Increasing the interest rate to 5%, is this really the fairest way to slow inflation?

DiamondLily

Germanshepherdsmum

I don’t know why you feel guilty Poppyred. For many years the interest rate on mortgages has been extremely low whilst as Romola says, interest on savings was negligible, forcing many retired people to eat into their savings. And remember 10% of the state pension is 10% of not a lot.

Yes, savers have been penalised for years propping up artificial low interest rates for those with a mortgage.

It's about time we got a better return on savings/investments.

Hang on!

Interest rates have been low because inflation has been low. So how come people have had to 'eat into their savings'? It can't have been because of inflation...

Shouldn't they have manged better and not been spendthrift..

Good post, MOnica

I'm puzzled by vegansrock's statement that 'back in the day' people could get 100% or even 110% mortgages. Back in what day?

Wasn't that one of the things that precipitated the Global Financial Crisis? Uncontrolled credit?

Back in my day you'd have been lucky to get a 90% mortgage, let alone even more. 20% deposit and max 3x salary was about standard.

Germanshepherdsmum

I don’t know why you feel guilty Poppyred. For many years the interest rate on mortgages has been extremely low whilst as Romola says, interest on savings was negligible, forcing many retired people to eat into their savings. And remember 10% of the state pension is 10% of not a lot.

Yes, savers have been penalised for years propping up artificial low interest rates for those with a mortgage.

It's about time we got a better return on savings/investments.

DaisyAnneReturns

DiamondLily

I'm paying tax on all my pensions. If any increase is needed, I'd sooner it was on VAT - essential goods aren't taxed, and we have a choice whether to buy the rest.🙂

Of course you would rather it was VAT. That way the poorest pay the highest proportion of their income should they ever dare to want something others don't consider essential.

Why not kick them when they are down? It's been happening for the last 13 years!

Yes, well many of us have been poor. It is what it is.🙄

I have said it before and I will say it again. Every older generation considers that the younger generation are wasteful spendthrifts. It happened in my generation and my son's and no doubt my parent's and grandparent's.

In fact I have a 19th century book which is bound copies of a woman's magazine, and I remember reading an article there on a similar theme. In every generation and every age group, some people are spendthrifts and others are misers.

Our standards of what is acceptable changes. When we bought our first house, central heating was an optional extra. Now no house would be built without it. I am sure at some time inside wcs and bathrooms were considered an unwarranted luxury.

vegansrock

Back in the day you could get 100% mortgages - even 110% mortgages which is why some folks came unstuck . Today you have to have a huge deposit , maybe £50k+, which is a more than years salary for some -I don’t feel you can compare the two scenarios - “we were so frugal unlike todays youth “ - is smug and unhelpful.

If you are referring to me I don't think I was saying that we were so frugal - what I did say was that the things that young buy did not exist when we were young. If they had been I'm sure many of us would have bought some of them.

When I was buying a house back in 1979 we had to have a deposit of 20% which was £3700. I was self employed by then and half of the deposit came from my tax savings and the other half was borrowed from my Father. He was able to lend me this because his Mother had recently died and so he had an inheritance. In the end he lent us £3000 so that I could pay my tax.

All of us are frugal in different ways. Ours was buying furniture for our house 2nd hand and my DH made all our built in furniture. He also did all the renovations apart from re-pointing. (nothing worse than bad re-pointing)

My spendthrift moments were buying shoes and handbags. I shopped regularly at Russell & Bromley but the last time I walked past one of their shop windows I was amazed at the prices and certainly could not afford to shop there now. In fact I stopped buying fancy shoes and bags after we moved to Suffolk in the mid eighties. Then we moved into a period of poverty again.

vegansrock

Back in the day you could get 100% mortgages - even 110% mortgages which is why some folks came unstuck . Today you have to have a huge deposit , maybe £50k+, which is a more than years salary for some -I don’t feel you can compare the two scenarios - “we were so frugal unlike todays youth “ - is smug and unhelpful.

I agree. A lot of comments about 'the youth of today' are hard to see. It was easier to be frugal when there was less to buy, and expectations were lower. Also, as I've said before, I don't think that living in a house constitutes 'working hard' for the profit on it.

Something needs to be done about the housing situation; but I'm not sure that keeping interest rates low is the answer. Building more houses and controls on rents seem to me to be more sensible approaches. For one thing, low rates on savings make it more difficult to get a deposit together, as both of my children are finding. Also, increasing supply to match demand will reduce prices for homebuyers and landlords alike. The whole economy shouldn't be run around house prices, surely?

I don’t know why you feel guilty Poppyred. For many years the interest rate on mortgages has been extremely low whilst as Romola says, interest on savings was negligible, forcing many retired people to eat into their savings. And remember 10% of the state pension is 10% of not a lot.

Great thread, thanks to the regulars.
Poppyred why do you feel guilty about your savings rate going up? Your capital is still being eroded by inflation. Savers received diddlysquat for years, and the same thing applied, ie the return didn't keep up with even the lowish inflation. Investments did okay, but that is no longer the case. So anyone with savings is getting poorer.

vegansrock

Back in the day you could get 100% mortgages - even 110% mortgages which is why some folks came unstuck . Today you have to have a huge deposit , maybe £50k+, which is a more than years salary for some -I don’t feel you can compare the two scenarios - “we were so frugal unlike todays youth “ - is smug and unhelpful.

Completely agree, vegansrock. My parents' life was full of deprivation and worry but they never would have wanted that for their children and were genuinely pleased to see our lives improve compared to theirs. The 1930's were very difficult times, so were the 1980/90s and so are the 2020's, but they are all difficult in different ways and perhaps it's not helpful to compare them?

I don’t know what the answer is but I do feel guilty that we are getting decent rates on our savings and a 10% plus increase in pensions while young families are struggling.

We struggled in the 80s when the mortgage rate went up overnight and had to go from working part-time to full time to cover the extra cost. That’s not even an option now with most women working full time already.

Dickens

Doodledog

I seldom agree politically with GSM, although we do agree on other things, but I don't think she is rude in her responses.

... I second that.

Third.

Doodledog

I'm sure that when VAT came in (I was a child) it was genuinely charged only on 'luxury' goods, but that is no longer the case. I don't see it as a 'fair' tax at all.

I don't believe VAT to be 'unfair'.

Quote: "some goods and services are subject to VAT at a reduced rate of 5% (such as domestic fuel) or 0% (such as most food and children's clothing)."

Many important items purchased, fuel, food, children's clothing are low/exempt - most other items subject to VAT. Just a tax, we all pay.

Back in the day you could get 100% mortgages - even 110% mortgages which is why some folks came unstuck . Today you have to have a huge deposit , maybe £50k+, which is a more than years salary for some -I don’t feel you can compare the two scenarios - “we were so frugal unlike todays youth “ - is smug and unhelpful.

Doodledog

I seldom agree politically with GSM, although we do agree on other things, but I don't think she is rude in her responses.

... I second that.

Dinahmo Many people are saying that we cannot compare the problems that my generation had with those of the present day because the numbers are different. However, I think we can.

Then and now, people had/ are having problems making ends meet. Some people will no doubt lose their homes but the banks have agreed to halt repossessions for a year and have also agreed to negotiate with mortgagees on changing the terms of their loans. This did not happen, as far as I'm aware, back in the 70s and 80s.

The difference, as I see it, is the current generation have a far greater choice in what they spend their money on. We did not have expensive mobile phones, IPads, computer games, leased cars and so on. I'm not blaming them because those things are there for them to spend money on.

Agreed

Last paragraph, some people don't, for example, save to a deposit - rather spending on phones, nails, takeaways - their choice.

The origin of this thread was the increase in current interest rates to 5%. Many of us suffered from the increases in 1979 to 17%, the 14.375% in 1981 and back up to 14.875% in 1989. At either one of those high points people would have been paying above these B of E figures for their mortgages and many will have suffered financially. For some, it might have been reducing their spending whilst for others it meant selling their houses and some of them will have had negative equity.

Between 2009 and 2022 the B of E rate was less than 1% - ie 13 years. I don't think that there was ever before such a long period of very low interest rates. This will have encouraged many people to buy their home at the maximum price they could afford.

Many people are saying that we cannot compare the problems that my generation had with those of the present day because the numbers are different. However, I think we can.

Then and now, people had/ are having problems making ends meet. Some people will no doubt lose their homes but the banks have agreed to halt repossessions for a year and have also agreed to negotiate with mortgagees on changing the terms of their loans. This did not happen, as far as I'm aware, back in the 70s and 80s.

The difference, as I see it, is the current generation have a far greater choice in what they spend their money on. We did not have expensive mobile phones, IPads, computer games, leased cars and so on. I'm not blaming them because those things are there for them to spend money on.

When we lived in London, one treat was to go to South Ken for lunch in the Polish cafe and shop in the remaindered book shops, followed by a visit to the V & A. When the interest rates hit we didn't do any of that. I remember asking my OH whether we should switch from proper coffee to instant and cancel the Sunday papers, in order to save money. The answer to that was no.

Doodledog

I'm sure that when VAT came in (I was a child) it was genuinely charged only on 'luxury' goods, but that is no longer the case. I don't see it as a 'fair' tax at all.

A history of VAT in the UK

When it was introduced it did, indeed, replace purchase tax but it was imposed on a wide range of goods and services.

It can be seen that over the years various Chancellors have adjusted VAT rates both up and down to suit their political ends.
It's notable that at the start of the 2008 recession caused by the Global Financial Crisis the Chancellor reduced to standard rate of VAT. I'm assuming that this was to lessen its effect on people with lower incomes. This was reversed 2 years later.

Our current standard rate of 20%, imposed by the tories after the 2010 election, is the highest rate ever charged in the UK.

en.wikipedia.org/wiki/Value-added_tax_in_the_United_Kingdom

From the ONS report on incomes and taxation for year ending 2021

richer households pay a smaller proportion of disposable income on indirect taxes (9%) than the poorest fifth (23%).

The full report here, includes downloadable data.

www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/financialyearending2021

Doodledog

I seldom agree politically with GSM, although we do agree on other things, but I don't think she is rude in her responses.

And you are entitled to that opinion. I sincerely think we are all more rounded human beings in real life than we appear to be on here - at least I hope so.

DaisyAnneReturns

Germanshepherdsmum

Why are you consistently so rude and aggressive towards me, Daisy? We have different views on many things but that is no excuse.
Rent controls were introduced in 1915 when nine tenths of the housing stock was privately rented, By 1988 the figure had fallen to one tenth and it was considered that this was largely due to rent controls, which were abolished by the Housing Act of that year.
I expect many tenants lived very happily under housing control but the figures demonstrate that landlords did not.

And you consistently make declarations with no argument to support them. That is incredibly insulting to the rest of us. Why are you so rude?

You should know by now that people tend to reply in the same tone as the post they are replying to. Expecting people to accept what you say, just because it is you saying it, is always likely to raise hackles.

researchbriefings.files.parliament.uk/documents/SN06747/SN06747.pdf

GSM
"Rent controls were introduced in 1915 when nine tenths of the housing stock was privately rented, By 1988 the figure had fallen to one tenth and it was considered that this was largely due to rent controls, which were abolished by the Housing Act of that year."

I'm not sure that I agree with your figures. Before 1914 home ownership was 15% of the housing stock, by 1938 it was 32% and by 1996 it was 67%.

Public or social housing began with almshouses . During the Industrial Revolution some factory owners built housing for their workers - Saltaire, Bourneville and Port Sunlight. Around the same time, charities started to build public housing such as Peabody. The City of London built a block of tenements in Farringdon Road in 1865. This action was followed by Liverpool Corporation in 1869 onwards.

The state started to take an interest in social housing and in 1885 Royal Commission was held. This led to the Housing of the Working Classes Act in 1890 which encouraged local authorities to build and also obtain subsidies. The next big push came after WW1 with the "homes for heroes" policy.

During WW2 nearly 4 million British homes were destroyed or damaged. Council housing provision was shaped by the New Towns Act 1946 and the Town and country Planning Act 1947. Aneurin Bevan had a vision that this housing would be for everybody, not just the poor. Most houses built then had larger rooms and much space around them than present day private housing.

In 1951 when the Tories came to power, the emphasis changed towards high rise building since the belief at that time was that more people could be accommodated in a block of flats.

The rest is history of which most of us will be aware.

maddyone

DaisyAnneReturns
I think you are the rude one and consistently aggressive towards anyone with a different view to your own. Perhaps you could try a little more tolerance towards others. Report me if you wish, I’m not bothered.

Just to set your mind at ease, I have no intention to "report" you.

I seldom agree politically with GSM, although we do agree on other things, but I don't think she is rude in her responses.

Who and why was it considered that when "the figure had fallen to one tenth" that "this was largely due to rent controls" GSM

Why was the "fact" that a higher proportion of houses that were bombed were in industrial areas, ignored. A much greater proportion of those were likely to have been previously rented. Why was this not considered by your source? It could well have been the case that the owners just took the compensation.

Why, also did your source not consider the vast rebuilding the state undertook after the war and the increase in house buying in the 1970s onwards?

And why didn't your source take into account the fact that it was the Thatcher government that did this and they would have wanted people to believe it, whether it was fact or simply spin?

And, if it were true, which you seem to believe it is, why, with the increase in privately rented homes creeping up, would the corollary not be true and the return of rent controls be the right thing to do?

DaisyAnneReturns
I think you are the rude one and consistently aggressive towards anyone with a different view to your own. Perhaps you could try a little more tolerance towards others. Report me if you wish, I’m not bothered.