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

Did she give any information on what this rescue plan would consist of GrannyGravy? Hope your finger's a little better.

Germanshepherdsmum

What more do you expect?

I expect the BoE to stop needlessly putting up the interest rate.

They're like the doctors who refused to give up bloodletting, despite proof it didn't work and tended to hasten the patient's death.

Germanshepherdsmum

I don’t frequent beauty salons GG, but I remember the trouble when a local so-called beauty therapist was sued. She had no insurance and went bankrupt. As I said, the industry is largely unregulated so I would consider the certificates on the wall pretty worthless.

They have a public liability insurance certificate displayed at the one I use, is that worthless? The competency certificates are usually NVQ or City and Guilds, which are recognised bodies, so I think they hold some credibility.
I can see if you used a self employed therapist visiting your home there could be issues, but the survival of beauty salons rests on their reputation and they only employ competent, qualified people in my experience.

MaizieD And it will do nothing for inflation, because our current inflation is not being caused by too much money swilling around in the economy. I don't understand how people don't understand this.

People don't agree with you, simple really.

Germanshepherdsmum

You trying to be clever growstuff?

Pardon?

Har

Smileless2012

Did she give any information on what this rescue plan would consist of GrannyGravy? Hope your finger's a little better.

I believe I heard their plan could include "forcing" banks to offer support to borrowers. Perhaps allowing them to move on to interest-only mortgages, extending their repayment period.

Hard of hearing?

Some reasons for the massive increases in house prices that have taken place since Thatcher came into power:

1. Increase in MIRAS from £25k to £30k in the 1983 Budget.

2. Unmarried couples could pool their allowances to £60k.

3. Lawson's announcement in the March 1988 Budget that the above would cease in August 1988 caused a rush to beat the deadline and lead to a sharp increase in house prices. Lawson publicly regretted that he had not removed the option as from the Budget Day.

4. Regular periods of gazumping.

5. Large rises in 2000 - rising prices encouraged banks to lend. More bank lending encouraged increases in house prices.

6. Help to buy scheme. It was possible to borrow 20% of a house price interest free (40% in London). Buyers had to find a 5% deposit and the house must be a new build.

7. Stamp duty holiday- July 2020 the govt announced a stamp duty holiday until June 2021. Buyers would not pay any duty on the first £500k of a house purchase. £1.3 million people took advantage of this leading to a further increase in house prices. First time buyers are still exempt if the property price is under £500k.

8. Finally I would add that the low interest rates that have obtained between 1995 and 2022 have encouraged buyers to spend as much as possible on their house without realising that interest rates could go up.

That makes sense Norah.

growstuff

GrannyGravy13

growstuff one of the reasons we delayed getting married was whilst we were single despite living together and a joint mortgage we both were able to claim miras

I didn't realise that. Maybe if I had, we would have delayed getting married.

I can remember advising clients not to get married for that very reason.

Grantanow

I don't think much came out of Hunt's meeting with lenders apart from credit ratings being unaffected for those with repayment problems and a deferral of repossession by 12 months. Most lenders will be flexible up to a point but repayment holidays, part payment etc., simply defer the debt.

Of course they do but it may help people to stay in their homes.

Most people need a little luxury in their lives to help them through the bad times. For many women it's a new lipstick is important. Here's a link to a Guardian article last year about the "lipstick effect"

www.theguardian.com/business/2022/oct/14/lipstick-effect-britons--luxuries-cost-of-living-crisis

Dinahmo

Some reasons for the massive increases in house prices that have taken place since Thatcher came into power:

1. Increase in MIRAS from £25k to £30k in the 1983 Budget.

2. Unmarried couples could pool their allowances to £60k.

3. Lawson's announcement in the March 1988 Budget that the above would cease in August 1988 caused a rush to beat the deadline and lead to a sharp increase in house prices. Lawson publicly regretted that he had not removed the option as from the Budget Day.

4. Regular periods of gazumping.

5. Large rises in 2000 - rising prices encouraged banks to lend. More bank lending encouraged increases in house prices.

6. Help to buy scheme. It was possible to borrow 20% of a house price interest free (40% in London). Buyers had to find a 5% deposit and the house must be a new build.

7. Stamp duty holiday- July 2020 the govt announced a stamp duty holiday until June 2021. Buyers would not pay any duty on the first £500k of a house purchase. £1.3 million people took advantage of this leading to a further increase in house prices. First time buyers are still exempt if the property price is under £500k.

8. Finally I would add that the low interest rates that have obtained between 1995 and 2022 have encouraged buyers to spend as much as possible on their house without realising that interest rates could go up.

Dianhmo, Finally I would add that the low interest rates that have obtained between 1995 and 2022 have encouraged buyers to spend as much as possible on their house without realising that interest rates could go up.

Not allowing for rate changes, I'd guess this is much of the problem now.

Dinahmo

growstuff

GrannyGravy13

growstuff one of the reasons we delayed getting married was whilst we were single despite living together and a joint mortgage we both were able to claim miras

I didn't realise that. Maybe if I had, we would have delayed getting married.

I can remember advising clients not to get married for that very reason.

We didn't have a joint mortgage until we got married in 1986, so I guess we didn't miss much, but I'm pretty sure we weren't told. Before then, the mortgage was in my name alone.

Successive governments have encouraged people to buy and been a catalyst for the current high prices.

Not allowing for rate changes, I'd guess this is much of the problem now.

Yes, it is, plus the fact that renting is so expensive and is essentially paying somebody else's mortgage.

When I was forced to sell my house 10 years ago, I owed just over £60,000 on the mortgage, but I was unemployed (through illness) at the time and nobody would give me a mortgage. Since then, I've paid just under £100,000 in rent and have nothing to show for it.

Norah

MaizieD And it will do nothing for inflation, because our current inflation is not being caused by too much money swilling around in the economy. I don't understand how people don't understand this.

*People don't agree with you, simple really.*

Why don't they agree with me? It's not an 'opinion', it's economic fact.

I get my information from economists. Where do they get theirs?

Does nobody remember rising house prices in the 70s? I had a very modest two up two down. I worked with a girl of similar age - she and her husband were renting but looking to buy. Nothing was good enough for them. Prices began to rocket and they ended up with something worse than they originally turned their noses up at. Meanwhile we made a profit and moved upwards.

growstuff

Dinahmo

growstuff

GrannyGravy13

growstuff one of the reasons we delayed getting married was whilst we were single despite living together and a joint mortgage we both were able to claim miras

I didn't realise that. Maybe if I had, we would have delayed getting married.

I can remember advising clients not to get married for that very reason.

We didn't have a joint mortgage until we got married in 1986, so I guess we didn't miss much, but I'm pretty sure we weren't told. Before then, the mortgage was in my name alone.

Successive governments have encouraged people to buy and been a catalyst for the current high prices.

You probably didn't use an accountant!

Germanshepherdsmum

Does nobody remember rising house prices in the 70s? I had a very modest two up two down. I worked with a girl of similar age - she and her husband were renting but looking to buy. Nothing was good enough for them. Prices began to rocket and they ended up with something worse than they originally turned their noses up at. Meanwhile we made a profit and moved upwards.

We were gazumped when trying to buy a cottage in the mid 70s. We had an offer accepted and then the estate agents told us that a cash buyer had come along and offered the same price. Would we offer more? We said yes but the same thing happened at which point we said "Up Yours"

ronib

Gordon Brown put a stop to Nora’s arguing it was only benefitting middle class couples. Typical!

This made me smile. I was wondering who Nora was. Till you explained.

MaizieD

GrannyGravy13

Excuse my musings if the banks put up interest rates on savings accounts and ISA’s more people would lock their money away for a 1/2/3 or even a 5 year period which would take money out of circulation which under normal circumstances would help bring down inflation.

Unfortunately inflation is being driven by more external factors than supply and demand, but every action would help.

Inflation is being driven by external supply shocks, and now, the BoE raising interest rates.

People saving their money instead of spending, it seems to me, will just result in putting companies out of business, though I have seen it argued that they might reduce prices in order to get people buying.

Saving instead of spending doesn't appear to me be helpful at all.

But, how long could they sustain that for? Particularly if they are having to pay increased charges on loans and rentals.

And it will do nothing for inflation, because our current inflation is not being caused by too much money swilling around in the economy. I don't understand how people don't understand this.

I agree with you regarding the current situation, which is what I said in my last paragraph.

Locking any available funds away at the highest interest rate possible is still attractive though.

This is about the US, which is facing the same inflationary pressures as the UK

www.theguardian.com/commentisfree/2022/aug/17/inflation-is-causing-real-pain-but-raising-interest-rates-will-make-it-worse

www.smh.com.au/money/banking/supply-side-inflation-nemesis-of-central-banks-20211025-p592y2.html

I agree with you totally,Germanshepherdsmum.

4allweknow

There were no cries for help in 1992 when rates reached 15%. Before the buts, yes prices were lower but so were wages.

It's the percentage of cost to income that is higher that makes the difference.