Interest Rates

[Paul Norman]

The Bank of England might put up interest rates, the press are reporting. Well, not reporting. It is predicting.

And the mortgage providers are signalling that they will be passing this onto customers in full, and even taking the opportunity to increase their mark up.

Will this curb the surge in house prices? Or will financial products just continue to drive the prices up?

 

[Mark T Jones]

There has been 18 months of artificial stimulus, so logic suggests that a correction is inevitable.

House prices are a huge political and fiscal hot potato - across all parties - it's not just about affordability, for most of the population their perception of wealth hinges around the value of their home - this impacts directly on willingness to spend in restaurants - and so the accelerator/decelerator rolls.

Also, whilst I 'get' the use of interest rates to control inflation through demand, the current inflationary pressure is led by supply issues outside the control of consumers.

Conclusion - personal consensus, we are long overdue a BIG correction, but whoever is in power will try to avoid it.

(caveat - at the start of lockdown I predicted 3 million unemployed and house prices to crash by 30% - so best not to take my advice)

 

[The Byre]

(caveat - at the start of lockdown I predicted 3 million unemployed and house prices to crash by 30% - so best not to take my advice)

Actually, you were right - every prediction is just a percentage/chances game - what is the most likely outcome if all things remain equal? What you could not take into account, was the reaction of the BoE and the Treasury. They borrowed and pumped record sums into the economy, or rather, into the asset economy. Here it was furlow payments, in the US, it was 'stimmies' and all combined with giant asset purchases by governments everywhere.

Had those purchases and record QE not gone ahead, your prediction of three million unemployed and a 30% correction looks remarkably conservative!