Wage inflation

[doodab]

Look, you not listening - they took this mortgages when rates were 5%, ok? It might be reasonable to expect those people to get shafted if rates went up to 10%, however we are talking about increase from 0.5% - if you are saying that those people can't handle increase back to normal rates then they should not have borrowed in the first place.

They can handle the rates going back to what they were. What they can't handle is the rates going back to what they were and the price of everything else they have to pay for doubling, because wages haven't kept pace.

[SueEllen]

Let's just look who is selfish here.

1) Me - I won't gain anything directly from increased rates (you need lots of cash even in good days for 5% to generate meaningful returns after 40% tax).

2) You and people you defend - directly gain from low rate by having massive increase in disposable income. It's like having massive targeted tax cut - for those who took on debts and tax increase (via lower income in savings) on those who saved.

Who is selfish here?!?!

I think you have misread something.

Gingerjedi is pointing out for people like him there is no disposable income.

It's not sustainable to have rates at zero level when inflation is so high.

You should have saved money (which high rates should encourage) for periods out of work, and not load up yourself with debt if you are not sure what tomorrow brings (I speak from experience here).

It's easy when your life is predictable but not so easy when you have children or your spouse loses their job.

There are different reasons for inflation, right now it is mostly imported due to high cost of commodities which is made worse by weak currency (GBP).

So how will raising interest rates help that?

Also the weak pound helps exporters which is what we want.

In addition to this QE and unreasonably low rates maintain real estate bubble thus preventing realistic market pricing to establish itself.

One of the latest house price surveys showed prices had fallen 19% and this was mainly due to the fact banks are unwilling to lend to people with out large deposits.

As a consequence in my own area the price to rent a property has gone up a lot in the past year.

[gingerjedi]

Look, you not listening - they took this mortgages when rates were 5%, ok? It might be reasonable to expect those people to get shafted if rates went up to 10%, however we are talking about increase from 0.5% - if you are saying that those people can't handle increase back to normal rates then they should not have borrowed in the first place.

I'll say it again; fuel and food inflation, job losses and wage stagnation have taken up the slack and this doesn't leave any 'wriggle room'.

Are you listening?

[AtW]

Are you listening?

Yes, and all I am hearing is selfish person who wants to own house with 0% interest paid that is subsidized by savers twice - first not getting any interest on savings and second suffering inflation to due weak sterling that is due to low interest rates.

People who took on debt made that choice on their own accord, if you did that when rates were 5% then you have no right to whine when they go back up to that level, be grateful you had some breathing space in the first place funded by people who had nothing to do with your decisions in live.

[doodab]

Yes, and all I am hearing is selfish person who wants to own house with 0% interest paid that is subsidized by savers twice - first not getting any interest on savings and second suffering inflation to due weak sterling that is due to low interest rates.

People who took on debt made that choice on their own accord, if you did that when rates were 5% then you have no right to whine when they go back up to that level, be grateful you had some breathing space in the first place funded by people who had nothing to do with your decisions in live.

And what about the people who didn't take on debt, even when it was much less than 5%, and are now going to find it harder to save a sensible deposit or even to pay their rent?

[AtW]

I think you have misread something.

I didn't.

Gingerjedi is pointing out for people like him there is no disposable income.

He's overstretched himself with debt and did not allow himself room for maneuver.

It's easy when your life is predictable but not so easy when you have children or your spouse loses their job.

Yes live is unpredictable, that's why it is important to have high savings rate (mind was around 50% of net earnings at some point when I was getting £35k pa).

So how will raising interest rates help that?

First of all nobody owes any help to people who made decisions to get in debt - they are all adults and should have known what they were doing.

Secondly I've explained that increasing rates would deal with the problem by taking inflation under control, and finally bursting the house price bubble - once that is settled market will become realistic and less artificial.

Those who've overpaid or overstretched themselves will have to pay for decisions they made.

Also the weak pound helps exporters which is what we want.

B0ll0x - UK imports most of stuff (food, fuel, products in shops) - Germany can benefit from weak euro, but not UK from weak pound.

One of the latest house price surveys showed prices had fallen 19% and this was mainly due to the fact banks are unwilling to lend to people with out large deposits.

20-25% deposit was norm just a decade ago, wtf you calling it big? That's the whole point of having high savings rate - safety in case something happens and also helps you safe to buy a house. Keeps house prices under control too by limiting amounts banks can lend - limiting debt expansion and avoiding printing money (debt is just indirect way of doing it) are the two key things that help control bubbles.

As a consequence in my own area the price to rent a property has gone up a lot in the past year.

Rents are stable in my area but good places are in shortage, so I am paying now £1k per month

[AtW]

And what about the people who didn't take on debt, even when it was much less than 5%, and are now going to find it harder to save a sensible deposit or even to pay their rent?

Drop in house prices by 50% will make 25% deposit be more like 12.5% now.

[doodab]

Yes live is unpredictable, that's why it is important to have high savings rate (mind was around 50% of net earnings at some point when I was getting £35k pa).

Rents are stable in my area but good places are in shortage, so I am paying now £1k per month

I'm sure even you can see that if you were earning £35k now (and most young people earn a lot less than that), and paying £12k in rent, you wouldn't be able to save 50% of your net earnings.

[doodab]

Drop in house prices by 50% will make 25% deposit be more like 12.5% now.

When you have £0 left over every month it doesn't really matter.

[AtW]

When you have £0 left over every month it doesn't really matter.

When you have 0 left every month you need to do 2 things:

1) earn more
2) spend less

When I came to this country I lived in a shared house renting just one room for around £60 per week or so. Even when I earned £35k (permie) I kept renting room for some years - this helped me save enough to get SKA off the ground without begging "dragons".

Now I live in £1k rented very nice place but I am still not stupid to get into debt only to "own" house - I am sure I will soon regardless of what rates do, but without proper deflation of house bubble millions of others won't have a chance to proper own the house.