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Thread: Bank of England Interest rate increase Aug 18?

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    HEXUS.timelord. Zak33's Avatar
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    Bank of England Interest rate increase Aug 18?

    https://uk.reuters.com/article/uk-br...KBN1KK0WK?il=0

    I've got a mortgage, so I know it's gonna hurt, but let face it.. enough is enough. This country needs a very slow very gradual interest rate increase.

    It's been SOOOOO LONG..... that we've been at 0.5 or below.


    it's time to begin a really really slow steady planned increase, so that no one is in for a surprise.

    Do it...do it... do it....
    Last edited by Zak33; 30-07-2018 at 02:51 PM.

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    Re: Bank of England Interest rate increase Aug 18?

    Can anyone give a tl;dr of what the base interest rate is please? I still don't understand.

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    Re: Bank of England Interest rate increase Aug 18?

    It's suggested to go up 0.25% to 0.75% on Thursday - the decision predicted is based on a 8-1 majority at the BoE

    As for what it is, banks pretend to use it to decide how much money they want to show off to themselves. (joking ?!)
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    Re: Bank of England Interest rate increase Aug 18?

    If they raise interest rates - fine. As long as we see it on our savings too.

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    HEXUS.timelord. Zak33's Avatar
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    Re: Bank of England Interest rate increase Aug 18?

    Quote Originally Posted by Millennium View Post

    As for what it is, banks pretend to use it to decide how much money they want to show off to themselves. (joking ?!)
    you're pretty close.

    It's the theoretical rate that the central bank would/could lend money to the large high street and commercial lenders... and those banks could then lend it out from there with a profit to you and I.

    It's also a theoretical rate that the central bank would PAY back to the large commercial / high street lenders if they deposited it back in and didn't lend it. It's more complex than that but it's a basic analogy. In some countries, the base rate has been a MINUS, which means that a high street lender would be charged to pace it in the central bank and therefore they're better off lending it to you and I to earn something, rather than losing money. It's a way of a central bank/government to keep a financial system moving.

    In the financial global screwup up 10 years ago, when everyone in finance realised that they'd all been lending more and more dough on bigger and bigger things, and selling stuff for more and more money.. and that actually the world is one place, with the exact same amount of stuff on it as 1 million years ago, minus Elon's sports car, a few other space ships going outbound.... and a few meteors hitting, and that all we really had..... was more humans, less plants and not enough to pay back the imaginary bills we'd all invoiced to each other... the interest rates were slid as low as they could go so that us mere mortals could look a loan in the eye and not think "hold crap, I'm not having that"

    A decade later and the rest of the world needs to see the UK as a place to stick their money. Without it, and with the luscious uncertanty of a Brexit day imminent, we might not have enough spondulics for the globe to take us seriously. Frankly they don't at the moment in many finaces anyway.

    There was a time when we were charging SO MUCH interest that a personal loan APR was always over 20% APR for someone with a gold pated credit rating, and some car loans were 30% APR. It hurt like hell but the entire world wanted to put their $ and sheckels into the UK banks. It was too high but it kept house prices v v low and made us uber popular as a country to stick global savings.

    Now.. we're the opposite.

    Quote Originally Posted by Advice Trinity by Knoxville
    "The second you aren't paying attention to the tool you're using, it will take your fingers from you. It does not know sympathy." |
    "If you don't gaffer it, it will gaffer you" | "Belt and braces"

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    Re: Bank of England Interest rate increase Aug 18?

    I was there. House prices were low - but at 15% you couldn't afford them. Higher interest rates would be crippling right now.
    Society's to blame,
    Or possibly Atari.

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    Re: Bank of England Interest rate increase Aug 18?

    So I've saved and I have money but I'm not rewarded for it. Because people who save buy things at a slower rate. What the government wants is for people to buy expensive things regularly. So we start with the miracle that is fractional reserve banking which is a scam to increase the amount of money in an economy. The risk is quite small but the hazard if it goes wrong is absolute destruction of your financial system.... yeh, that didn't nearly happen. Northern Rock? What's that?

    The problem with fractional reserve banking is that a lot of the end assets depreciate in value rather than holding it so you'll never get your money back if someone stops paying - for example cars. And even if you're mortgaging that money out, these days a lot of mortgages are to people who can only just afford it and on very high loan:value (sound familiar?). I remember when it was possible to get a 99% LTV mortgage. Madness. As a result of this you're VERY vulnerable to small scale economic downturns as the kinds of houses that will be repoed will only be desirable to those at the low end of the market in the kinds of jobs that will be lost the quickest when there's a small dip. You then end up with what would have been a small economic downturn snowballing into a massive one as it starts hitting those with the bick bucks who would be investing and now aren't as they've just lost a bunch of cash and want to see where the market goes before investing further. Thus the money dries up, banks stop lending to all but the richest and the economy starts really slowing.

    But now, they've gone one step further and you have stuff like PCP on cars and mobile phones which are meant to last only a couple of years but are the best part of a grand a throw and bought on credit (you see it as a contract but it's essentially credit). How many people without this clever marketing would spend £800 or so on a telephone every 2 years? We see people who will beg you not to take their 25p a pack (costs way more to the NHS due to processing) paracetamol off their prescriptions whilst fondling their latest iPhone. PCP means people are buying cars at a rate never before seen. I ride motorcycles and will never buy one on finance so I'm an outlier but my missus buys a car to last her 70,000 or so miles and then renews. We are both professionals on a decent wage but we drive around in a base model Ford Fiesta 1 litre and look around at all the people with Audis, etc knowing full well they're bought on PCP, advertised as a status symbol. We will keep a car for a good 5-7 years and then replace it when it's verging on starting to have issues. That's how people used to do it - a car was a long term investment but now they're encouraging you to essentially lease the thing for 3 years. New metal every 3 years rather than every 7+. Now THAT's generating money for the economy and it all adds to GDP and makes things look better.

    Of course, if you went round and smashed all the windows of all the businesses in London with a bat and blew up the Houses of Parliament, you'd end up with a massive government contract being dished out, the windows all being replaced on insurance and so on and the end result would also be a giant increase in GDP.... which is a good metaphor for finance in general - the best way to make things look better is to make them worse.

    </rant>

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    Banhammer in peace PeterB kalniel's Avatar
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    Re: Bank of England Interest rate increase Aug 18?

    Quote Originally Posted by philehidiot View Post
    We are both professionals on a decent wage but we drive around in a base model Ford Fiesta 1 litre and look around at all the people with Audis, etc knowing full well they're bought on PCP, advertised as a status symbol.
    Nah, I saved up and bought my Audi outright in cash, I'll keep it 10 years.

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    Re: Bank of England Interest rate increase Aug 18?

    Quote Originally Posted by kalniel View Post
    Nah, I saved up and bought my Audi outright in cash, I'll keep it 10 years.
    I hope so. The amount of money they spent scamming emissions, I hope you're gonna get your money's worth and keep it polluting for as long as possible (says me with the motorbike that does <40mpg and is so beyond redemption that the last lot of emissions laws meant they just ditched the whole model).

    Joking aside, you're probably in a similar group to us in the whole save and buy it thing which is not what they want. You do have to now notice that Mercedes and Audi aren't exactly as exclusive as they once were. Whilst some of this is that they have brought in low end models, a lot of it is increasing accessbility with easier borrowing. I'd personally never bother buying a high end car as I just don't see the point when it spends most of its time pootling and being stuck in traffic. That said, I do have this idea in my head that if I tried one I'd never want to go back. And that.... is dangerous.

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    Re: Bank of England Interest rate increase Aug 18?

    No, I know - I've almost certainly cost them money. It's a pretty clean economical petrol one too (50+mpg), so I'm happy on the emissions front. I got it because it was cheaper than the Golf equivalent

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    Re: Bank of England Interest rate increase Aug 18?

    Quote Originally Posted by philehidiot View Post
    I'd personally never bother buying a high end car as I just don't see the point when it spends most of its time pootling and being stuck in traffic. That said, I do have this idea in my head that if I tried one I'd never want to go back. And that.... is dangerous.
    I tend to buy cars outright based on how much cash I have spare at the time, but I'm done with budget models *because* I spend hours of my time pootling in traffic which adds up to a lot of my life sat in that seat so it needs to be a lovely place to sit. I also tend to find when driving small & budget cars that people treat you like dirt on the road, and that adds to driving stress. I hardly ever get cut up in a bright red Alfa.

    On my last car change I was very tempted by a new Alfa Giulia, which as a new model was only available to me as a new car so would have required a PCP deal. I just didn't feel comfortable with the level of financial risk for the benefit from the car I would be getting. These days the Veloce model might have tipped the balance mind, I could see me keeping one of those for 10 years at least.

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    Re: Bank of England Interest rate increase Aug 18?

    While I agree on PCP finance for cars and am also a member of the buy the car outright for cash group (3-4k gets you a pretty good motor these days,) if I was going higher up the market I'd definitely lease (PCH).

    As the old saying goes, if it appreciates then buy it, if it depreciates then rent it. Cars depreciate and for the right model the leasing costs are a lot cheaper over a 3 year term than PCP (worst of both worlds,) or the opportunity cost of buying if you're spending more than about 5k up front. And if anything goes wrong with it that's the lease companies problem unless you've bent it.

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    HEXUS.timelord. Zak33's Avatar
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    Re: Bank of England Interest rate increase Aug 18?

    PCP is one thing, but lets not got there right now. No one here knows it better than I, I assure you. 100%

    I'm talking Bank of England Base Rate:

    Who thinks it SHOULD go up ?

    Quote Originally Posted by Advice Trinity by Knoxville
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    Re: Bank of England Interest rate increase Aug 18?

    Quote Originally Posted by Zak33 View Post
    PCP is one thing, but lets not got there right now. No one here knows it better than I, I assure you. 100%

    I'm talking Bank of England Base Rate:

    Who thinks it SHOULD go up ?
    Me. But only a little at a time.

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    Re: Bank of England Interest rate increase Aug 18?

    Wouldn't increasing the rate slow down GDP growth though? If I've got that right I'm not sure putting the brakes on would be a good idea, especially as we'll probably be dropping rates back down in eight or so months due to the high probability of further reductions in the value of the pound when we notionally leave the EU.

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    Re: Bank of England Interest rate increase Aug 18?

    Quote Originally Posted by Corky34 View Post
    Wouldn't increasing the rate slow down GDP growth though? If I've got that right I'm not sure putting the brakes on would be a good idea, especially as we'll probably be dropping rates back down in eight or so months due to the high probability of further reductions in the value of the pound when we notionally leave the EU.
    It kind of works the other way around - if the pound falls further you'll need to increase interest rates to offset inflation. Yes, it will dampen GDP growth, which is why you only do it a little at a time. You also want to have the brakes on a little bit all the time, so that you can release them when you need to give a more urgent stimulus. At 0.5% we've got very little room to maneuver when we crash out of the EU.

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