The economic impact of Covid-19

[Xela]

4 minutes ago, Sid4ever said:

We start in August on a five year fixed at 1.79% which looked like a good deal, think it still is.

Absolutely. Any mortgage starting with a 1 is a good deal!  

[Genie]

Mine is up at the end of the year, I’m gonna sweat it out till the last minute. I’ll probably go for a 3 year fixed, maybe 5

Edited July 8, 2020 by Genie

[Vive_La_Villa]

Economics blows my mind. Isn’t all this monetary easing going to effectively bankrupt the country? Inflation is going to rocket.

[HanoiVillan]

37 minutes ago, Vive_La_Villa said:

Economics blows my mind. Isn’t all this monetary easing going to effectively bankrupt the country? Inflation is going to rocket.

Inflation isn't going to 'rocket'. It may increase somewhat, which would be a good thing all told.

[maqroll]

I'll be clearing out of the Cider House space on Friday. Trying not to think too much about it. Because the apartment above went with the commercial space, I've got to clear out of there as well on Friday. Thanking my lucky charms that I can crash at my grandparents house a couple hours north of here. They are long gone now, but we rent the house out in the summertime. But because nobody is vacationing in Maine right now, I can flop there for the rest of the summer and beyond if I have too. Without this option, I'd be f*cked. 

As it is, the last 4 weeks have been a mad scramble trying to sell off all my equipment. (I drank all the cider )

Finally sold the big cooler today and the last table, so I'm ready to GTFOH.

The bar should be filling up right now with tourists and neighborhood people. **** sad.

[LondonLax]

17 minutes ago, HanoiVillan said:

Inflation isn't going to 'rocket'. It may increase somewhat, which would be a good thing all told.

The quantitative easing unleashed after the financial crisis did result in inflation. Not inflation of every day items like food, clothes etc, those remained low, coupled with low wage inflation.

However, the money released by quantitative easing resulted in inflation in assets, like housing and stocks. The same thing is happening again, all this government stimulus is causing the stock market to ramp up to levels way out of kilter with the underpinning economic reality.

[chrisp65]

4 minutes ago, maqroll said:

I'll be clearing out of the Cider House space on Friday. Trying not to think too much about it. Because the apartment above went with the commercial space, I've got to clear out of there as well on Friday. Thanking my lucky charms that I can crash at my grandparents house a couple hours north of here. They are long gone now, but we rent the house out in the summertime. But because nobody is vacationing in Maine right now, I can flop there for the rest of the summer and beyond if I have too. Without this option, I'd be f*cked. 

As it is, the last 4 weeks have been a mad scramble trying to sell off all my equipment. (I drank all the cider )

Finally sold the big cooler today and the last table, so I'm ready to GTFOH.

The bar should be filling up right now with tourists and neighborhood people. **** sad.

Keep on keepin’ on, man.

We’re rooting for you.

[Vive_La_Villa]

28 minutes ago, HanoiVillan said:

Inflation isn't going to 'rocket'. It may increase somewhat, which would be a good thing all told.

To be honest I don’t really know what I’m taking about so that was a throw away comment really. But I have read a lot that real inflation is and will be a lot higher than the official figures will ever tell us. Gold is a hedge against inflations and it’s close to all time highs.

[Demitri_C]

2 hours ago, chrisp65 said:

I am, honest!

But if I wanted to boost the television industry, I wouldn’t do it by knocking a fiver off the tv licence.

 

Go treat yourself to a pizza. Ho all out and order some ice cream too with your voucher mr miserable 

[chrisp65]

1 minute ago, Demitri_C said:

Go treat yourself to a pizza. Ho all out and order some ice cream too with your voucher mr miserable 

They didn’t want to spend £3 making sure vulnerable kids ate whilst schools were closed.

But people that already have cash, can dine out for half price.

(I know I might be perceived as being less joyful than normal, but I’m just amazed that they can let 65,000 die, blame the nurses, blame the care homes, and then give everyone a discounted burger)

This same government that are asking private employers to keep people on and offering them a cash bonus, are currently telling thousands of civil servants they will be made redundant this financial year. 

But let’s not worry about them slashing the civil service just when they say we need to preserve jobs, they can have stamp duty waved and get half price burgers on Wednesdays in August.

And people buy it every single **** time.

 

 

 

[HanoiVillan]

1 hour ago, LondonLax said:

The quantitative easing unleashed after the financial crisis did result in inflation. Not inflation of every day items like food, clothes etc, those remained low, coupled with low wage inflation.

However, the money released by quantitative easing resulted in inflation in assets, like housing and stocks. The same thing is happening again, all this government stimulus is causing the stock market to ramp up to levels way out of kilter with the underpinning economic reality.

Yes, that's true, but most of the time when people raise the spectre of inflation in a 'we'll never be able to afford it' tone, it's not to complain about rising asset prices.

[tinker]

7 hours ago, HanoiVillan said:

Yes, that's true, but most of the time when people raise the spectre of inflation in a 'we'll never be able to afford it' tone, it's not to complain about rising asset prices.

If inflation does rise, which seems likely, then so will interest rates   Those waiting  it out waiting for rates to drop further should factor that in. Add to that the likelihood of jobs losses and you have a lot of pressure on lenders to tighten their lending up.

 

[KenjiOgiwara]

11 hours ago, Genie said:

Mine is up at the end of the year, I’m gonna sweat it out till the last minute. I’ll probably go for a 3 year fixed, maybe 5

Honestly, what's the point of a 3 year fixed? Have you ever heard that was beneficial? It makes no sense to me. I'm not a fan of 5 year fixed either. 

Fixed rates basically mean you are willing to gamble you know more about the economic development than the mathematicians within the banking sector. By extending the duration of the deal it's less likely they are accurate, so you might come out ahead. At 3 year deals that's highly unlikely. 

Ofc. if it makes you sleep better or the banks aren't offering other deals  that's another thing entirely. 

[Genie]

41 minutes ago, KenjiOgiwara said:

Honestly, what's the point of a 3 year fixed? Have you ever heard that was beneficial? It makes no sense to me. I'm not a fan of 5 year fixed either. 

Fixed rates basically mean you are willing to gamble you know more about the economic development than the mathematicians within the banking sector. By extending the duration of the deal it's less likely they are accurate, so you might come out ahead. At 3 year deals that's highly unlikely. 

Ofc. if it makes you sleep better or the banks aren't offering other deals  that's another thing entirely. 

There’s a few reason fixed rate deals are incredibly popular. Knowing what your payments are going to be for a period of time being the main one. My mortgage is quite big so if there is a spike up of interest rates then it will hit me hard. Then obviously the current economy, a uptick combined with being out of work will be another disaster.

I think I’m unlikely to move in the next 3 years so it feels a good length of time. Beyond that I’m not sure. If I fixed for 7 or 10 years (at a higher rate than my 3/5 year deal) I could get stung with some hefty penalties for settling early.

Its not about being cleverer than the economists, it’s about knowing where I stand for a period. There’s much more scope for the rates to go up than down so locking in at record low levels for a few years suits me. 

[KenjiOgiwara]

Yeah I get that. Just saying I think there's no chance a 3 year fixed rate will be beneficial. You're just paying more than you should. But from the point of sleeping better knowing you're aware of your monthly payments I get that. 

Edited July 9, 2020 by KenjiOgiwara

[HanoiVillan]

2 hours ago, tinker said:

If inflation does rise, which seems likely, then so will interest rates   Those waiting  it out waiting for rates to drop further should factor that in. Add to that the likelihood of jobs losses and you have a lot of pressure on lenders to tighten their lending up.

 

The part of this prediction that seems likely to come true to me is the prediction of job losses. Assuming that they will happen at a pretty enormous scale (sadly), that is likely to lead to a *deflationary* pressure on wages. The response to the financial crisis did not see rampant inflation or rapidly rising interest rates, and it's very hard for me to see why this response would have completely different effects this time when the macroeconomic basics look pretty similar. It is going to be very cheap for governments and financial instittutions to borrow for the forseeable future, for as long as investors have few good options for locating their money, and it's not clear to me why, in an economic demand slump so steep that the government is literally subsidising meals in restaurants, the Bank of England would want to raise the incentive to save.

(To be clear, since I was (rightly) pulled up on not making this clear last night, this comment should not be taken as arguing that government policy will not *also* keep the prices of certain classes of asset - like stocks and housing - artificially high)

[Genie]

I can get a 5 year fixed rate deal at 1.34-1.39%

Best 5 year variable rate is 1.59%, second best is 2.19%, best 3 year variable are 1.54% to 1.65%
 

Why would I go for the variable? They may come down a little bit, but doesn’t seem worth it for the (small) risk they might go up a lot.

Edited July 9, 2020 by Genie

[KenjiOgiwara]

34 minutes ago, Genie said:

I can get a 5 year fixed rate deal at 1.34-1.39%

Best 5 year variable rate is 1.59%, second best is 2.19%, best 3 year variable are 1.54% to 1.65%
 

Why would I go for the variable? They may come down a little bit, but doesn’t seem worth it for the (small) risk they might go up a lot.

I think the risk/reward argument you're pitching makes more sense with a longer deal, and personally I think that's around 10 years. 

In the next 3 years the likelyhood of a massive interest hike is relatively low, thus the deal they offer. But the next 10 years there's so much uncertainty the banks simply can't know, thus it's more likely to be a deal that's economically beneficial. Especially with todays interest rates. 

I don't know the exact deals offered in the UK, but if you can get a 5 year fixed at 1,4% you can probably get a 10 year fixed deal <2,2%. Now 2,0% (or there about) over 10 years is a much much better risk/reward deal relative to 1,4% over 5 years imo. 

The short term picture 1-2-3 years the banks know most scenarios. The likelyhood of stagflation, the inflation models. The worst case models. Yet they offer you a fixed rate deal at a premium. Why? Because it makes them money. 

At a 10 year deal there's a lot of macro they are absolutely clueless about. But ultimately this is a subjective PoV I guess. 

I'd also add, by large, fixed rates in Norway are considered to never make you money. Statistically the last 30 years adjustables have always come out ahead. Not sure how these numbers add up in the UK. 

Edited July 9, 2020 by KenjiOgiwara

[Lichfield Dean]

John Lewis in Grand Central closing down.

Complete disaster. To be honest, the store should never have been built there anyway. I always thought it smacked of dodgy bungs somewhere because I'm sure it was just randomly dumped on top of the station after the original designs had been done.

Anyway, the current economic crisis has now left a huge gaping void in the glitzy showcase transport hub of Birmingham.

[OutByEaster?]

11 minutes ago, Lichfield Dean said:

John Lewis in Grand Central closing down.

Debenhams has gone in the Bullring too hasn't it.

Holes appearing.