The rising cost of living

[Genie]

Just now, desensitized43 said:

That's the right attitude to have, but the question is how much of that pain are you going to pass onto your tenant? Just out of curiosity, don't feel the need to answer that if you don't want to.

FWIW I think our mortgage market if **** because this model of renewing every few years or so is ridiculous. Why can't I fix for the entire lifetime of the mortgage?

It does seem bonkers to have to keep renewing. In many other places you fix for the full term which makes sense as it’s at the point you take the full loan. 

Luckily I still have until Feb ‘26 on mine (1.39% 5 year fix) before I need to renew. Hopefully things have settled and ideally dropped a bit. I don’t think we’ll be back to 0.1% base rate again in my mortgage lifetime.

[bickster]

3 minutes ago, Genie said:

The BoE is not fully independent. We all know that. Government decides who runs it for a start.

The current chairman has a contract until 2028. If they sack him for a non-credible reason that would cause financial turmoil in the markets

[turvontour]

I'm finding myself increasingly reluctant to pay for things that have hiked so much in price. But sadly, more often than not to date, I have just bit the bullet and paid it. I'm struggling with what I'd value something at and what it now costs.

Great example friday night at edgbaston for the cricket a car park about a mile from the ground charged me £15 to park there. On what planet is £15 to park in a field for a few hours now the going rate? I drove off and hit traffic and other car parks I know are cheaper were full so went back with tail between my legs and paid. But I find this a near daily occurrence in terms of what I should and shouldn't pay for.

Edited June 26, 2023 by turvontour

[desensitized43]

1 minute ago, Genie said:

It does seem bonkers to have to keep renewing. In many other places you fix for the full term which makes sense as it’s at the point you take the full loan. 

Luckily I still have until Feb ‘26 on mine (1.39% 5 year fix) before I need to renew. Hopefully things have settled and ideally dropped a bit. I don’t think we’ll be back to 0.1% base rate again in my mortgage lifetime.

I'm on a 4 year fix at 1.99% that expires December 2024. Did a reccy a few weeks ago and it'll go up £200 per month minimum. Basically my payments at the moment at £450 and it'll go to around £660. I'm just lucky that I decided to take something that was very affordable and didn't get tempted to stretch to something which admittedly would have been great but I'd be really worried about now.

[Genie]

5 minutes ago, bickster said:

The current chairman has a contract until 2028. If they sack him for a non-credible reason that would cause financial turmoil in the markets

True, that doesn’t mean he’s not going to be as helpful to the people who gave him the job as he can be.

Edit: The BoE is being heavily criticised for not increasing interest rates sooner and falling behind the curve. If you remember this was the period where Boris was shouting from the rooftops about how we had the strongest economy in the G7. Was he putting pressure on them to maintain lower interest rates to keep the economy running hot? Wouldn’t surprise me one bit.

Edited June 26, 2023 by Genie

[bickster]

Just now, Genie said:

True, that doesn’t mean he’s not going to be as helpful to the people who gave him the job as he can be.

He only gets the casting vote on MPC though, he'd have to get rid of his three assistants and the Chief economist, or the 4 independent members to guarantee the result he / the Govt wants. That would spook the markets again

[Genie]

Just now, bickster said:

He only gets the casting vote on MPC though, he'd have to get rid of his three assistants and the Chief economist, or the 4 independent members to guarantee the result he / the Govt wants. That would spook the markets again

I just added a bit more above. Whilst I agree that the governor can’t do it all himself there will be mechanisms for politicians to put pressure on the BoE to do what helps them. 

[Demitri_C]

7 hours ago, bickster said:

But the BoE is independent of the government. Are you suggesting the Government will take control of the BoE again?

 

No

[bickster]

1 hour ago, Demitri_C said:

No

Then how are the government going to bring down interest rates, they don’t have the power to do that

[KentVillan]

I think BoE are genuinely independent in the sense they don’t collude with govt on individual decisions. But they’re a bit like the Supreme Court or whatever, there is indirect govt influence in terms of their makeup, the types of personalities who are favoured, and so on.

Their actions over the last year certainly haven’t helped the govt afaics.

[CVByrne]

11 hours ago, Genie said:

True, that doesn’t mean he’s not going to be as helpful to the people who gave him the job as he can be.

Edit: The BoE is being heavily criticised for not increasing interest rates sooner and falling behind the curve. If you remember this was the period where Boris was shouting from the rooftops about how we had the strongest economy in the G7. Was he putting pressure on them to maintain lower interest rates to keep the economy running hot? Wouldn’t surprise me one bit.

BoE raised rates before the Fed or the ECB. They couldn't predict Putin would invade Ukraine. When that happened it's very difficult to control inflation as raising rates don't really impact volatile food and energy prices. To say they were too slow raising rates doesn't account for how difficult this period has been. Coming out of Covid lock downs, a war breaks out. Brexit thrown in there too 

[KentVillan]

12 minutes ago, CVByrne said:

BoE raised rates before the Fed or the ECB. They couldn't predict Putin would invade Ukraine. When that happened it's very difficult to control inflation as raising rates don't really impact volatile food and energy prices. To say they were too slow raising rates doesn't account for how difficult this period has been. Coming out of Covid lock downs, a war breaks out. Brexit thrown in there too 

BoE started earlier, but the Fed raised more aggressively when it did start hiking.

Problem is BoE seems to have found a sweet spot for rates where they are causing pain but not really feeding through into reduced inflation.

And Bailey constantly calling for wage restraint, while you can understand his point that on aggregate it would help to arrest inflation, on an individual or company level, nobody rational is going to voluntarily do this … so why keep saying it?

[CVByrne]

Just now, KentVillan said:

BoE started earlier, but the Fed raised more aggressively when it did start hiking.

Problem is BoE seems to have found a sweet spot for rates where they are causing pain but not really feeding through into reduced inflation.

And Bailey constantly calling for wage restraint, while you can understand his point that on aggregate it would help to arrest inflation, on an individual or company level, nobody rational is going to voluntarily do this … so why keep saying it?

Fed has an inbuild advantage in that dollars are the world reserve currency and everything is sold in dollars. They have not foreign exchange risk to manage too. Strong dollar has made inflation worse around the world. As we need to buy dollars to buy oil etc.. 

I personally think BoE should have raised rates fast last year. But I'm not going to be blaming them for it. The energy shock looked like it would tip us into recession and hitting rbig rate hikes on back of it could have done more damage. Also it's clear Truss didn't even tell BoE of her crazy plans and BoE was caught by a currency crisis suddenly as the pound tanked.

It's been a very tough period 

[AshVilla]

Savings rates are a joke at the minute with the big name high street banks.

Currently with HSBC and have a 1.35% easy access account but then i check raisin uk and can get an alternative easy access account with GB bank at 4.15% instead who are also covered by the FSCS scheme.

I think i'll be switching.

 

Edited June 26, 2023 by AshVilla

[Xela]

26 minutes ago, AshVilla said:

Savings rates are a joke at the minute with the big name high street banks.

Currently with HSBC and have a 1.35% easy access account but then i check raisin uk and can get an alternative easy access account with GB bank at 4.15% instead who are also covered by the FSCS scheme.

I think i'll be switching.

 

HSBC OBS savings account is 4%  on the first £10k

[Genie]

9 hours ago, CVByrne said:

BoE raised rates before the Fed or the ECB. They couldn't predict Putin would invade Ukraine. When that happened it's very difficult to control inflation as raising rates don't really impact volatile food and energy prices. To say they were too slow raising rates doesn't account for how difficult this period has been. Coming out of Covid lock downs, a war breaks out. Brexit thrown in there too 

The threat of war in Europe was there for some time, it was at the same time Boris was bragging about the UK having the fast growing economy. There was an opportunity to cool it off with a rate rise against the threat of a war that wasn’t taken at the time.

Of course these are once in a hundred year events and we had 2 back-to-back (plus the idiocy of Brexit) but I still maintain we could have done a bit more to prepare better. The US approach of shocking the system with sharper rises might have had more of an impact in hindsight. 

 

[Genie]

7 hours ago, Xela said:

HSBC OBS savings account is 4%  on the first £10k

3.8% at Chase for immediate access at any time. They pay 5% interest on “roundups” too.

[CVByrne]

2 minutes ago, Genie said:

The threat of war in Europe was there for some time, it was at the same time Boris was bragging about the UK having the fast growing economy. There was an opportunity to cool it off with a rate rise against the threat of a war that wasn’t taken at the time.

Of course these are once in a hundred year events and we had 2 back-to-back (plus the idiocy of Brexit) but I still maintain we could have done a bit more to prepare better. The US approach of shocking the system with sharper rises might have had more of an impact in hindsight. 

 

As I said, the Bank of England raised rates before any other major economy in late 2021 and again in early 2022. The US was behind and had to catch up quicker. The US had less impact of the energy shock as they are energy self sufficient and oil is sold in USD.

This revisionism is just nonsense. The BoE had the Ukraine war and Truss in space of 6 or 7 months. Rate rises have little effect on the volatile food and energy prices too. 

[Genie]

9 minutes ago, CVByrne said:

As I said, the Bank of England raised rates before any other major economy in late 2021 and again in early 2022. The US was behind and had to catch up quicker. The US had less impact of the energy shock as they are energy self sufficient and oil is sold in USD.

This revisionism is just nonsense. The BoE had the Ukraine war and Truss in space of 6 or 7 months. Rate rises have little effect on the volatile food and energy prices too. 

The US base rate was higher than ours to start with, and increased at the same point (within a month). We were playing catch up.

Didn’t you say Brexit wasn’t a major factor in our price of food and (incorrectly) that the EU has higher food inflation?

What is driving our high food inflation costs then if it’s not energy, interest rates or Brexit?

[CVByrne]

8 minutes ago, Genie said:

The US base rate was higher than ours to start with, and increased at the same point (within a month). We were playing catch up.

Didn’t you say Brexit wasn’t a major factor in our price of food and (incorrectly) that the EU has higher food inflation?

What is driving our high food inflation costs then if it’s not energy, interest rates or Brexit?

Your narrative is nonsense. BoE began raising rates earlier, the Fed later. Fed first rise was in MArch 2022 from 0.25 to 0.5. BoE raised from 0.5 to 0.75 in March. They both raised rates fast. BoE had bigger issues to face than the Fed in 2022 with Energy and Truss. So you can't compare the jobs they did as if they were both working in identical economies with identical objectives.

You can continue with your "captain hindsight" that they should have done it different etc.