And? Reducing interest rates would do the same.
What export industry?
Look at America: they've devalued the dollar by over 20%, but that hasn't significantly helped exports, because they barely make anything to export and many of the companies that do are probably being hammered by the rise in oil prices.
Mark
And turn a recession into a depression. Great idea.
Mark
The problem is that the bulk of the trade gap there is with China, whose currency is pegged to the Dollar. So if the Dollar falls, China gets to export more to everyone else.
FoFP
Property markets tend to be cyclical. Speculators particularly like this?
The stamp duty has afaiac has helped the current climate.
Do remember of course that no two properties are *identical*
- not even if they are in the same street, afaiac.
j-1
Why is it that mortgage, and other, interest rates change in step with the BOE rate? Does it mean that the mortgage lenders have to borrow the money from the BOE in order to lend it to their customers? If (as I strongly suspect is the case) they do not do this (but finance the advances from savers' deposits and interest received from borrowers), is there any reason why there has to be any relationship between the BOE base rate and the interest rates charged/paid by other institutions?
If a small drop in stamp duty makes the difference between being able to mortgage your life for a house and not being able to, you shouldn't be doing so: you clearly won't be able to handle any significant increase in interest rates.
Mark
I would suggest that stamp duty as well as other moving expenses now form a significant percentage of property purchase costs
-particularly in certain price brackets.
j-1
It's been a while since I read up on government banking but IIRC the Bank controls the selling of Treasury Bonds, which define the interest rate inasmuch as everything else sells at a discount to Treasuries (I.E at a higher interest rate) because they're higher risk than Treasuries (it's assumed that the government will always honour its debts).
So technically a bank could ignore a change in base rates and sell at their own prices, but the arbitrageurs would make mincemeat of them in pretty short order.
Conversely, if there are already a lot of Treasuries out there, then the bond vigilantes could en masse ignore a central bank rate and price bonds their way, essentially resetting the base rate of a country. This is what happens in a currency crisis: bond traders perceive greater risk and demand more money (I.E higher interest payments) to take that risk and thus "force up" interest rates.
In the more normal scenario the media will talk about "markets pricing in a base rate hike in July". What they mean by this is that derivatives based on Treasuries (in this case futures: bets on the future price of treasuries) are priced in such a way as to reflect an expectation that interest rates will be higher in July. Using the Black-Scholes equation, they can even put precise odds on the hike. To some extent this puts pressure on the bank to raise rates as the markets expect because it outlines the price at which they can expect to sell Treasuries to finance government borrowing.
In summary: yes, the BoE controls interest rates, whenever the markets let them.
FoFP
Where exactly can you buy a house where stamp duty and moving expenses 'form a significant percentage of property purchase costs'? For that to be true, you'd probably have to be buying for 50k or less, which would be lucky to get you a used cardboard box around here.
The problem is not stamp duty and moving expenses, it's the fact that house prices have been hugely inflated in the last few years, vastly more than any wage inflation.
Mark
I read it as preventing a slowdown in the economy as a whole, rather than just a house price crash.
Firstly - How was the pound when rates were 3.75%?? I dont remember anyone squealing about it a 18 months ago, or so?
Secondly - I thought a pound with less value encouraged exports and discouraged imports, which was not a bad thing historically.
How will it do that? The 'economic growth' of the last few years has come from vast borrowing... at some point people simply can't justify borrowing any more, and interest rates won't make any difference.
Again, look at Japan. Cutting interest rates to _ZERO_ made such a big difference there, didn't it?
It was around 1.4 to the dollar, which was insanely low. Also, oil has about doubled in that time, we've only been spared much of that inflation because the dollar has sunk against the pound... the last thing we need is higher oil prices.
LOL. Get out of the 1950s: today we make very little to export and are hugely reliant on imports... a lower pound will cause far more harm than benefit.
Mark
Oil prices in this country are determined far more by tax rates than the cost of oil. Also, as engineering output has fallen, the impact that increasing oil prices have on the economy diminish.
rotfl! That's it, blame everything but the cost of houses.
Daytona
Personally, I thought that raising interest rates to 4.5% was enough to cool down any overheating, (maybe even 4.25% would have been enough). Dont forget, a rise of 1% in the rate at these low levels is actually a rise of 25%, whereas if rates were 10%, a rise of 1% is only 10%. Interest rates make a difference to disposable income, which has been hammered by the rate increase, hence the slowdown in everything - and we are not Japan!
??? The price of oil bears little relation to the cost of oil. I remember discussing how much of the price of a litre of petrol is the actual cost of the oil, and I think it is around 8p-10p, so a doubling in oil prices will only increase the cost of petrol by 8p-10p. I agree that it is not insignificant, but it is not as significant as it seems at first glance.
I did say, "historically", but I am only thinking back to the early '90's, when a lot was made of the value of the pound being to high.
lol! they're telling us ?! Cheeky bastards. They can f*ck right off.
If that surprises them, they don't know much. Our property prices have always risen quicker. It doesn't take an economist to understand why.
The only doubt seems to come from the BoA.
Really? With record post war unemployment in Germany and France and their generous social benefits ?!
Daytona
On Fri, 13 May 2005 13:40:16 +0000 (UTC), M Holmes mysteriously appeared thru the usenet mist to inform us thus...
Indeed and sterling's been far too stable in recent times!
Must be time for a tumble down to normal Labour levels, which might also give Blair the excuse he wants to join the euro. Is it a plot?
On 13 May 2005 06:49:33 -0700, snipped-for-privacy@my-deja.com mysteriously appeared thru the usenet mist to inform us thus...
And when the population goes marching for jobs, introduce some more police state laws to maintain order ...just what Blair wants.
Absolutely. Unsurprisingly earnings increases correlate with house prices increases. Consumers control the economy, not politicians or financial markets.
Daytona
Whilst i wouldn't say that extra moving expenses is the only reason for the current situation, it may have been a significant contribution factor. IMHO, buyers are price sensitive to these addiitonal costs.
Does Belgium also have high property prices, and longer financing arrangements. Interestingly, i think the UK and Belgium also both have high population densities?
j-1
snipped-for-privacy@my-deja.com wrote in news:1115980727.279387.71120 @o13g2000cwo.googlegroups.com:
At which point the seller will slowly and patiently explain to you the laws of supply and demand and that if you don't want to buy at the price he is asking you are welcome to go elsewhere.
If you an unprincipled wanker.
Andrew
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