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Interest Rate Increase

“No one expects the Bank of England to cut interest rates today.

That is not because they should not do so. The case for a cut is overwhelming. Inflation is disappearing. High interest rates may be the biggest driver of continuing inflation, most especially through rents. And the evidence that interest rate rises have delivered no benefit to anyone but the wealthy is overwhelming”

www.taxresearch.org.uk

The message from today will be that the Bank of England’s abuse will continue

No one expects the Bank of England to cut interest rates today. That is not because they should not do so. The case for a cut is overwhelming. Inflation is disappearing. High interest rates may be the biggest driver of continuing inflation, most especially through rents. And the evidence that...
www.taxresearch.org.uk
 
I'm not in favour of graphs that don't show the source of the data and how it was collected.

As an example I'd like to challenge this clause "What the graph shows is that house prices have risen since Thatcher and irrespective to inflation".

During the early 1990s and in a recession house builders couldn't sell. I was working in Germany at the time and the agents at a building site located on the SE coast that my wife and I had viewed at the weekend called and asked if we'd be interested in a house the sale of which had just fallen through. I quickly took 25% off in my head and later that day I had another call accepting my offer. My wife and I had visited several new developments and at one we were give a bunch of keys so that we could view every property. Our own house in SW20 didn't sell so once the offers started to drop and drop we pulled out relocated to Germany and let it out furnished.

Black Wednesday in 1992 bumped up the DM to UKP so I effectively had a big pay rise as well ~20%!

DV
 
hifinutt said:
Have we not seen inflation coming down ? Is that not good for the man n the street ?
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It is only good if their income rises faster than inflation, otherwise all that happens is that people are getting porrer more slowly and the previous reduction in the ability to live is locked in.
 
‘High interest rates may be the biggest driver of continuing inflation, most especially through rents. And the evidence that interest rate rises have delivered no benefit to anyone but the wealthy is overwhelming.’

Not sure I agree with this. Rents are higher because ability to pay for the existing stock in a competitive market is higher through wage increases. Low interest rates inflate asset prices. You could argue that assets have inflated with 5% rates. Well, 5% is a low rate. The problem is high debt levels leveraged up by close to zero rates, which people thought would never come to an end.
 
gingermrkettle said:
Um, no. Price increases are a supply side thing in this case.
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If people weren’t willing and able to pay, the market would be awash with empty rental properties. Whereas the opposite is true. People are having to bid up and pay more to compete in the market.
 
Ponty said:
If people weren’t willing and able to pay, the market would be awash with empty rental properties. Whereas the opposite is true. People are having to bid up and pay more to compete in the market.
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People have no choice. The lack of supply means people have to pay-up or live somewhere else. This is the situation at all pricing levels.

The Government have allowed this situation to happen because it hasn't controlled the housing market effectively. It could do this anytime it wanted by restoring the link of direct property value to taxation: A 0.48% Proportional Property Tax. This would curb property prices and done right, it could be cheaper for 77% of homes. Stamp Duty could be abolished to provide better liquidity in the market for home owners to move - upsizing or downsizing:

fairershare.org.uk

Council tax is broken. Help us fix it. - Fairer Share Campaign

Fairer Share - the campaign to abolish Council Tax and Stamp Duty. Our Proportional Property Tax will benefit 18 million households up and down the country.
fairershare.org.uk fairershare.org.uk
 
Ponty said:
If people weren’t willing and able to pay, the market would be awash with empty rental properties. Whereas the opposite is true. People are having to bid up and pay more to compete in the market.
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You make it sound like folks are just finding the extra cash down the back of the sofa and they have it to spare.

Until folks are paying 100% of their wages on rent then of course they'll have to find the money from somewhere, that doesnt mean they can just keep paying ever increasing rents.
 
Exactly, as prices increases housing demand has essentially zero elasticity. It is just the application of basic economics and an example of why a completely unregulated market does not meet perfect market definitions and hence does not operate for the benefit of both suppliers and consumers.
 
gingermrkettle said:
Exactly, as prices increases housing demand has essentially zero elasticity. It is just the application of basic economics and an example of why a completely unregulated market does not meet perfect market definitions and hence does not operate for the benefit of both suppliers and consumers.
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Well, that’s not true. If I double the rent, I’d have empty property. I find tenants by offering property to the market and the rent is set by participants in that market in terms of their willingness (or not) to pay.
 
Ponty said:
Well, that’s not true. If I double the rent, I’d have empty property. I find tenants by offering property to the market and the rent is set by participants in that market in terms of their willingness (or not) to pay.
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No, if everyone doubles the rent then you don't have empty property. There may be sufficient market participants on the supply side for you to be a price taker but that does not mean that the market is working properly.
 
Ponty said:
Well, that’s not true. If I double the rent, I’d have empty property. I find tenants by offering property to the market and the rent is set by participants in that market in terms of their willingness (or not) to pay.
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This is housing we're talking about, not avocado on toast. People will find a way to pay it to keep the roof over their head.

Just because someone can cut corners on food, utilities and leisure bills so twats can keep cranking rents doesnt make it right.
 
gingermrkettle said:
No, if everyone doubles the rent then you don't have empty property. There may be sufficient market participants on the supply side for you to be a price taker but that does not mean that the market is working properly.
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If all supply side participants could double the rent and achieve it, that would indicate they’ve all been undercharging, which again I can assure you doesn’t happen!
 
The 'market' is a supply and demand model. In the case of rent its an equilibrium

#properties with tenants <=> #properties without tenants

If you increase the rent then the equilibrium moves to the right and vice versa. Hence the rent for a given property finds its own level.

In October 2022, there were 676,304 recorded empty homes in England.

DV
 
Ponty said:
If all supply side participants could double the rent and achieve it, that would indicate they’ve all been undercharging, which again I can assure you doesn’t happen!
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What exactly do you think has happened to rents in the last few years?
 
gingermrkettle said:
What exactly do you think has happened to rents in the last few years?
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Well, they’ve increased, of course, in line with ability and willingness of market participants to pay, for the given supply.

Real life example. A place of mine has increased in rental value by 33% over the past 10 years. Trouble is, running costs have increased by a greater amount over the same period, as has the opportunity cost of capital. It’s therefore a less attractive proposition than 10 years ago, despite the rental value increasing.
 
matt j said:
This is housing we're talking about, not avocado on toast. People will find a way to pay it to keep the roof over their head.

Just because someone can cut corners on food, utilities and leisure bills so twats can keep cranking rents doesnt make it right.
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Well, you can squeeze landlords until the pips squeak, which is essentially what the (tory) govt has been doing. Certainly by enough for the supply side to contract / fail to keep up with demand, leading to higher rents. You can’t square a circle.
 
ks.234 said:
And the evidence that interest rate rises have delivered no benefit to anyone but the wealthy is overwhelming”
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The increased IRs have benefitted savers. Not all savers are wealthy, though this is the slow way to increase one's wealth. This wasn't possible for prudent (a.k.a. cautious) savers at less than one percent returns. 5% is only high by recent standards but was more or less the norm throughout my period of observance; say early 70s onward.
 
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