How high will inflation go ?

[IanSuth]

Warning homeowners face 20% drop in disposable income

Some 1.4 million mortgage holders will see their disposable income fall by more than 20%, a think tank says.

www.bbc.co.uk

This is what i was writing about months ago
Rising interest rates could cause 1.4 million mortgage holders see their disposable incomes fall by more than 20%, a think tank has warned.
Some 690,000 of those set to be hit hardest will be under 40

if those are you target customers expect choppy times ahead, equally bank upon pay demands from staff in that bracket. It won't be because they are greedy or spending on frivolities but because they have just run out of slack in their finances.

May be worth looking at things you can do which cost you less than a payrise (which is permanent) but allow them to save money, allow them some flexibility over hours in the summer to help cover childcare without paying someone/a holiday club for example.

 

[MBE2017]

Big day tomorrow, reckon it will to be a large interest rise from the BoE, they don’t have much else to use. Inflation remaining at 8.7% today comes as a big surprise, most thought it was likely to drop officially below 8%, but huge food increases put paid too that idea.

Personally I think a half % increase, taking the base rate of the BoE to 5%, with further stricter stress testing being introduced. For those thinking landlords are raking it in, most are not. With the new reforms being discussed, not only will tenants gain several new rights, but most landlords will have to pay for further training, new registration fees, tribunal fees potentially etc. Funnily enough, many of these changes do not apply to social housing properties, which is where the vast majority of complaints come from.

Anyone in the game, do your homework now, it takes six months minimum to get certain training, it is not just a box ticking exercise, ensure your letting agents understand the new landscape as well.

I’m not a landlord, or letting agent, but seem to understand more about what is heading the industries way than many already in it.

 

[The Byre]

Join the dots, folks!

The money supply is tightening because money is leaving the system, going into gilts and bonds and gold - all places where it remains static and no longer a part of the real economy.

Interest rates are going up and up everywhere, pulling spending power out of the real economy.

This is a three-strikes and you're out scenario! The third strike is when share prices fall. They have not done that yet but they will. When unemployment starts to rise, that's when you know the reset has started!

I have been warning about this for at least five years here - brace for impact! We're going down!

Next stop - a deflationary depression if we're lucky. Hyperinflation and disaster if the government is stupid enough to try to borrow its way out of the hole it dug for itself and the central banks pivot and cut rates! "Too late, the prophets (profits) cried. The island's sinking, let's take to the skies!" - Supertramp.

MV=PQ=GDPn as Copernicus said in 1517 as he clicked on Zoopla, looking for bargains!

 

[UKSBD]

As long as savings rates stay within 2 or 3% of mortgage rates I'm fine

I still have a small mortgage but have more in savings

Previous few years there has only been 1 or 2% difference so prefered to keep the savings and mortgage

Last 6 months my savings interest has actually been higher than mortgage interest, this changes in April 2024, if my mortgage rate does go up to the 8 or 9% as predicted and savings are only at 4% That's when I will consideer paying off the mortgage

It's like Martin Lewis was saying, the building societies are being unfair by raising borrowing rates at a drop of the hat, but not raising savings rates so quickly.

Both help tackle inflation, so why isn't the Government putting pressure on them to keep the gap between borrowing rates and saving rates fairer?

 

[Chris Ashdown]

O dear remember we still survived at just under or maybe over 15% in the 80's

What's all the fuss about at 5%, just caught out by the stagnate prices for about 5 years and brought silly money houses that were really far in excess of their means if they had looked long term rather than short term

 

[The Byre]

Both help tackle inflation, so why isn't the Government putting pressure on them to keep the gap between borrowing rates and saving rates fairer?

Because they need the arbitrage (spread between the two rates) to cover the growing number of defaults.

O dear remember we still survived at just under or maybe over 15% in the 80's

We (well, actually you - I wasn't here) didn't have record amounts of debt, both private and government debt. That is the bubble that threatens the very fabric of society if/when it bursts!

silly money houses that were really far in excess of their means if they had looked long term rather than short term

Exactly! Many people were stampeded into spending more and more to get less and less!

 

[MBE2017]

I have been warning about this for at least five years here - brace for impact! We're going down!

I must have missed that post of yours.

 

[Red Wood]

This is a three-strikes and you're out scenario! The third strike is when share prices fall. They have not done that yet but they will. When unemployment starts to rise, that's when you know the reset has started!

My stock and shares ISA is doing OK, something has been telling me to liquidate it though, but frankly, I haven't the balls... probably live to regret it.

 

[IanSuth]

O dear remember we still survived at just under or maybe over 15% in the 80's

What's all the fuss about at 5%, just caught out by the stagnate prices for about 5 years and brought silly money houses that were really far in excess of their means if they had looked long term rather than short term

In the 80's the proportion of peoples income needed to cover that 15% was much smaller than now because house prices are stupidly inflated currently due to a mixture of help to buy, relaxed lending rules & people pumping their pensions into property.

1985 Average salary c £10.5k house price £29k
2023 Average salary c £27k house price £286k

Salaries are about 2.5x house prices are 10x and people have much larger mortgages as a % as well

 

[The Byre]

My stock and shares ISA is doing OK, something has been telling me to liquidate it though, but frankly, I haven't the balls... probably live to regret it.

That will depend on which shares you have bought. For example - water equipment companies with low or no debt will be OK in the long run, though they may go down by as much as 50% for a while (as a result of margin calls!) and then climb back out of that hole (see Franklin Electric). In general, I would be looking for low-debt companies with healthy revenue and profit flows in safe jurisdictions.

I would be very reluctant to rely on fund managers as they get things right about 50% of the time - flipping a coin is about as good!

The problem is that nobody knows where the trouble will start and what will really happen. I am attending all kinds of online group discussions and the economists present are as clueless as everybody else. We know something terrible will happen, but we do not know which bit of whose economy will break first! I am looking at the UK as the most likely candidate as it is the worst off of the larger Western economies. It is also the worst governed (IMO).

As for inflation - on the one hand, the BoE is trying to bring it down the money supply with higher interest rates. On the other hand, the government remains as wasteful as ever and continues to borrow new money into existence. Of course, the BoE could set the cat amongst the pigeons by refusing to buy the government's gilts - the result of which would be the total implosion of central government.

It's an enticing thought, isn't it? Imagine - civil servants not getting paid. HS2 dead in its tracks! All HSRC functions go offline. The Universal Credit scheme just collapses. Riots and fires in major cities everywhere and police have long since walked off the job. Rubbish piles up in the streets (again!) as the bins are not being collected. Bodies stored in meat lockers as the morgues are full (again!)

I missed it all the last time as I was not here, but we watched you all having fun on TV. All those German reporters trying hard to not look smug as they reported on the Englische Krankheit (The English Disease).

Until all this kicked off in the 70s and 80s, when a German spoke of Die Englische Krankheit, they meant rickets. Today, they just mean economic mismanagement by government.

I must have missed that post of yours.

There you go - https://www.ukbusinessforums.co.uk/threads/byretorial-i-predict-five-shillings-saved.392535/ That was back in 2018.

In that thread, I mentioned the 2007 CDO crisis, which lead to the 2008 banking crisis. "This is a far, far bigger black hole and it is opening up right under the US and UK governments. 2008 was just the overture."

@Mark T Jones stated that prophets of doom are stopped clocks "In my view, recession predictions are stopped clocks - sometimes they are right, but the information is still worthless."

He was of course right, in that recessions come every few years so we just have to sit tight and wait long enough. Except what I am saying is coming will be far worse. The problem is that I do not know (nor does anybody else!) what it is that is coming!

I cannot even tell you when!

It is like looking out to sea and seeing the water recede by a few miles. WTF is coming? The last time things looked this bad, it heralded WW2. And the seeds of WW2 were sown decades earlier. (Or as Spike Milligan put it "Prince Ferdinand of Austria still alive! World War One a mistake!")

Of course, back in the 1920s, some saw what was coming and a few became rich as a result - but nobody had coined the expression 'Pessimism Porn'. Like any horrific event, we have to stare!

 

[UKSBD]

Short term thinking is the problem

People thinking if an interest rate is a *% percentage now it's always going to stay that forever is crazy

Mortgages are like investments, people should be thinking about the average rate for the whole mortgage period, not just 5 years of it

 

[Newchodge]

Short term thinking is the problem

People thinking if an interest rate is a *% percentage now it's always going to stay that forever is crazy

Mortgages are like investments, people should be thinking about the average rate for the whole mortgage period, not just 5 years of it

Would it not be better that, as in many countries, the rate were fixed for the full term so that you knew exactly what your costs would be?

 

[UKSBD]

Would it not be better that, as in many countries, the rate were fixed for the full term so that you knew exactly what your costs would be?

If you can counter act human behaviour and what generations of UK citizens believe - yes

If suddely setting the rate at a 50 year average in a period of low rates led to civil disobedience, destitution - no

Edit to add: It would also be better if clauses were relaxed
I would have much preffered a longer fixed term contract last time I switched, but too many clauses about if you pay ot off early, how much overpayments you can do, etc.

 

[Newchodge]

If you can counter act human behaviour and what generations of UK citizens believe - yes

If suddely setting the rate at a 50 year average in a period of low rates led to civil disobedience, destitution - no

Edit to add: It would also be better if clauses were relaxed
I would have much preffered a longer fixed term contract last time I switched, but too many clauses about if you pay ot off early, how much overpayments you can do, etc.

When I first got a mortgage in the early 80's, there were no fixed rate deals. You paid the rate that was current at the time. Which increased, at one point, to 18%, I think. But they managed to change the system to allow fixed rate mortgages, they can change it again for new mortgage holders.

 

[Justin Smith]

TBH I no longer think how high inflation will go is the significant question, it's how long will it remain.
The fact is that many people saved huge amounts of money during the pandemic as they were being paid Billions by the government (for doing nothing) but were severely limited in what they could spend it on at the time. It is no coincidence that inflation only started rising when vaccines came out and people started getting confident about spending (see graphic below).
The big problem is many people (the ones who saved a shed load) are cushioned over inflation because of all that dosh, so stifling inflation may take some time as it has to work its way out of the system.
An article here suggests huge figures too :

But even if consumers do run down their savings pots, it is difficult to work out how much is left in them. One option is to look at the savings rate, which tells us how much households are putting away each quarter. By adding up the flow of savings over and above the pre-Covid trend, we can work out the stock of ‘excess’ savings acquired over the course of the pandemic.
Using this method, Ashley Webb, UK economist at Capital Economics, calculates a sum of £294bn – or almost 12 per cent of gross domestic product (GDP) (for context, the substantial tax cuts announced in Kwasi Kwarteng’s mini-Budget added up to £45bn). But this is almost certainly an overestimate: Webb notes that the measure doesn’t adjust for any funds that have been invested in housing and financial assets or used to pay down debt. Although this money was in households' savings at some point, it might not be any longer.

The only positive is inflation is far higher than savings rates so there is an incentive to get the cash spent sooner rather than later, which also contributes to the current inflation level but implies it may not last as long as it could.

 

[UKSBD]

But they managed to change the system to allow fixed rate mortgages, they can change it again for new mortgage holders.

They proably can - but would people take them up on it?

Assuming the average of a 50 year cycle is 8%

Providing a full term fixed rate of 8% when the past 10 years it has averaged 12% sounds great

Providing a full term fixed rate of 8% when the past 10 years it has averaged 2% sounds naff

How do you convince those who have been used to paying 2% that an 8% full fixed term is better for them? (even when statistically it probably is)

I personally think for new mortgage holders it makes sense to have long term fixes, compulsary or voluntary though?

 

[Newchodge]

They proably can - but would people take them up on it?

Assuming the average of a 50 year cycle is 8%

Providing a full term fixed rate of 8% when the past 10 years it has averaged 12% sounds great

Providing a full term fixed rate of 8% when the past 10 years it has averaged 2% sounds naff

How do you convince those who have been used to paying 2% that an 8% full fixed term is better for them? (even when statistically it probably is)

I personally think for new mortgage holders it makes sense to have long term fixes, compulsary or voluntary though?

If that is all that is available they accept it or they don't get a mortgage. Simple.

 

[IanSuth]

TBH I no longer think how high inflation will go is the significant question, it's how long will it remain.
The fact is that many people saved huge amounts of money during the pandemic as they were being paid Billions by the government (for doing nothing) but were severely limited in what they could spend it on at the time. It is no coincidence that inflation only started rising when vaccines came out and people started getting confident about spending (see graphic below).
The big problem is many people (the ones who saved a shed load) are cushioned over inflation because of all that dosh, so stifling inflation may take some time as it has to work its way out of the system.
An article here suggests huge figures too :

But even if consumers do run down their savings pots, it is difficult to work out how much is left in them. One option is to look at the savings rate, which tells us how much households are putting away each quarter. By adding up the flow of savings over and above the pre-Covid trend, we can work out the stock of ‘excess’ savings acquired over the course of the pandemic.
Using this method, Ashley Webb, UK economist at Capital Economics, calculates a sum of £294bn – or almost 12 per cent of gross domestic product (GDP) (for context, the substantial tax cuts announced in Kwasi Kwarteng’s mini-Budget added up to £45bn). But this is almost certainly an overestimate: Webb notes that the measure doesn’t adjust for any funds that have been invested in housing and financial assets or used to pay down debt. Although this money was in households' savings at some point, it might not be any longer.

The only positive is inflation is far higher than savings rates so there is an incentive to get the cash spent sooner rather than later, which also contributes to the current inflation level but implies it may not last as long as it could.

The issue is that the savings are not spread evenly

Many low paid workers were still working, managed to save little or none and are now being hammered by rising rental costs, they can't change their spending as they have no leeway

Others older and richer, sat at home with smaller outgoings, saved a large amount, are now working from their owned homes with less fixed outgoings and are earning greater interest on their savings. Rising interest rates have little effect on their spending habits.

Neither of those 2 groups will change inflation through changed spending

 

[IanSuth]

If you can counter act human behaviour and what generations of UK citizens believe - yes

If suddely setting the rate at a 50 year average in a period of low rates led to civil disobedience, destitution - no

Edit to add: It would also be better if clauses were relaxed
I would have much preffered a longer fixed term contract last time I switched, but too many clauses about if you pay ot off early, how much overpayments you can do, etc.

The issue is that for the last 25+ years we have been conditioned to think property is an ever inflating asset - any money you can put in it will long term grow and also save you spending on rent so hock yourself to the hilt - hence property prices being dependant upon the supply and demand of capital rather than properties.

Those tho did that in the last 10 years are the ones who are going to be squealing at these interest rate rises - they just didnt do the sums and the mortgage companies/estate agents didnt want them to anyway

 

[IanSuth]

Would it not be better that, as in many countries, the rate were fixed for the full term so that you knew exactly what your costs would be?

Or even better they set a minimum deposit at something like 25%

That would cool the market and to be frank, stop people just going for the most expensive house they could get a mortgage for

It would have to be phased in over a few years but no more painful than the phased changes to pensionable age or companies having to pay into pensions

 

[BobzYourUncle]

The next few years are going to be pretty crap. A forced quick and sharp recession by the BOE seems inevitable. Inflation has become sticky. I see it my industry, food. My suppliers are not passing on discounts to businesses. For whatever reason. Which means we can only keep putting prices up. It will never go down. The price of correcting this crisis looks like high unemployment, businesses going to the wall, property crash lots of uncertainty and volatility. There will be lots of repossessions unless banks are able to extend peoples mortgages to say 40 years!

 

[IanSuth]

There will be lots of repossessions unless banks are able to extend peoples mortgages to say 40 years!

Counterproductive unless they say it is only for existing owners and they can't buy another property without dropping it back to the original term - otherwise will just continue house price inflation due to excess availability of capital.

The UK needs a huge property price reset - as I have said before, I am willing to take a 50% hit on the paper value of my property as it only matters when trading down and I would like my children to have a hope of not putting all their earnings into rent.

I see no other way to sort out our economy - lower rent means more disposable income to spend on life or pay off debts (and now 50% go to uni that is a lot of debt the govt is carrying for them as student loans)

 

[Justin Smith]

The issue is that the savings are not spread evenly
Many low paid workers were still working, managed to save little or none and are now being hammered by rising rental costs, they can't change their spending as they have no leeway
Others older and richer, sat at home with smaller outgoings, saved a large amount, are now working from their owned homes with less fixed outgoings and are earning greater interest on their savings. Rising interest rates have little effect on their spending habits.
Neither of those 2 groups will change inflation through changed spending

I disagree, quite apart from anything they might be more likely to leave their money in the bank (earning reasonable interest) rather than thinking I want to spend it now whilst it's still worth something

 

[IanSuth]

I disagree, quite apart from anything they might be more likely to leave their money in the bank (earning reasonable interest) rather than thinking I want to spend it now whilst it's still worth something

interest rates are significantly less than inflation - especially of day to day goods so pointless holding off spending.

Watch that washing machine or hoover go up in price 10-15% as you get 4% (at best) locking the money away in savings.

If you want people to save not spend then interest rates have to be above effective personal inflation for the consumer in question.

My mother tells me she only ever did catalogue shopping in the 70's for big items because you could wait until just before a new 1/4's catalogue came out and purchase at a price less than the shops had it at because inflation was so high - didnt stop her purchases, just made her timings change

 

[MBE2017]

I see no other way to sort out our economy - lower rent means more disposable income to spend on life or pay off debts (and now 50% go to uni that is a lot of debt the govt is carrying for them as student loans)

Rents will not reduce with an interest rate cut. With the Rent Reforms going through, new requirements coming through, basically local tax increases, and many private rental houses now off the market, demand is vastly outstripping demand.

Thousands of private landlords are quitting the industry, many are converting to service accommodation, without a major tax reform, incentives plus a National house building plan, things will not get better anytime soon.

To give you an indication of the problem, I hear Bristol now has 1400 less private rental rooms/houses, having lost them to serviced accommodation. Many landlords have no choice, now being taxed on mortgage interest as private rentals. This problem will only accelerate with higher interest rates. Less supply mean only one thing, higher rents. This is just one city in the country.

The really big next problem will be student accommodation, the Government is being asked to reconsider their ill judged Michael Gove rental reforms, but, there are no guarantees they will listen.

 

[BobzYourUncle]

Counterproductive unless they say it is only for existing owners and they can't buy another property without dropping it back to the original term - otherwise will just continue house price inflation due to excess availability of capital.

The UK needs a huge property price reset - as I have said before, I am willing to take a 50% hit on the paper value of my property as it only matters when trading down and I would like my children to have a hope of not putting all their earnings into rent.

I see no other way to sort out our economy - lower rent means more disposable income to spend on life or pay off debts (and now 50% go to uni that is a lot of debt the govt is carrying for them as student loans)

Deffo agree that something needs to be done to reset the property prices. Its going to be painful but necessary. It doesnt help we humans have this fundamental flaw. We have this preoccupation for ownership. It's not just houses. We just seem to want to accumulate so much stuff wether it's material stuff or investment etc. In most cases more than we will ever need in our life time. We dont need 2 homes and chalet in france right?? But still we don’t see anything wrong with it. My parents used to bang on about needing to buy a house when I was young and that bricks and mortar will always be safer in the long run. Speculate to accumulate its instilled. They would say you can always rent it out. Or it will be a good pension pot. Dont get me wrong I'm also guilty of this too. I'm sure I've also encouraged my own kids to not rent long term, it's dead money only making the landlord rich. Buy your own place. It will always increase in value. And I'm sure I'm not the only one. And here begins this prepetual behaviour of seeing property as a no lose entity from your have a go average Joe Bloggs being a small time property developer or BTL landlord. People see how easy it can be and Mr Joe Blogg is now driving a beamer and 4x4 going on fancy holidays. Its not hard to see how we get this way eventually suckered in to this illusion that attaining wealth equates to happiness. Even after a property crash/reset. This cycle of speculation, need for ownership need to get wealthy, however destructive will just start again. I guess we just can't help it. ?

 

[Newchodge]

It doesnt help we humans have this fundamental flaw.

While I agree with most of your post, I cannot accept that this is a human flaw. It is a flaw in English society (and in some others) but it most certainly is not universal. in many European countried (never mind the rest of the world) home ownership is not the norm.

We dont need 2 homes and chalet in france right?? But still we don’t see anything wrong with it.

Many of us have seen a lot wrong with this for a long time!

 

[IanSuth]

Rents will not reduce with an interest rate cut. With the Rent Reforms going through, new requirements coming through, basically local tax increases, and many private rental houses now off the market, demand is vastly outstripping demand.

Thousands of private landlords are quitting the industry, many are converting to service accommodation, without a major tax reform, incentives plus a National house building plan, things will not get better anytime soon.

To give you an indication of the problem, I hear Bristol now has 1400 less private rental rooms/houses, having lost them to serviced accommodation. Many landlords have no choice, now being taxed on mortgage interest as private rentals. This problem will only accelerate with higher interest rates. Less supply mean only one thing, higher rents. This is just one city in the country.

The really big next problem will be student accommodation, the Government is being asked to reconsider their ill judged Michael Gove rental reforms, but, there are no guarantees they will listen.

If you believe in supply and demand of housing being determined by supply of property then a reduction in supply of rental properties will lead to rising prices until people can't pay them (in that area) which will lead to a shortage of people (for the university to fleece or for people to employ) this would generally mean either pay goes up or uni goes bust (or both)

But I think the property market supply and demand is caused by the supply of capital - rising interest rates will reduce demand for houses (either to own or to rent out when people can't get/afford the loans) which will lead to a shortage of rental properties but also falling house prices until the sums work again for btl. In the meantime students will just borrow (or use) more from the magic money tree called "maintenance loans", the uni carries on as usual and small businesses take the brunt as their workers demand enough pay to compete with students for a roof to live under

 

[MBE2017]

If you believe in supply and demand of housing being determined by supply of property then a reduction in supply of rental properties will lead to rising prices until people can't pay them (in that area) which will lead to a shortage of people (for the university to fleece or for people to employ) this would generally mean either pay goes up or uni goes bust (or both)

But I think the property market supply and demand is caused by the supply of capital - rising interest rates will reduce demand for houses (either to own or to rent out when people can't get/afford the loans) which will lead to a shortage of rental properties but also falling house prices until the sums work again for btl. In the meantime students will just borrow (or use) more from the magic money tree called "maintenance loans", the uni carries on as usual and small businesses take the brunt as their workers demand enough pay to compete with students for a roof to live under

Both supply and demand and supply of Capital effect the market, but the changes in taxation have effected the situation a lot more than the cost of loans, having raised many landlords into the top taxation rates, resulting in many paying more tax and earning less, even making losses.

The cost of Capital has a much smaller effect, until you deal in the market it is hard to explain easily, but many properties are bought outright, or the money is from private investors. There is no shortage of money, it is swilling around everywhere, the only real criteria is if a deal stacks.

Few landlords now do what is referred to as vanilla BTL, the real gains tend to be in adding value. Without the PRS doing things such as converting old houses into HMO’s, the situation would be awful, since the Public Sector is doing nothing atm.

 

[BobzYourUncle]

While I agree with most of your post, I cannot accept that this is a human flaw. It is a flaw in English society (and in some others) but it most certainly is not universal. in many European countried (never mind the rest of the world) home ownership is not the norm.

I'm merely looking at 'ownership' as kind of a evolutionary psychology perspective. Not just owning property. I'm highlighting us humans having this relentless pursuit of material possessions and wealth. Be it property, watches, gadgets, tools, toys doesn't have to be physical in nature like stock and shares, ******. All this needing and wanting to acquire stuff Is governing our behaviour some of it is irrational. This trait in wanting to have ownership is a flaw in our human makeup as we end up destroying the planet thru enviromental impact eg plastic, fossil fuel. Its not only what we are doing to the planet. Its our own physical and mental well being. So many people are just stressed creating themselves endless material goals. It's something we don't see in other species like animals. We humans are just not good at being content for very long with what we have. We are somewhat pushed to believe we need more. All this material consumption.
By now your probably thinking I'm some anti wealth lord. I'm not saying I'm against the pursuit of wealth. At the end of the day I believe it can be a useful motivator to encourage, innovation, entrepreneurship and creativity. Maybe I'm just wishing we can change our ways for the greater good. But alas I don't think we ever can. There will be little increments of improvements in society. But it seems it only happens when we have seen it or its been proven. By that time the damage is already done and sometimes irreparable. But any change is better than no change to our bebehaviour. Even if we just look at say property, assets and investments all these stuff. Stuff we can hand down to our spouses and kids. Our Markets and Econonmies are underpinned by 'ownership' of these stuff so inheritanly we will carry on our merry go round of wanting stuff we want but not necessarily need. But hey we can pass on to our kids. And guess what they do the same thing too for their kids. It's a pretty unique human trait we've created.

 

[Newchodge]

I'm merely looking at 'ownership' as kind of a evolutionary psychology perspective. Not just owning property. I'm highlighting us humans having this relentless pursuit of material possessions and wealth. Be it property, watches, gadgets, tools, toys doesn't have to be physical in nature like stock and shares, ******. All this needing and wanting to acquire stuff Is governing our behaviour some of it is irrational. This trait in wanting to have ownership is a flaw in our human makeup as we end up destroying the planet thru enviromental impact eg plastic, fossil fuel. Its not only what we are doing to the planet. Its our own physical and mental well being. So many people are just stressed creating themselves endless material goals. It's something we don't see in other species like animals. We humans are just not good at being content for very long with what we have. We are somewhat pushed to believe we need more. All this material consumption.
By now your probably thinking I'm some anti wealth lord. I'm not saying I'm against the pursuit of wealth. At the end of the day I believe it can be a useful motivator to encourage, innovation, entrepreneurship and creativity. Maybe I'm just wishing we can change our ways for the greater good. But alas I don't think we ever can. There will be little increments of improvements in society. But it seems it only happens when we have seen it or its been proven. By that time the damage is already done and sometimes not irreparable. But any change is better than no change to our bebehaviour. Even if we just look at say property, assets and investments all these stuff. Stuff we can hand down to our spouses and kids. Our Markets and Econonmies are underpinned by 'ownership' of these stuff so inheritanly we will carry on our merry go round of wanting stuff we want but not necessarily need. But hey we can pass on to our kids. And guess what they do the same thing too for their kids. It's a pretty unique human trait we've created.

But it is not universal. There are many societies where possessions are not the norm. Or, looking at it in a different way, it is not just human. Most animals and birds are territorial and defend their own territory against interlopers.

 

[The Byre]

Some serious things to remember -

• Raising interest rates is itself inflationary. It is like chemotherapy for cancer - a very blunt instrument that is also damaging. "We have cured your father's cancer, but unfortunately the cure killed him!"
• The bank is trying to reduce economic activity through higher interest rates, while the government continues to boost economic activity by borrowing record amounts.
• Inflation is when there is too much currency, yet nowhere in past statements did the BoE mention the money supply, which is being boosted by the government borrowing fresh money into existence. It is the government itself that is causing inflation by creating new money!
• Rent controls on their own inevitably lead to the creation of slums (e.g. New York). Landlords need an incentive such as tax-free property sales after say 10-15 years. This allows large companies to wash profits clean of taxes by investing in social housing that they can sell tax-free after 10-15 years. It also encourages corporate long-term planning, something sadly lacking in the UK.
• Rent controls must be accompanied by minimum rental standards such as compulsory full insulation (floors, walls and ceilings) and the property being kept in good order. Legal provision must be made to allow the tenant to repair and take the money off the rent if a landlord refuses to keep a property in good order.

None of that is hard and you do not hear of Scandinavian or German landlords moaning and complaining about having their feet held to the fire over rent controls or property standards. Quite the opposite! As a landlord in Germany, I am very happy to develop tax-free equity that I or my heirs can harvest after just ten years - and it ensures a plentiful supply of reasonably priced rental housing.

 

[BobzYourUncle]

But it is not universal. There are many societies where possessions are not the norm. Or, looking at it in a different way, it is not just human. Most animals and birds are territorial and defend their own territory against interlopers.

But do these animals and birds destroy their own enviroment in the pursuit of living in their enviroment or however long they are on earth for? Monkeys have tools but they don't collect like humans do they abandon them when they don't want it. Go into our kitchen we have fridges and freezers. Yes all very useful. But then go into our garages what do we have.. loads of other stuff we don't need. Do most of us park our cars in them. As that's what's its intended for.. No probably not. We over persue things we don't need. We seem to want to own stuf. I don't think u see this obsession in the animal kingdom. To the point it shapes our perceived identity throughout our whole lives.

 

[Justin Smith]

Rents will not reduce with an interest rate cut. With the Rent Reforms going through, new requirements coming through, basically local tax increases, and many private rental houses now off the market, demand is vastly outstripping demand.

Thousands of private landlords are quitting the industry, many are converting to service accommodation, without a major tax reform, incentives plus a National house building plan, things will not get better anytime soon.

To give you an indication of the problem, I hear Bristol now has 1400 less private rental rooms/houses, having lost them to serviced accommodation. Many landlords have no choice, now being taxed on mortgage interest as private rentals. This problem will only accelerate with higher interest rates. Less supply mean only one thing, higher rents. This is just one city in the country.

The really big next problem will be student accommodation, the Government is being asked to reconsider their ill judged Michael Gove rental reforms, but, there are no guarantees they will listen.

Plus all the extra regulation they keep loading onto landlords, most of it, in a pragmatic proportionate world, unnecessary.
The requirement for all newly rented properties (both residential and commercial) to reach an EPC rating of 'C' or above from 2025* is a ticking time bomb. How many landlords will think sod it, this is all too much, I'll just sell up. On the other hand they reckon house prices could tank over the next few years so it's a bad time to sell (if you are not moving into another property).

* Any existing rented properties (both residential and commercial) MUST have an EPC rating of 'C' or above by 2028

 

[IanSuth]

Plus all the extra regulation they keep loading onto landlords, most of it, in a pragmatic proportionate world, unnecessary.
The requirement for all newly rented properties (both residential and commercial) to reach an EPC rating of 'C' or above from 2025* is a ticking time bomb. How many landlords will think sod it, this is all too much, I'll just sell up. On the other hand they reckon house prices could tank over the next few years so it's a bad time to sell (if you are not moving into another property).

* Any existing rented properties (both residential and commercial) MUST have an EPC rating of 'C' or above by 2028

I have a mate who did own 1 rental (his old house he just didnt sell when he met his partner).

He is convinced there is a cunning plan to get all rental owned by a few big investment firms/pension funds and the current new rules and interest hikes are designed to drive private landlords out of the industry for their portfolios to be bought up cheap by the investors or via repossession

 

[MBE2017]

None of that is hard and you do not hear of Scandinavian or German landlords moaning and complaining about having their feet held to the fire over rent controls or property standards. Quite the opposite! As a landlord in Germany, I am very happy to develop tax-free equity that I or my heirs can harvest after just ten years - and it ensures a plentiful supply of reasonably priced rental housing.

Take a look at what happened in Eire re rent controls.

”Government measures to control rents have backfired and in many cases have led to an increase in rents, a new report has claimed.

The study by economist Jim Power suggests that rent pressure zones (RPZs), introduced in 2016 to limit rent price increases, have resulted in significant "rent rigidities" and an inefficient two-tier system where the proper maintenance of rental properties is no longer economically viable.

This has prompted many smaller landlords to exit the market and to be replaced by institutional landlords with new stock at higher rents.

A long-standing complaint against the RPZ system is that new rental properties or tenancies are excluded from the restrictions and can be put on the market at any rent. “The real losers are tenants at the lower end of the market,” Mr Power said.

Report claims rent controls have backfired and worsened crisis

Study claims rent pressure zones have added to rent pressures

www.irishtimes.com

 

[Justin Smith]

Plus all the extra regulation they keep loading onto landlords, most of it, in a pragmatic proportionate world, unnecessary.
The requirement for all newly rented properties (both residential and commercial) to reach an EPC rating of 'C' or above from 2025* is a ticking time bomb. How many landlords will think sod it, this is all too much, I'll just sell up. On the other hand they reckon house prices could tank over the next few years so it's a bad time to sell (if you are not moving into another property).

* Any existing rented properties (both residential and commercial) MUST have an EPC rating of 'C' or above by 2028

To paraphrase Pastor Martin Niemöller :

First they came for the landlords
And I did not speak out
Because I was not a landlord
Then they came for the homeowners
And now I am in the crap

 

[thetiger2015]

I have a mate who did own 1 rental (his old house he just didnt sell when he met his partner).

He is convinced there is a cunning plan to get all rental owned by a few big investment firms/pension funds and the current new rules and interest hikes are designed to drive private landlords out of the industry for their portfolios to be bought up cheap by the investors or via repossession

That's exactly what they're doing. The plan is to move away from private ownership and to long term renting from corporations, National and international investment groups etc.

The problem is, these companies have to drive huge profits for shareholders. Rents will only ever go up, the supply of housing isn't meeting demand, investment groups can afford to out bid private buyers for land and property, knowing they'll make a profit over 10 to 15 years...its all planned. They're not stupid. They're redistributing property and land to their mates businesses and investment groups to turn a profit in the long term.

 

[simon field]

O dear remember we still survived at just under or maybe over 15% in the 80's

What's all the fuss about at 5%, just caught out by the stagnate prices for about 5 years and brought silly money houses that were really far in excess of their means if they had looked long term rather than short term

In the 80s, the average house cost @3.5 (ish) x your average salary.

What multiple of the average salary do you think it is now?

Prices are artificially high. Down come they must!

 

[Bob Morgan]

What multiple of the average salary do you think it is now?

The established method was based upon 2.5x Primary Salary PLUS 1x Secondary Salary = 3.5x for 'Couples.' The Multiplier of 2.5x was often a limiting factor in the case of a 'Single' Purchaser - I changed jobs TWICE in one year, merely in order to 'Achieve the Multiplier' - Which was rigidly enforced! Even then, and with the benefit of MIRAS, I still needed a 'Second Job' to keep ahead of Mortgage Payments. Taking the Current 'ONS Average Wages' and an 'ONS Average House Price' the Multiplier is now effectively 9x Gross Annual Salary. However, in London, a large part of South-East England, and other 'Pockets' of the UK this can be as high as 12x (MIRAS was removed in 2000).

Exceptionally Low Interest Rates over a prolonged period have led to the Disproportionate Multiplier we have today. We are also seeing Mortgage Terms being lengthened to between 35 and 50 Years, from the norm of 25 Years. HOWEVER for the last four months, the ACTUAL Completion Value of a House Purchase has been falling. Similarly, the VOLUME of House Sales has also fallen. This was disclosed by HMRC & Land Registry at the end of May 2023 - ONS Statistics (House Prices) are based upon a trawl of 'Averaged Regional Advertised Values' (Confirmed via FOIA Disclosures).