Inflation and interest rates

[Sallywallywoowoo]

The BOE keep raising rates to curb inflation. I understand that is the only thing that the BOE can actually do and so they've got no choice. But isn't there anything else the govt can do? It's genuinely scary seeing articles on the BBC how 1 million mortgage holders will see their payments increase by £500pm by 2026. Literally nobody I know could afford that. And it doesn't even include renters in that number. Presumably loads of them are in the same boat or worse. If their LL mortgage costs go up, then so will their rents.
It seems to me the financial burden could be spread more fairly. Anyone who owns outright isn't feeling the pain. And for the most part that group is likely to be the ones who could most afford it. Especially if they have a load of savings that they're now getting a nice high rate of interest on. Surely things COULD be done differently if the will was there?

And actually "nobody is entitled to interest on savings" not that I actually believe that, it was another poster who said it, is not equivalent to "nobody is entitled to own a house"
It would be equivalent to "nobody is entitled to make money off their house"

I'm not actually in the UK, and yes I rent privately as I have too much money to qualify for social housing here, and so I will still probably still be renting privately in my 80s - unless I go out and recklessly spend everthing so that I can qualify, which seems wrong to me.

My rent is pretty low and there has no been increase so far during the time I have lived here. I'm not sure that the family who own the three flats where I live even have a mortgage on them, if they do it won't be a large one.

It was me who said that, and I didn't actually say "nobody is entitled to own a house", I said I could say that. However, in actual fact, nobody is entitled to own a house. There are millions of people in countries all around the world who don't own houses. Everyone is entitled to a home, but not necessarily to own that home.

Although I never will own a house again I really don't care, but I won't have people telling me that I shouldn't expect interest on any money I have in a savings account just because I refuse to pay the ridiculous prices houses sell for (even if I could afford to buy I wouldn't for that very reason).

Quite a few comments on here about how savers have lost out since the GFC due to low returns on savings. This is still the case though, real interest rates are negative due to the high level of inflation. When inflation was 2% and interest rates near zero, your real interest rate was negative. This is still the case now and likely will continue to be the case when inflation and interest rates reduce again (as they will, although not as far as covid levels). The whole structure of the economy is different to how it was pre-GFC, you won’t get real returns on cash and it’s a bad strategy to rely on cash savings to fund retirement etc.

@Sallywallywoowoo It’s important to have money diversified. We have money in stocks and shares both for medium and long term stuff but then short term savings are in interest only accounts. These are for things like maintenance or school fees. So it’s nice when that money, which I earned and was taxed on before I put away, works as well as opposed to just being run down by inflation to support those living through massive amount of debt.

Good post!
When I bought my first home, interest rates were 15%. I bought a wreck of a house in a bad area that took me 8 years to refurbish, just doing each job as I saved up for it. Since then, I have never bought a house where I couldn't afford the mortgage with the interest rate at 10% even if it meant the house wasn't perfect or in the best area.
Having such low interest rates for such a long time was never going to last. Surely people knew this?
I paid my mortgage off when my life insurance paid out due to being diagnosed with a terminal illness. But, if I hadn't, that 10% contingency was still in place.
An no, I'm not a boomer. Just someone who watched the heartbreak of families losing their homes in the 80's/90's because they had over stretched themselves

Agreed

And what happens in this scenario? Landlords sell up, as they have already been doing in their tens of thousands. Reduce the supply and you push up rental prices.

No, you're also reducing demand, because people who previously rented but wanted to buy, can now buy the houses from the landlords who are selling.

Same number of homes, same number of people, but just the demographical shift between renting and owning, for those who want to buy.

Take out a whole swathe of "renters" who can now buy homes from ex-landlords, and far fewer people will be chasing the rental properties.

What a nasty post. Do you think most families can afford £500 extra a month in the current climate? Could you? I assume your mortgage is paid off due to your smugness. Between studying, working a corporate job and childcare I can’t get a second job. Why do people get slated for saying they’re struggling? I get no govt help btw as it stands.

Having had my life fall apart and be responsible for absolutely everything for me and 3 children I have struggled to cover my costs for many years. It isn't easy. I live in a house that is falling apart and I haven't decorated in 15 years. But there is only me - two people moaning they can't find extra money because they already work full time when some of us are working multiple jobs is 'nasty', as you say. . Yes my mortgage is paid off but I lost my parents for that to happen. How lucky am I?!

It’s pretty obvious what you’re suggesting. It’s that mortgage holders are subsidised by the rest of us. Sorry, not happening.

It’s about having empathy. You struggled but no one else is allowed to say so? Teaching lends itself to other jobs, not everything does. Hope you never teach my kids with an attitude like that. I’m alright Jack (now) so fuck the rest of you it seems.

@Blossomtoes

No, it's really not what she's saying at all.

The point is that if we need to take money out of the economy, that can be done multiple ways, not just through interest rates alone.

Let's take the triple lock pension. I'm not aiming to start a generational bum fight, but it's a clear and easy example.

The govt want to suppress wage growth, but have promised that pensions will rise in line with inflation. Is it fair that a pensioner gets a payment in line with inflation and can choose to either spend that money or get a decent interest rate on it?

Meanwhile a public sector worker will get a pay increase far below inflation and may face higher mortgage or rent costs as well. There are no incentives or choices for them, just higher costs.

This isn't about paying someone else's mortgage, it's about who is experiencing the carrot and who is experiencing the stick.

Generation bun* fight 😂😂🙄

You are assuming that all pensioners choose between purchasing extras or saving money. What about those who are ‘surviving’ on a state pension? What choices do they have when utility costs have increased dramatically? People who are of working age have more choices: move jobs, get a second job, overtime…considerably more choices than an 80 year old with health issues surviving on a state pension.

Yes, you're right but why do we only provide universal financial support for people of pension age?

Plenty of working age people cannot earn enough to support themselves and they have to pass eligibility tests to access support.

Just because people on low incomes need additional state support, we don't provide that support to everyone as standard.

I'm not looking to push pensioners into poverty but they are not the most at risk group right now. I volunteer at a food bank and see people in desperate situations who are doing everything they can to stay afloat.

@ShanghaiDiva

And this isn't really about pensioners/ pensions anyway, I was just trying (and clearly failing) to explain that this isn't about op wanting people to pay her mortgage.

Op's point (I think) is about who is getting the carrot and who is getting the stick.

And as others have said upthread, people under the age of 40/45ish have had plenty of sticks already in their adult life.

I think it’s just completely the wrong mechanism and outdated.

it possibly worked when people didn’t see so much as necessities, there inflation wasn’t driven largely by imports where much of the inflation was set by global markets where credit wasn’t so widely available, where people hadn’t had years of misery austerity followed by pandemic where people are in a mindset of fuck it!

it’s affecting the poor most. All these rises in costs are just passed down the chain. Employers already struggling to recruit in the professions have no choice but to increase salaries, these costs are then passed on.

what’s the solution? Fuck knows but this is the result of globalisation, the creation of a consumer economy where what should be luxuries are seen as necessities and have been sold as such.

So you haven't invested appropriately for retirement and now think that you should be entitled to high interest in savings.

Yes, I do think that everyone is entitled to a home, and renting isn't a cheaper alternative. Landlords are also hiking rents to cover mortgage costs.

So you haven't invested appropriately for retirement and now think that you should be entitled to high interest in savings.

So you're against pension credit?

What does “invest appropriately for retirement” even mean? She didn’t say she hadn’t got a pension, she said she’d never been in a position to buy a property.

The govt want to suppress wage growth, but have promised that pensions will rise in line with inflation. Is it fair that a pensioner gets a payment in line with inflation and can choose to either spend that money or get a decent interest rate on it?

Meanwhile a public sector worker will get a pay increase far below inflation and may face higher mortgage or rent costs as well. There are no incentives or choices for them, just higher costs.

I don't think it's fair that workers have stagnant wages but pensioners are protected. Particularly when pension age keeps moving out.

We're still not in recession yet - which is what I think Bank of England wants.

https://www.bbc.co.uk/news/business-66179998

Most of the price increases we've had have been in none discretion spending - food/fuel so we've cut savings slightly and any spending we can to cover the additional costs -and overpaying mortgage so when rates go up we are in best position we can be to weather the increases - which has meant delaying some much needed house improvements/maintance for few years.

But why should people have to do this just because the government have screwed up?

People shouldn't have to work every hour that god sends just to afford a roof over their head. If you work hard and earn well then it's reasonable to expect a decent quality of life. That's the social contract.