Thursday, September 11, 2014
Cost of bank renting about to increase!
Bank of England boss: interest rates will rise months before wages do
The Bank of England's governor, Mark Carney, has warned trade union members that they face higher interest rates next spring before they receive rises in real wages. Speaking at the annual meeting of the Trades Union Congress on Tuesday, Carney said interest rates could start to climb from their record low of 0.5% in early 2015, while above-inflation pay rises were not expected before summer at the earliest. He added that in order to claw back wages that have declined in real terms since the recession, workers will need to improve their productivity, upgrade their skills and work more effectively.
Posted by khards @ 04:19 PM (5990 views)
19 thoughts on “Cost of bank renting about to increase!”
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libertas says:
Cost of bank renting? Our mortgage is 1/3 cheaper than renting in our area and half of the payments are re-payments. You CANNOT compare renting and buying. They are completely different, and to associate the two in this way shows economic illiteracy.
Also, Carney is saying that they may, could, he is flip flopping again, trying to distract the public from the inflationary mega trend of money printing and deficit spending, that they plan to go on, and on, and on.
As I speak, German interest rates on Bunds are collapsing. 2yr Bunds are at Rapid City MINUS 0.075 and there is inversion now at the low end of the yield curve, with 1 year and month long bunds yielding more than the two year Bund. Clearly implying that the worst is still to come for the Eurozone. We may see Germany on a course to exiting the Eurozone within the next 2 to 5 years if this continues.
Meanwhile, oil is continuing to collapse, almost breaking into the high $80’s, with Brent comfortably below $100. DEFLATION he screams. Meanwhile, the slashing of Russian oil is not boosting oil prices, because the impact of lower supply is merely being counteracted by reduced economic “growth” in Europe.
If the Scots vote NO, we could see a major reversal, with the United Kingdom strengthening, and maybe even seeing other countries seeking to join our Union. I would not be surprised to see Southern Ireland seek protection of the Bank of England. The Irish are strongly aware that prices and the availability of goods are more plentiful in Northern Ireland. Most building materials are imported from Britain now. If the Euro collapses, and that divergence occurs, we could see something interesting occurring. Do not be surprised to see some form of Anglo/Nordic union appearing also.
Its all in flux now.
Alan Lubin says:
In your situation perhaps.
My rent is £3k per month. The house next door but one (identical) just sold for £1.25m. I suspect a 100% interest only mortgage would be the same as my rent or more. In this instance (and given the amount of people with IO mortgages) it is quite reasonable to associate the two without being economically illiterate.
khards says:
@libertas – That all depends on your mortgage LTV.
If for example you were one of “Cameron’s Children” and had taken a 95% help-to-buy loan you budget might already be a little stretched.
Anyway, your mortgage payments WILL increase when rates go up because you have a tracker. The bankers will beat you on the mortgage rates so you will never be able to fix before rates rise.
You have as many reasons why interest rates should fall as the bears have for prices falling. At the end of the day it’s completely out of your control and unpredictable.
stillthinking says:
Good lordy! Is Carney suggesting strikes to reflate wages?
“He added that in order to claw back wages that have declined in real terms since the recession, workers will need to improve their productivity, upgrade their skills and work more effectively.”
I am sure they will take this sage advice to heart, and won’t consider the other option, go on strike for more money while staying exactly the same or getting worse. I wonder which they will do.
alan says:
Carney has given out so much conflicting “advice” to the markets I agree with the financial journos that he should just “shut up”.
libertas says:
Nonsense Khards. I can fix my rate for 10yrs, securing a deal within the space of 24hrs. There is NO WAY Carney is raising rates whilst our inflation remains muted and German Bunds are collapsing. As said, the German yield curve inversion indicates that we are between three and five years from interest rates turning the corner, according to market expectations.
Yes, I have 70% LTV, and expect to be 60% by the time I fix for 10yrs, but the vast difference between my mortgage (£950yr) vs the £1500 rent typical for houses like mine, means that even those on a poor LTV would still be FAR better off buying in this location. There are plenty of places like where I have looked, but you have to make compromises. I am 10mins drive from the Underground rather than 5mins walk. That is the sacrifice first time buyers should look at taking.
Most articles bleating on about owning being horrid focus solely on the prime areas. The cheap parts of town are not news worthy.
For example, even in St Albans, one of the most expensive towns in Britain, there are very cheap Council Estates, just 5mins from town where prices are very cheap. Cross the road onto the Victorian streets and prices quadruple, but you can get a start in most towns if you compromise.
libertas says:
Incidentally, you say that it is out of my control. Nonsense. I have contingencies in place. I could have fixed with Nationwide for 5yrs. Because I did not have payslips, Nationwide were the only lender who would touch me. I went on a variable rate with no early repayment penalty so that I had the liberty to re-mortgage for 10yrs with access to the whole mortgage market after my third pay-check. That will be October. Rates are not rising in October unless Scotland vote YES and there is a currency crisis.
jack c says:
libertas going back to the fool.co.uk post from earlier in the week – you’ve either bought a house and completed or you haven’t ? (Exchange of contracts is irrelevant these days – had a young couple back out on one of my clients in recent months having exchanged)
Last comment on the fool.co.uk thread
7. jack c said…
“I am waiting for the Scottish vote before exchanging however”
I thought you had actually purchased a property some months back ? and now you’ve yet to exchange ! all very odd and inconsistent with previous posts.
Wednesday, September 10, 2014 07:16PM
libertas says:
Nope, I have a price agreed and we are looking to exchange in the next couple of weeks. Yes, of course it can fall through. I’m aware of that, but our circumstances are good, with no chain, so the likelihood is very low. This is just one of the risks of living, like, if I was as risk averse as you, I may just be scared of opening the door in the morning. Statistically, it is a probability that I will get run over or mugged and not return. Statistically, death is a consequence of life, and so to eliminate risk, we should eliminate life. That is your logic taken to the extreme. It also ignores the opportunity cost risk of my landlord raising my rent and me having to rent during retirement age because I couldn’t be arsed to buy my own place.
stillthinking says:
Poland isn’t in the euro either. Polish guy I work with, I asked him what the inflation rate was (thinking probably fairly high) and he said first time ever they are in deflation.
cornishman says:
libertas – I don’t know where you get the idea that jack c is risk averse, or why you have chosen to make an ad hominem attack. He just voiced the fact that you have given the impression that you had already done the good deal you keep mentioning. Something that I had also thought – from what you have written previously.
Your purchase sounds fair enough in your circumstances. You must do what’s best for your family. But please don’t forget that the vendor may decide that the economics make sense for them to keep the house themselves and so back out of the deal. If it’s such a good deal for you under all forseeable economic outcomes, my suggestion is that you get it watertight ASAP.
icarus says:
cornish – maybe he’s waiting for Scotland to vote, given that he thinks house prices will be buoyed if she stays in the UK. But what if the vendor is thinking the same thing?
libertas says:
Icarus. Not many people think about much at all.
icarus says:
libertas – true, but people who are barely literate or numerate can suddenly read balance sheets if their own money is involved.
p. doff says:
A word of warning Libertas – several years ago we had exchanged contracts on a farmhouse we were purchasing when the seller suddenly refused to complete claiming that he had not intended to convey all the land shown on the plan (and marked out by a fence on site). My solicitor advised me to agree to their demands as I had just completed on the house I was selling and would otherwise be in a ‘homeless limbo’ at a time when builders and electricians etc were already booked for my intended renovations.
The deal aint done til it’s done!
jack c says:
libertas – Friday, September 12, 2014 06:10PM
I’m not sure how you came to the conclusion that I’m risk averse (which I’m not incidentally and in any event it’s irrelevant in my opinion to the content of this thread).
In recent weeks you have become increasingly bullish on housing outlining details of the type of property purchased and your future development plans for that property. All I did was question whether you had actually bought the property due to inconsistencies with some of your posts (notably the Fool thread)
I’ve been a regular on here for many years as you are well aware and have previously stated on several occasions that as a general rule of thumb renting meets a short term need whilst buying better serves a long term need. Typical example is the retail sector where my daughter works at middle management level and the staff move regularly from one region to another – renting is ideal, buying is not.
libertas says:
Jack, your daughter could still own a place and rent it out. Ideally, have a BTL in a town where she will plan to settle eventually. If she re-occupies it, she can avoid capital gains tax. What will she do when she retires if she does not own the roof over her head?
jack c says:
libertas – she has approached me on several occasions regarding having a BTL from which I have continually dissuaded her in my professional capacity as an IFA/Financial Planner. The main reason being that she would potentially reap the benefit of additional regular income whilst I would have to deal with ALL of the hassle that goes with it ! The nature of my work fortunately allows me to cover the angle of ensuring both my children will have unencumbered properties well before they reach retirement age. At present both live accommodation free under my roof with the proviso that they save what I would otherwise charge them in old fashioned “Board & Lodgings” or what they would be paying in private rented accommodation.
Mr Wadsworth as you know is no longer a contributor to this blog but he’s crunched the numbers and buy to let doesn’t stack up in the current market (one of my clients who has 30+ unencumbered properties states the same)
hpwatcher says:
Give it a rest Libby; I’m thoroughly bored of all your posts.
buy to let doesn’t stack up in the current market
Don’t underestimate how daft people are – after all…..the Newtonian laws have changed: what goes up, now stays up!