone and bought some humane traps as I have gotten soft in my old age!
We do keep money for a rainy day which ironically is doing fantastic with all these interest rate rises.
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Sorry I'm not a wordsmith, you're going to have to break that down for me
Because it's the BoE remit to control inflation and they only have one tool to do that - set interest rates.
If you only have a hammer in your tool box, you'll treat every problem like a nail.
What @dLockers is saying is - raising interest rates isn't going to really affect the biggest inflationary products at the moment which is food and energy as people can't really cut back on those very much.
If inflation was being caused by discretionary spending items e.g. goods and services (TVs, holidays etc) then, yes, reducing spending power by increasing interest rates would help as people would stop buying those but you can't stop buying energy or food.
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Soldato
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What is driving inflation is the increase in the money supply, if oil and gas go up seperately due to perhaps geo-politics, this would result in a recession if we are not in inflation
The recession is caused because you cannot buy stuff that isnt gas and food because you dont have the money, or you tighten your belt in preparation for the future..
However oil and gas is not driving inflation, its driving cost of living, which should trigger recession, but it is not, due to being in an inflationary environment.
To fight inflation we need to get into how deflation works, and it gets far more complicated.
It isn't just monetary supply.
Its a part of it. But you've also got things like Ukraine stifling wheat. The lack Of gas from Russia.
So although things like stamp duty break (terrible policy) and the money printing haven't helped. Most of inflation is down to those global effects.
They seems stubborn too. If your raw materials costs (both energy and physical) are inflated it's going to ripple through everywhere. It's not just luxuries.
So people are spending less anyway due to these costs. Whack up inflation and it's even more.
Really. I guess that's why base rate isn't being sent sky high. It's not needed. These raw material prices should (damn well hope) come down. And the bank rate will push it along a bit.
Its a close one for me energy prices and base rate.
If I was exposed to the energy price rises I'd be 120 extra down per month
Base rate? I'd be 200 down per month as it stands.
Food I'm down 100 per month.
And that energy price is heavily cushioned too. If everyone was fully exposed to it.. Probably wouldn't even need to raise base rate.
Its a part of it. But you've also got things like Ukraine stifling wheat. The lack Of gas from Russia.
So although things like stamp duty break (terrible policy) and the money printing haven't helped. Most of inflation is down to those global effects.
They seems stubborn too. If your raw materials costs (both energy and physical) are inflated it's going to ripple through everywhere. It's not just luxuries.
So people are spending less anyway due to these costs. Whack up inflation and it's even more.
Really. I guess that's why base rate isn't being sent sky high. It's not needed. These raw material prices should (damn well hope) come down. And the bank rate will push it along a bit.
Its a close one for me energy prices and base rate.
If I was exposed to the energy price rises I'd be 120 extra down per month
Base rate? I'd be 200 down per month as it stands.
Food I'm down 100 per month.
And that energy price is heavily cushioned too. If everyone was fully exposed to it.. Probably wouldn't even need to raise base rate.
Except prices are going up faster !
Makes me furious the way banks are coining it in. Then you see a flipping "black horse" helping a kid and think that the bank in question has just scalped the parents for an extra % on their mortgage.
I think what concerns me most is that the way inflation is described I do think many people think 0 inflation will mean we go back to 2020. But even at 0 these prices are here to stay.
How is the economy going to get out of this stagnation?.. On that one.. I have no answers.
Life is going to get harder. And I do not see any way to change it (realistically)
How is the economy going to get out of this stagnation?.. On that one.. I have no answers.
Life is going to get harder. And I do not see any way to change it (realistically)
Hyper inflation and subsequent debasing of currency is one option.
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Soldato
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Price rises are not inflation. Inflation is only the money supply. raw material costs are not "inflated", they have risen.
These are two separate things, the price of oil does inflate for example, but its over a long term, things like Ukraine are only supply speculation volatility.
Inflation has occurred mostly in 2020, but its still moving around into things, how you fight inflation is to do nothing and so long as you don't continuously inflate the money supply, inflation will go down.
The issue here can be seen that, when a couple of banks collapse, the central bank prints new money, simply undoing the progress in the first place.
Part of the reason for stagnation is due to long period of low interest rates, borrowing is cheap, speculation is high. As interest rates go up, companies are now forced to earn profit or go bankrupt.
In addition, the unemployment rate is too low, there are too many people doing many useless jobs.
Well , the IMF state different
https://www.imf.org/en/Publications...lation is the rate of,of living in a country.
I think I'd rather believe the IMF than a random poster on here.
Well that's kind of my point in response to the other poster saying maintenance costs aren't flat and you sometimes have very expensive things to pay for. This is absolutely true, a roof replacement is expensive when looked at in isolation, but when you take into account how frequently it's actually needs doing, then over time, it really isn't.
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Soldato
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There is no believe aspect to this, the original definition is as i have said, it has changed over the years as the two things have been conflated.
People do not understand here, what inflation is, and what causes it, and the difference between various economic cycles, supply and demand etc.
All of that is simply inflation.
The purpose of the conflation is, if i am a politician, or a banker, to print money, mess everything up, then blame someone somewhere. Like putin for example.
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Soldato
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This is simply not true.
You have picked on a few expensive low frequency items that are really some element of luck in regards replacement as some kind of gotcha.
They do and will fail.
The easiest way to look at what happens over a sustained period is what happens when an old couple who have lived in a house for many years in old age end up selling.
Those houses typically have tens of thousands knocked off the price since they need a full overhaul because they haven't been maintained because they simply can't do it themselves.
UPVC windows like old wood ones dont last forever. In fact wooden windows are a great example, Adams house being a prime one. His house from the 70s didn't have UPVc windows in it when built, someone paid the sum to change them.
Seals go, hinges go, locks go, units can and do fail. Its just luck once you get to sort of 10 years as to if you get a good run out of your or bits start to fail. Thats maintenance.
Maintenance is not just does the rook leak, or the boiler breakdown. But is it safe, eg electrics, and in preventing a longer term issues (painting exterior) and in preventing loss of value (interior standard).
Replacing kitchens, bathrooms, painting walls etc are all part of maintenance, maintaining the value of the property.
Well, that, I can agree on... I just doubt we are aiming that comment at the same people however.
Though if it was just external factors, material & energy costs, how come US inflation has dropped to ~4.9% and avg EU inflation to 6.9% when all those things affect them too.
What needs to happen is you first get inflation under control, so prices stop rising so dramatically. Then you enact policies to encourage growth in the Country which then should facilitate pay rises (a thing this Country specifically hasn't seen a lot of since the 2008 crash - especially compared to our peers) which then makes things more affordable again.
But we're probably talking at least another decade to get out of this.
Soldato
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Energy and materials are far cheaper in the US and haven't been as badly impacted because they produce much of it themselves rather than importing like we do.
Not as sure about EU but aren't several of their major governments subsidising energy more than we are?
Soldato
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The US vs UK comparison is difficult.
We import most of the things that have had the highest inflation where as the US actually produces a lot of them.
Currency exchange, as well, although quite limited in this timeframe.
Plus Brexit impacts still taking effect
But again, how much do those things cost vs how often they need doing? You mention having 10s of thousands of work needing doing, but over what period have those 10s of thousands built up? Having seen "old people houses" whilst home "shopping", we're not talking 10 or even 20 years - this is electrics which still have black and red wiring, kitchen units and carpets from the 70s, avocado coloured bathrooms etc. It's decades worth of "neglect", so of course it's going to cost decades worth of maintenance to get it back up to a modern standard. Ongoing maintenance isn't /that/expensive relatively.
Obviously this is property dependent - a 500 year old thatched cottage by the sea is going to take (and cost) significantly more maintenance than a 30 year old mid-terrace in the middle of a central city.
The other thing to bear in mind is that if it's your own home, chances are you're going to decorate it with more "premium" fixtures & fittings etc. Unlike a landlord fitting the cheapest possible, and covering everything in smartprice magnolia paint - you could reduce your costs further by doing the same.
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Soldato
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