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Inequality and the top 10%

As I said, prices are inversely proportional to IR’s.
Prices have a relationship to affordability, but to cite only Interest Rates is to see only one part of the picture. Changes in bank lending criteria, buy-to-let mortgages, globalisation (Chinese, Russian and other money flooding into the market), securitisation of mortgages as CDOs, etc. all had an effect.
 
Prices have a relationship to affordability, but to cite only Interest Rates is to see only one part of the picture. Changes in bank lending criteria, buy-to-let mortgages, globalisation (Chinese, Russian and other money flooding into the market), securitisation of mortgages as CDOs, etc. all had an effect.

Of course there are externalities but IR’s are the primary driver. If they were wound back to pre ‘emergency’ levels of 5% tomorrow, what would happen to prices?
 
Of course there are externalities but IR’s are the primary driver. If they were wound back to pre ‘emergency’ levels of 5% tomorrow, what would happen to prices?
Interest rates are to control inflation, they don’t cause inflation unless those big brains at the BoE can’t do sums.
 
Of course there are externalities but IR’s are the primary driver. If they were wound back to pre ‘emergency’ levels of 5% tomorrow, what would happen to prices?
I agree that IRs are an important component of house prices but (apart from a dip in 2003, where the lowest rate was 3.5% for four months) we had interest rates of around 5% until November 2008. And the facts show that houses were unaffordable at that time. I'll repeat this, because it is crucial: when interest rates were 'normal' in the decade to 2007 house prices were already out of reach of average earners. You can download a spreadsheet of bank rates here (Bank of England).

Looking at interest rates alone doesn't show why prices rose from 1997-2007. So it fails to qualify as a 'primary driver' in that period - there must be other explanatory factors. And therefore a return to normal interest rates is not - unless accompanied by other changes - going to fix things, unless your definition of fixed is to take us back to 2007.
 
The problems in the housing market were started by selling off rented public housing stock very cheaply for political purposes, and not replacing it, again for political purposes

Not sure about political purposes. The aim was for council tenants to become leaseholders (owners, in effect), by which they would look after and improve their assets as well as increasing the 'stock' of home-owners. One could argue that the properties were sold off too cheaply but there's no question about the effect on down-trodden council estates. The idea was for the proceeds to generate new social housing, but that was down to individual councils to implement and many didn't.

You only have one set of inhabitants in a property. To my mind, pride of ownership will always surmount paying rent and nobody was made homeless. Only a soothsayer would predict such returns on leaseholders' investments at the time, esp. as leasehold longevity declines (125 years in my patch).
 
I agree that IRs are an important component of house prices but (apart from a dip in 2003, where the lowest rate was 3.5% for four months) we had interest rates of around 5% until November 2008. And the facts show that houses were unaffordable at that time. I'll repeat this, because it is crucial: when interest rates were 'normal' in the decade to 2007 house prices were already out of reach of average earners. You can download a spreadsheet of bank rates here (Bank of England).

Looking at interest rates alone doesn't show why prices rose from 1997-2007. So it fails to qualify as a 'primary driver' in that period - there must be other explanatory factors. And therefore a return to normal interest rates is not - unless accompanied by other changes - going to fix things, unless your definition of fixed is to take us back to 2007.

I’d suggest houses have been ‘unaffordable’ since around 1997. The pre 2008/9 base rate of 5% was historically very low. Maybe rates higher than this are required to flush out the excess and bring prices back to ‘affordable’ levels relative to salaries. Of course that’s unlikely to happen because debt levels are off the chart.
 
The younger generation have been stuffed by the ridiculous growth of asset prices, but this is not the product of ZIRP, it’s the product of political decisions to get rid of the offset to rising house prices which is a publicly funded affordable rented housing stock

Don't know how "political" it is, in the narrow UK sense, given that the situation is exactly the same in Italy and Israel, with a rapid rise over the past 30-odd years of the relationship between wages and home prices.
 
The BoE printed unbacked ten-shilling and pound notes during World War One. There's a better explanation here (wikipedia), with a link to the FOI request that confirms it (click the pdf icon at the end of the text).
Yes, but Britain was on the Gold Standard in WWI. MMT describes the economy after the gold standard.
 
Don't know how "political" it is, in the narrow UK sense, given that the situation is exactly the same in Italy and Israel, with a rapid rise over the past 30-odd years of the relationship between wages and home prices.
Well the political-economic ideology (monetarism/neolib) is not national in character, it is pretty international. They work from the same failed crib-sheet.
 
Interest rates are to control inflation, they don’t cause inflation unless those big brains at the BoE can’t do sums.

They’ve kept going with ZIRP. What’s happened to prices (and not just houses)? Time for a stiff increase I’d say.
 
Well the political-economic ideology (monetarism/neolib) is not national in character, it is pretty international. They work from the same failed crib-sheet.

Indeed. It tends to be the case as the alternatives need to be imposed with police state authoritarianism! Even the countries we view as far more balanced and left-leaning than the ridiculous situation we have in the UK and US (e.g. much of Scandinavia, parts of the EU) still run on this basic model.
 
Ponty said:
They’ve kept going with ZIRP. What’s happened to prices (and not just houses)? Time for a stiff increase I’d say.
What a surprise. No government is contemplating it, so bad luck old chap.
 
Indeed. It tends to be the case as the alternatives need to be imposed with police state authoritarianism! Even the countries we view as far more balanced and left-leaning than the ridiculous situation we have in the UK and US (e.g. much of Scandinavia, parts of the EU) still run on this basic model.
I'm not sure what you mean. Since the current ideology is also imposed with 'legal' authority.
 
They’ve kept going with ZIRP. What’s happened to prices (and not just houses)? Time for a stiff increase I’d say.

I had a T-shirt saying ‘I don’t give a f*ck how much your house is worth’ in the 80’s when house price inflation had already become absurd. ZIR didn’t happen until three decades later. The fact that house price inflation has become more absurd is a product of speculation on that absurdity by those in a financial position to take advantage of it, it is not a product of ZIR itself.
 


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