(Buckle up) Recession for more than a year

[metalblue]

Another 0.5% interest rise due to be announced next month. There will be a lot of repossessions occurring very shortly at this rate. Doesn't make any sense.

Mortgages get more expensive, as do your other borrowings linked. Giving you less money to spend on other things. Resulting in inflation falling. It also strengthens the pound making imports less expensive - so in theory things like some foods, gas and fuel become marginally less expensive for the UK - again deflationary. That’s the “sense” to it. If it works or not is another question - I’d err towards saying it won’t fix inflation as the drivers aren’t UK consumer spending but doing nothing would make things more inflationary and worse for the UK consumer.

I don’t see a wave of repossessions however. Although our housing market is ridiculously skewed so a correction of sorts is required - preferably with us seeing sustained and sustainable wage increases.

 

[M18CTID]

Mortgages get more expensive, as do your other borrowings linked. Giving you less money to spend on other things. Resulting in inflation falling. It also strengthens the pound making imports less expensive - so in theory things like some foods, gas and fuel become marginally less expensive for the UK - again deflationary. That’s the “sense” to it. If it works or not is another question - I’d err towards saying it won’t fix inflation as the drivers aren’t UK consumer spending but doing nothing would make things more inflationary and worse for the UK consumer.

I don’t see a wave of repossessions however. Although our housing market is ridiculously skewed so a correction of sorts is required - preferably with us seeing sustained and sustainable wage increases.

Yep. On a personal note, I'm not a fan of interest rate rises as it means an increase in my monthly mortgage payments but - in theory at least - it's probably the right thing to do. I'd say interest rates will have to get a whole lot worse for them to be as big and widespread an issue for homeowners as the impending energy price rises. That's a far more worrying problem for many in the short term.

 

[Elbow beards]

Yep. On a personal note, I'm not a fan of interest rate rises as it means an increase in my monthly mortgage payments but - in theory at least - it's probably the right thing to do. I'd say interest rates will have to get a whole lot worse for them to be as big and widespread an issue for homeowners as the impending energy price rises. That's a far more worrying problem for many in the short term.

The problem is people will be paying £400 more for their energy, if interest rates rise to 5 or 6% your talking another £500 to £600 a month that's an extra grand a month. Some people just can't do it.

 

[metalblue]

He was quoting something that obviously wasn't his own opinion or original thought and then claimed he didn't know any of the background (ideology) to the quote.

So no, it doesn't mean that (what you said). Next you'll be claiming you have no ideology behind your opinions.

It’s not for me to answer however it’s quite reasonable that it’s something they had heard previously and they thought “yeah, I agree”. Doesn’t mean they’ve read copious amounts of literature on the topic, or indeed anything.

Like the vast vast majority of people my opinions are a mix and can be considered to take from various “ideologies”- thus are my own. Only an idiot, with no ability to think for themselves, would follow a single ideology religiously. Anyone who thinks their opinions follow completely two or more ideologies is probably bipolar.

 

[M18CTID]

The problem is people will be paying £400 more for their energy, if interest rates rise to 5 or 6% your talking another £500 to £600 a month that's an extra grand a month. Some people just can't do it.

That surely depends on the size of the mortgage and the rate they were paying before the rises started doesn't it? I think you'd need to have a pretty big mortgage coupled with being on a very low rate to see a £500/£600 increase in monthly payments if interest rates hit 5%-6%. As it happens, I'm already paying over 5% even before my mortgage provider has applied the 0.5% increase from last month to my account.

 

[dave_blue12]

Raising interest rates is absolutely the wrong thing to do.

Our current inflationary woes are not being caused by demand but by supply side. In reality incomes have been falling for some time and raising interest rates just makes things worse.

 

[M18CTID]

Raising interest rates is absolutely the wrong thing to do.

Our current inflationary woes are not being caused by demand but by supply side. In reality incomes have been falling for some time and raising interest rates just makes things worse.

You may or may not be right on that but why are so many countries raising rates if it's the wrong thing to do?

 

[daztrueblue91]

Mortgages get more expensive, as do your other borrowings linked. Giving you less money to spend on other things. Resulting in inflation falling. It also strengthens the pound making imports less expensive - so in theory things like some foods, gas and fuel become marginally less expensive for the UK - again deflationary. That’s the “sense” to it. If it works or not is another question - I’d err towards saying it won’t fix inflation as the drivers aren’t UK consumer spending but doing nothing would make things more inflationary and worse for the UK consumer.

I don’t see a wave of repossessions however. Although our housing market is ridiculously skewed so a correction of sorts is required - preferably with us seeing sustained and sustainable wage increases.

Would that makes Liz Truss’s promises of tax cuts to be counter productive to inflation then?

 

[bluethrunthru]

The problem is people will be paying £400 more for their energy, if interest rates rise to 5 or 6% your talking another £500 to £600 a month that's an extra grand a month. Some people just can't do it.

Most can't do it. And the way those that can will could be by cutting just about all discretionary spending - so no meals out, fewer take-aways, fewer trips to the cinema, fewer day trips to the seaside, fewer magazine subscriptions, maybe cut out away matches and so on. That means less overtime/extra hours at all those places you are no longer spending so those poor sods are earning less ( some may lose their jobs ) less tax being paid , less profits being made and so on and so on.

Throughout all this you will note the utility companies are getting that £400 pm per household thus swelling their coffers even more with a windfall they never expected and will not be used as any investment - there will be no more power generated by say wind to lower the price - no new reservoirs will be built and so on. Your real enemies are these allegedly privatised monopolies and the Govt who are their enablers.

 

[dave_blue12]

You may or may not be right on that but why are so many countries raising rates if it's the wrong thing to do?

To answer that question I would have to analyse each country and just like our central bank they could, of course, be wrong.

But other countries have generally not suffered the same massive increases in energy costs that we have and this is the root cause of our inflation.

Looking at events, it would appear that the BoE and the Government are actively pursuing policies to bring about a recession. Disaster capitalism anyone?