It's now almost 10 years since 'base rate' was cut to 0.5%.
This means all those people with base-rate tracker loans have been paying almost nothing and in cases where the loan was baserate minus 0.5% a nominal miniscule amount. I have heard stories of people paying 1p per month. How much money have these people saved at the expense of depositors ?.
I wonder how many people in the know, like MPs etc remortgaged in 2008 when savings rates were over 7% ?.
How many BTL properties have these sort of loans ?, while monthly rents have soared by 50% since 2008 ?.
Seems to me that 'base rate' should just be abolished. It serves no useful purpose other than political control. However since McRuin gave responsibility to BoE to set base rate, they should have just allowed 10-year gilt yields to set 'base rate' dynamically. 10-year gilt yields underpin all term deposits and loans so why do we need an artificial fudge as well ?.
Anyone with a brain can see that Browns decision was to shift the blame onto the BoE, while in fact he (and subsequent chancellors) could pull the strings in the background and avoid being blamed.
I have no answer. But I recall after the 2000 crash exporters struggling with the (then) high interest rate being told "But we can't have one rate for mortgages and another for savings".
Of course, come 2008, and - standing to lose billions - guess what we managed to get ?
Either way, in our case it's hard to complain. When we got our mortgage in 2002, repayments were £680/month. They're now £440/month. Given that the first 15 years are where the biggest hit is taken for interest, we've been lucky. When our fixed-rate runs out (2021) there will be 6 years left.
Well, this was in response to the recession. This was one of the worse recessions in the UK. However, the ultra low interest rate was one of the things that kept the public spending, kept the country in full employment, and stopped any mass house reposessions. As far as I know, that's the first and only time in history that _any_ country has managed to achieve this through such a serious recession, and I think both Brown (from the point of the crash, not before) and the coalition government did a particularly good job in protecting UK citizens from what was a serious recession. I recall several much less serious recessions in the past which resulted in millions unemployed and loads of people losing the homes, and indeed that happened in other countries during this recession.
BTL mortgages normally have higher interest rates because of the extra risk to the lender.
His action was to prevent a crash as a result of Labour entering power. Every previous Labour government made the country bankrupt within one term, and the markets feared exactly the same would happen again as Labour had no fiscal credibility at all. He wanted to make it clear to the markets that the new Labour government was a different kind of Labour and would no longer be controlling interest rates, leaving it to the experts instead of the politicians.
No its not. Both Canada and Australia got an even better result and didn't have even a single retail bank implode spectacularly or need to be bailed out by government.
and I think both Brown (from the point of the crash,
But the worst effects of the recession were over by mid-2012 and help-to-buy was warming up the property market.
Interest rates should have started to return to 'normal' from then, instead of which house prices have simply lurched higher by another 25%, so the FTB is back to square one.
Labour had been in power for 11 years by the time things were obviously going wrong.
Neither Canadian nor Australian banks were involved in financial 'engineering' like UK and US banks.
Remember Carney has form with housing bubbles because he created one in Canada before coming to the UK. OZ was riding the metals and commodities boom and this gave them a electrifying property bubble.
There's a massive shortage of housing, and until that's been addressed, house prices will be driven predominently by the big supply and demand inbalance. To do that by using interest rates would massively damage the economy before it had any noticable impact on house prices. If house supply and demand were nearer balanced so house prices rose broadly in line with inflation, then tweaking interest rates within viable limits for the rest of the economy would have an impact on house prices too.
All the workarounds for not fixing the housing shortage such as help-to-buy, affordable housing, etc may help a small number of people, but on average just make it worse. All governments have failed to address the root cause for over 40 years.
That's 11 years after transfering interest rate control to BoE.
However, since you brought it up, I think having to sell off well over half the country's gold reserves at 20 year low prices just 2 years into their first term in order to keep the government spending going was a much earlier sign. Sure, that extra revenue kept them going longer than they ever managed in the past, before running out of money.
No, just the usual government incompetence. Governments aren't anything like as important as they think they are with massive shifts in the fundamentals like that. Yes, Britain did very well after the war with slum clearances and providing new housing and then lost the plot completely with stupid planning controls and not realising how many would choose to pour into Britain.
Nothing like it. That is due to the stupid bit of their constitution that stops them from banning guns for the general public. That constitutional provision did make sense when an armed militia allowed them to kick their colonial masters out, but has that massive downside now.
Public pressure changed the constitution to ban alcohol, and then reverse that ban. So the failure of public pressure to revise the second amendment is a tacit acceptance of the inevitable mass shootings the US sadly suffers.
Yes, but there was never an original constitutional right to alcohol. Its much harder to change those with their system.
and then reverse
Not so much a tacit acceptance as a massive problem with those that believe that they should be allowed to continue to have guns, and that there isnt a big enough problem with mass shootings in the US to warrant a ban on guns.
It was easy to ban guns in the UK with no constitutional right to bear arms.
Oh, and there are already limitations on the second amendment in place anyway. Mythbusters occasionally had to film outside California, as they have "quite strict gun laws", compared to New Mexico (where they then go).
Anyway, it's their problem, and the answer lies in their hands, not some banter on uk.d-i-y. Because it's uk.d-i-y and not uk.d-i-y-and-US- constitution-discussion-workshop.
Pretty sure it is deliberate, but not by the government - just that governments have done nothing to fix the issue.
House builders over 40+ years have merged into just a few big developers. This makes it easier to avoid competition and keep prices high, by keeping supply restricted. They make their money now from land banking rather than building homes. A friend worked in estate agency for some years, a sector that's as bent as hell. Their income comes not so much from commission on selling, but from back-handers from developers looking for plots and paying agents to pass them on at reduced prices without properly advertising them, which are then land-banked to keep the supply short and prices high. The other loss of competition is due to local councils no longer building their own council houses, which most did in the 1950's and 1960's. Although those were obviously targetted at council housing, generating supply in any of the housing categories (council, private landlord, or owner occupied) balances prices across all the others too, and the shortage we have is across all categories.
Although house prices have climbed steeply, the actual building cost has not gone up at anything like the same rate, and becomes a smaller part of the sale price over time. Nevertheless, developers have skimped badly on this, and many modern houses are built extremely poorly, but aren't sold for any less. Houses were traditionally built with a life expectancy of 200 years, but many new houses are unlikely to reach that before major renovation or demolition is required.
Planning restrictions is often quoted as a problem, but I'm doubtful this is as big an issue as developers make out. Developers like large greenfield sites because of land banking, but there are lots of brownfield sites - just that they can't make as much money from landbanking from them.
Fredex mentioned the Section 106 charges by local authorities. The governmemt tried to kill those off for small developments (less than
10 houses and self-build), but some councils got that exemption overturned and I think it's in limbo at the moment. Radio 4 examined one case in Reading (one of the councils which got the exemption overturned). A plot for 6 houses was bought by a small builder (not landbanking), and the imposed S106 charges by Reading meant the builder would make a loss and so couldn't start, so this does need fixing.
There are doubtless other factors too, but the industry needs a shakeup so developers turn back into house builders and land banking becomes unattractive. Maybe something like a 100% tax on developers land banking gains would turn them back into builders? Poor design (homes with small rooms, no storage) and low build quality needs addressing too. This was last examined by the Parker Morris Committee in the early 1960's, but something similar needs doing again to stop the building of poorly designed, low quality, expensive homes.
I'm reminded of the headline on The Sun some years back "Grandma at 25".
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