The rising cost of living

[KentVillan]

12 minutes ago, CVByrne said:

Real wages have dropped very little in the last year as wage increases have only been slightly behind inflation. Figure 3 from ons below

Average weekly earnings in Great Britain - Office for National Statistics (ons.gov.uk)

Those who get richer during inflation are those who have large amounts of debt, so anything leverage like owning property etc.. as inflation is higher than the interest they pay

House prices are flatlining (or arguably starting to fall) though so it’s a bit of a muddled picture for mortgage holders?

I guess the people who are really doing well are those who’ve locked in lowish interest for 5 years and are now seeing their debt inflated away through this crisis.

But I don’t think inflation is really helping anyone tbh, it will force BoE to go much harder on rates until unemployment starts to go up.

We’re in for a very rough ride IMO.

[ender4]

My fixed gas/electric deal ends in 5 weeks with Ovo. The new fixed deals are double/triple my current rates, so my options are:

1 - stay on variable and pay the price cap.

2 - Fix it at the current high rate and then feel annoyed when gas/electric prices probably fall over the next few months.

3 - Join the Octopus tracker, currently much cheaper than the price cap and fixed deals, but expected to be double/triple the current prices over the winter months when demand rockets.

[CVByrne]

10 minutes ago, KentVillan said:

House prices are flatlining (or arguably starting to fall) though so it’s a bit of a muddled picture for mortgage holders?

I guess the people who are really doing well are those who’ve locked in lowish interest for 5 years and are now seeing their debt inflated away through this crisis.

But I don’t think inflation is really helping anyone tbh, it will force BoE to go much harder on rates until unemployment starts to go up.

We’re in for a very rough ride IMO.

It depends on when you bough your home. Prices have risen approx 18% in 2 years from beginning of 2021 to end of 2022. They were too high and now falling back so when you look at it over a 4 year period in 18 months time people who bought at start of 21 will be still in positive equity. Then when you get to rich people who own multiple properties etc. Most of those would have locked in longer periods at lower rates. 

Remember though higher interest rates are a temporary think, they are there to cause recessions / drops in consumer spending. When a recession hits the rates drop quickly. So the higher mortgage rates are temporary 

[KentVillan]

1 minute ago, CVByrne said:

It depends on when you bough your home. Prices have risen approx 18% in 2 years from beginning of 2021 to end of 2022. They were too high and now falling back so when you look at it over a 4 year period in 18 months time people who bought at start of 21 will be still in positive equity. Then when you get to rich people who own multiple properties etc. Most of those would have locked in longer periods at lower rates. 

Remember though higher interest rates are a temporary think, they are there to cause recessions / drops in consumer spending. When a recession hits the rates drop quickly. So the higher mortgage rates are temporary 

I don’t think we’re getting anywhere near 2008-22 rates any time soon. Might drop back to 4-5%ish in next couple of years, but I think history suggests inflation takes much longer to rein in than people expect, and for various reasons interest rates find new equilibriums and get locked in for extended periods. So no, not really “temporary” unless you’re talking over 5+ years, which is long enough to wipe a lot of people out.

[CVByrne]

3 minutes ago, KentVillan said:

I don’t think we’re getting anywhere near 2008-22 rates any time soon. Might drop back to 4-5%ish in next couple of years, but I think history suggests inflation takes much longer to rein in than people expect, and for various reasons interest rates find new equilibriums and get locked in for extended periods. So no, not really “temporary” unless you’re talking over 5+ years, which is long enough to wipe a lot of people out.

No the 2008 to 2022 rates were frakishly low rates due to how deflationary globalisation was especially China artificially keeping it's CCY lower. 

I think the 2-4% will be where new rates will settle post recession when we return to growth. Current rates are projected to hit 6%+ so I mean those levels will be temporary

[Genie]

38 minutes ago, ender4 said:

2 - Fix it at the current high rate and then feel annoyed when gas/electric prices probably fall over the next few months.

If prices drop dramatically and better fixed deals are around you can pay the exit fee and move.

[chrisp65]

Could it currently, hypothetically, be worth riding the Standard Variable Rate roller coaster for a few months on the gamble that rates would be more likely to go down rather than up over the whole of the next 2 years?

 

 

[blandy]

2 hours ago, bickster said:

I see we're already making savings on the punctuation....  

it’s a difficult period

[Genie]

7 minutes ago, chrisp65 said:

Could it currently, hypothetically, be worth riding the Standard Variable Rate roller coaster for a few months on the gamble that rates would be more likely to go down rather than up over the whole of the next 2 years?

 

 

That’s my plan. But as I mentioned above, you can pay to come out of a fixed deal (it used to be £40/50 per fuel but now about £100). 

It could still be worth it though for peace of mind. If the prices tumble just stump up the £200 and get on a better fix. If it’s with the same supplier they might waiver the exit fee.

[bickster]

14 minutes ago, blandy said:

it’s a difficult period

Comma gain?

[Seat68]

 

[KentVillan]

32 minutes ago, chrisp65 said:

Could it currently, hypothetically, be worth riding the Standard Variable Rate roller coaster for a few months on the gamble that rates would be more likely to go down rather than up over the whole of the next 2 years?

The problem is that BoE are struggling to get inflation under control with the one tool they have, for reasons they understand - not that many people have mortgages, those that do take ages to be affected by BoE policy (b/c of fixes, natural time lag on consumer spending), and so much of inflation being supply side.

So that implies they will have to raise very aggressively for some time - let’s say next 6-12 mths. And then how long they lock that in is anyone’s guess.

At least with a fix you know what your outgoings are, but yeah I don’t think there’s any easy answer at all.

[CVByrne]

1 hour ago, chrisp65 said:

Could it currently, hypothetically, be worth riding the Standard Variable Rate roller coaster for a few months on the gamble that rates would be more likely to go down rather than up over the whole of the next 2 years?

 

 

My advice for anyone needing to remortgage is don't fix for 2 years get a tracker. 

[sidcow]

4 hours ago, bielesibub said:

We've got 4 kids, I'm spending well over £1k a month on food. A normal food shop would have been about £200, the last one was £380.

Yep, we're a family of four and the weekly shop. Is upwards of £200 a pop now. 

[Genie]

In the latest instalment of “project reality”

Quote

The shockwaves triggered by the impact of Russia's invasion on food and energy bills have been felt globally. But inflation in the UK has climbed faster and been more stubborn than in the US and EU. 

Some, including Mark Carney, the former governor of the Bank of England, claim Brexit may be to blame. But it's a complex picture.

Singling out the impact of Brexit isn't easy, especially with the effects of a pandemic and a war. But there is evidence that the red tape - the form filling and other hurdles - required to bring goods into the country may have added to food bills. 

More than a quarter of our food is imported from the EU.

link

[Genie]

I wonder if Truss and Kwarteng are sat in a coffee shop somewhere talking about how this would never have happened if their plan had been implemented.

Edited June 21, 2023 by Genie

[Mozzavfc]

4 hours ago, ender4 said:

My fixed gas/electric deal ends in 5 weeks with Ovo. The new fixed deals are double/triple my current rates, so my options are:

1 - stay on variable and pay the price cap.

2 - Fix it at the current high rate and then feel annoyed when gas/electric prices probably fall over the next few months.

3 - Join the Octopus tracker, currently much cheaper than the price cap and fixed deals, but expected to be double/triple the current prices over the winter months when demand rockets.

I'd contact OVO directly if your quoted rated are double/triple. I renewed my 1 year fixed with OVO last week and the difference was a few pence on the standing charge 

[ml1dch]

This is good reading.

[Genie]

41 minutes ago, ml1dch said:

This is good reading.

You’d think having an ex-chancellor as PM we might actually be quite good at economics. Nope.

All roads also lead to that other place, the B word. And still nobody in Westminster has the balls to admit it.

[foreveryoung]

5 hours ago, CVByrne said:

It depends on when you bough your home. Prices have risen approx 18% in 2 years from beginning of 2021 to end of 2022. They were too high and now falling back so when you look at it over a 4 year period in 18 months time people who bought at start of 21 will be still in positive equity. Then when you get to rich people who own multiple properties etc. Most of those would have locked in longer periods at lower rates. 

Remember though higher interest rates are a temporary think, they are there to cause recessions / drops in consumer spending. When a recession hits the rates drop quickly. So the higher mortgage rates are temporary 

Talking like a true accountant/banker

So in laymens terms, when people are skint, losing there homes, cannot feed there kids and can't even afford that next Iphone, inflation will drop and interest rates will come down. What a way forward, I guess the national debt will not be far off paid by then, an bankers bonuses will be back to normal rates.