Food Bank latest

[Andy Onchan]

14 minutes ago, Roger Mexico said:

You're thinking of Black Wednesday:

At 10:30 am on 16 September [1992], the British government announced an increase in the base interest rate, from an already high 10%, to 12% to tempt speculators to buy pounds. Despite this and a promise later the same day to raise base rates again to 15%, dealers kept selling pounds, convinced that the government would not keep its promise. By 7:00 pm that evening, Lamont announced Britain would leave the ERM and rates would remain at the new level of 12%; however, on the next day the interest rate was back to 10%.

I seem to remember there being talk of 20%, though it was never announced.  But the reality after all that panic was that the cost of mortgages were effectively unchanged, if still very high.   Obviously this is base rate, so what people were paying on their mortgages would be higher.

(The whole thing was the fault of the already-departed Thatcher who insisted on joining the ERM at a ridiculous 2.95 DM to show what a 'strong' currency the UK had).

You remembered right about house prices too as seen in this graph:

But even at the worst in the previous house price boom people were only paying 5 times salary to buy a house and you probably paid 3-4 times.  People have been currently paying 7 times.  So all those saying how much harder they had things - you're wrong.

It's all relative Roger. 

[Banker]

9 hours ago, finlo said:

That has only been increased because of market manipulation thanks to the likes of Dandara et el.

Not really it’s been UK wide & higher rises than here In some places, lack of supply, demand, inflation etc all contributed 

[Asthehills]

10 hours ago, finlo said:

That has only been increased because of market manipulation thanks to the likes of Dandara et el.

Do you not travel off island much?

[finlo]

1 hour ago, Asthehills said:

Do you not travel off island much?

Yes thanks, same problems apply over there now property being treated as an investment rather than a home.

[offshoremanxman]

11 hours ago, Roger Mexico said:

You're thinking of Black Wednesday:

At 10:30 am on 16 September [1992], the British government announced an increase in the base interest rate, from an already high 10%, to 12% to tempt speculators to buy pounds. Despite this and a promise later the same day to raise base rates again to 15%, dealers kept selling pounds, convinced that the government would not keep its promise. By 7:00 pm that evening, Lamont announced Britain would leave the ERM and rates would remain at the new level of 12%; however, on the next day the interest rate was back to 10%.

I seem to remember there being talk of 20%, though it was never announced.  But the reality after all that panic was that the cost of mortgages were effectively unchanged, if still very high.   Obviously this is base rate, so what people were paying on their mortgages would be higher.

(The whole thing was the fault of the already-departed Thatcher who insisted on joining the ERM at a ridiculous 2.95 DM to show what a 'strong' currency the UK had).

The whole ERM drop out thing is not too different to now really. Post Brexit the UK is an emerging economy not a mainstream economy where you might expect more stability and lower interest rates. Emerging economies tend to have high interest rates and more unstable currencies as they are at the risk of speculation. They have high interest rates to attract inward deposits with, and they have interest rate volatility because investors are quick to pull the plug and follow the money elsewhere. That’s the reality the UK is in and we’re going to have high interest rates for a good long while now so people better get used to it. 

[Cambon]

1 hour ago, offshoremanxman said:

The whole ERM drop out thing is not too different to now really. Post Brexit the UK is an emerging economy not a mainstream economy where you might expect more stability and lower interest rates. Emerging economies tend to have high interest rates and more unstable currencies as they are at the risk of speculation. They have high interest rates to attract inward deposits with, and they have interest rate volatility because investors are quick to pull the plug and follow the money elsewhere. That’s the reality the UK is in and we’re going to have high interest rates for a good long while now so people better get used to it. 

Sorry, but 5% is not high. But they haven’t finished yet! 

[Cambon]

13 hours ago, Andy Onchan said:

It's all relative Roger. 

Correct. I remember the cost of many things back then being high. Telephone calls, for example. If you wanted a PC, they started around £600. More than most people earned in a month. 

[offshoremanxman]

45 minutes ago, Cambon said:

Sorry, but 5% is not high. But they haven’t finished yet! 

I didn’t say they had but the days of low interest rates are well and truly over for a generation of borrowers as the UK now has to operate as an emerging capital market post Brexit.

[mad_manx]

22 hours ago, Roxanne said:

Didn't one day it go up an incredible amount? I seem to remember my husband ringing me at work (no mobile phones) to say it had shot up to 25% or was it 35% or even higher? We'd just bought our first house and the value of it had dropped by a quarter in a year and we were up to our ears in high interest rates and negative equity. It took about ten years to equalise. But yes - did Imagine that huge interest rate at one time? My husband was at his wit's end and I just remember laughing maniacally down the phone at the absurdity of it all. Surely I couldn't have imagined it?

Many sales are falling  through these days and those who want to sell are having to drop prices.

[mad_manx]

7 hours ago, Cambon said:

Sorry, but 5% is not high. But they haven’t finished yet! 

Long term trend in interest rates are downwards.  Clever money is actually moving to long term cash /cash equivalent deposits..

 

[Cambon]

7 hours ago, offshoremanxman said:

I didn’t say they had but the days of low interest rates are well and truly over for a generation of borrowers as the UK now has to operate as an emerging capital market post Brexit.

I disagree on the emerging market comment. However, banking is a competitive industry, and all currencies have to compete. The UK is and will do well long term. 

[Cambon]

1 hour ago, mad_manx said:

Long term trend in interest rates are downwards.  Clever money is actually moving to long term cash /cash equivalent deposits..

 

Sorry, but the days of virtually zero interest rates are over. The clever money never looks at cash! 

[mad_manx]

2 hours ago, Cambon said:

Sorry, but the days of virtually zero interest rates are over. The clever money never looks at cash! 

Actually they do.  You will be surprised how many  very clever people  are sitting  on a high % of cash right now 

And that cash is yielding decent interest with low risk ( other than inflation)

Agree that its counter intuitive but sometimes cash is king when you need to pick up distressed assets.

Edited July 8, 2023 by mad_manx

[woolley]

On 7/8/2023 at 10:26 AM, offshoremanxman said:

The whole ERM drop out thing is not too different to now really. Post Brexit the UK is an emerging economy not a mainstream economy where you might expect more stability and lower interest rates. Emerging economies tend to have high interest rates and more unstable currencies as they are at the risk of speculation. They have high interest rates to attract inward deposits with, and they have interest rate volatility because investors are quick to pull the plug and follow the money elsewhere. That’s the reality the UK is in and we’re going to have high interest rates for a good long while now so people better get used to it. 

Thank you for this searing insight.

It must explain why the Bank of England in the "emerging economy" UK has raised interest rates from 0.25% to 5% between Feb 22 and Jun 23.

Presumably it also explains why the Federal Reserve in the "emerging economy" USA has raised interest rates from ZERO to 5.25% between Jan 22 and May 23, and the ECB in the "emerging economy" EU has raised them from 0.25% to to 4.25% between July 22 and June 23.

What a load of old cobblers. It has the smell of the doom-laden Guardian about it to me. The UK not a mainstream economy with London vying with New York as the world's largest financial centre? Give over.

Higher interest rates are here for a while and may never go back to where they were before and during Covid, but not just in Britain.

Edited July 9, 2023 by woolley