Jacob
New Luddism. Awake and resist!
Cutting taxes raises savings. Those paying top rate are not likely to go on a spending spree with the chancellor's gift.
Raising taxes injects cash. Takes it from where it is not needed to where it is.
Mortgage rates / interest etc
- Thread starter baldkev
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Raising taxes injects cash. Takes it from where it is not needed to where it is.
treeturner123
Established Member
The other problem with Private Landlords was that the government decided not to allow Mtge payments as an allowable expense!
So as a result, the supply is deminishing whilst demand increases. Do no governments have ANY IDEA of the laws of Supply & Demand? Clearly not!!
Phil
Jacob
New Luddism. Awake and resist!
Yes - that is what happens if you speculate!
They don't demolish their properties when they stop being landlords, they tend to put them on the market. May even force prices down to everybodies benefit except the speculators.
No. The properties don't fade away.
They'll pay less if landlords loosen their grip on property!
Jacob
New Luddism. Awake and resist!
By and large landlords do not supply housing they buy what has already been supplied. Fewer landlords does not mean fewer houses.
Terry - Somerset
Established Member
A fundamental economic proposition is that the current values - loans, shares, property etc - reflects the overall market assessment of its likely discounted future value.
Put another way - current interest rates reflect what the market expects to happen in the future. If the market thought that rates would fall, then interest rates for (say) 5-year mortgages would fall.
So, you have a choices:
Put another way - current interest rates reflect what the market expects to happen in the future. If the market thought that rates would fall, then interest rates for (say) 5-year mortgages would fall.
So, you have a choices:
- back your judgement against that of market professionals. Although professionals will often get things wrong, they are almost certainly better informed than you (or this forum)
- accept the higher rate assuming you can afford it - removes risk (albeit at a cost)
- if unaffordable, you either need to accept a risk (eg: a 2 year rather than 5/10-year fix) or other strategy (downsize, just hope etc)
J-G
Established Member
Yes it's a 'gamble' - My father secured a Fixed rate Mortgage @ 4% over the full 25 years - this was in 1941 on a property @£495
He was laughing when interest rates went into 2 figures!My last Mortgage was a tracker @ 0.75% above base and it seemed eminently affordable when the base rate dropped below 0.25% but then I've never over-stretched my asperations!
Somthing that is so often overlooked with mortgages is the setup fee.
If you average the setup fee for a fixed rate over the lifespan of the fixed term, then you may find that it adds 1.5% to the cost of the loan (obviously this is highly dependant)
People so often overlook this.
We had a very odd situation with the deceased minibudget with fiscal and monetary policy pulling in entirely different directions, one attempting to reduce the supply of money and one trying to increase it. Hence the market reaction and it's rapid demise.
Sunak will go with austerity V2 as he will be too scared to tax the very wealthy (himself) and we will remain in a situation where the economy lacks stimulus whilst at the same time inflation rises (largely due to external factors) and the boe sucks cash out of the system with interest rates.
There is no way out for the conservatives.
As for rates - so hard to tell. It's such a mess currently.
A side note -
People always talk about rates being higher in the past, seemingly as some sort of justification, whilst neglecting three wholly significant factors -
The cost of housing as a percentage of wages was way lower.
Wages, at the time, also rose.
This makes any comparison using the interest rate in isolation somewhat naive.
If you average the setup fee for a fixed rate over the lifespan of the fixed term, then you may find that it adds 1.5% to the cost of the loan (obviously this is highly dependant)
People so often overlook this.
We had a very odd situation with the deceased minibudget with fiscal and monetary policy pulling in entirely different directions, one attempting to reduce the supply of money and one trying to increase it. Hence the market reaction and it's rapid demise.
Sunak will go with austerity V2 as he will be too scared to tax the very wealthy (himself) and we will remain in a situation where the economy lacks stimulus whilst at the same time inflation rises (largely due to external factors) and the boe sucks cash out of the system with interest rates.
There is no way out for the conservatives.
As for rates - so hard to tell. It's such a mess currently.
A side note -
People always talk about rates being higher in the past, seemingly as some sort of justification, whilst neglecting three wholly significant factors -
The cost of housing as a percentage of wages was way lower.
Wages, at the time, also rose.
This makes any comparison using the interest rate in isolation somewhat naive.
johna.clements
Established Member
Why should a landlord get a subsidy to buy a house but not a owner occupier.
Well here's the ultimate expert; DG Monetary Policy at the BoE;
"Because they’ve depressed real incomes, that slowing in demand will to some degree follow from the very same rises in import costs that have pushed up headline inflation. Equally, if government support mitigates that effect, there is more at the margin for monetary policy to do. The MPC is likely to respond relatively promptly to news about fiscal policy. Whether official interest rates have to rise by quite as much as currently priced in financial markets remains to be seen."
The inflationary consequences of real shocks
This is all banker-speak, so let me translate;
If Downing St leaves well enough alone, the spike in import costs will suck money out of the economy by knobbling demand because people can't afford to pay for stuff anymore, thus counteracting inflation over time.
If the Gov put in place measures to counteract this (e.g. capping energy costs, increasing pensions, etc. etc.) then less money will be sucked out of the economy, and the BoE won't hesitate to increase rates. That's the warning to the Govt to not start messing about with basic economic realities.
(As the DG notes, govt intervention only displaces the loss; rather than hitting Joe Public in the pocket, it goes onto the national balance sheet).
It remains to be seen if the increases - if any - will be as bad as the markets are predicting. Which is banker-speak warning the markets not to go crazy pricing stupid increases into their yields because interest rates aren't going up that high.
As to the OP - I think with fair winds and good sailing, there's a good chance that the interest rates will stablise by Feb next year under a stable Sunak government. You may want to fix, as someone else said, just so you have some certainty, not forgetting to get any moves properly costed by your advisor.
To paraphrase Jack Reacher - it's always a 50/50. Either interest rates will go, up they won't. If you can make better odds than that, you should be a financial analyst.
FYI, I fixed for 5 years, 6 months ago, as I felt the ECB were on a long-term upwards trend (disclaimer, I am a central bank employee, but I don't work in Monetary Policy side of the Bank so all I know is what gets published on the website).
"Because they’ve depressed real incomes, that slowing in demand will to some degree follow from the very same rises in import costs that have pushed up headline inflation. Equally, if government support mitigates that effect, there is more at the margin for monetary policy to do. The MPC is likely to respond relatively promptly to news about fiscal policy. Whether official interest rates have to rise by quite as much as currently priced in financial markets remains to be seen."
The inflationary consequences of real shocks
This is all banker-speak, so let me translate;
If Downing St leaves well enough alone, the spike in import costs will suck money out of the economy by knobbling demand because people can't afford to pay for stuff anymore, thus counteracting inflation over time.
If the Gov put in place measures to counteract this (e.g. capping energy costs, increasing pensions, etc. etc.) then less money will be sucked out of the economy, and the BoE won't hesitate to increase rates. That's the warning to the Govt to not start messing about with basic economic realities.
(As the DG notes, govt intervention only displaces the loss; rather than hitting Joe Public in the pocket, it goes onto the national balance sheet).
It remains to be seen if the increases - if any - will be as bad as the markets are predicting. Which is banker-speak warning the markets not to go crazy pricing stupid increases into their yields because interest rates aren't going up that high.
As to the OP - I think with fair winds and good sailing, there's a good chance that the interest rates will stablise by Feb next year under a stable Sunak government. You may want to fix, as someone else said, just so you have some certainty, not forgetting to get any moves properly costed by your advisor.
To paraphrase Jack Reacher - it's always a 50/50. Either interest rates will go, up they won't. If you can make better odds than that, you should be a financial analyst.
FYI, I fixed for 5 years, 6 months ago, as I felt the ECB were on a long-term upwards trend (disclaimer, I am a central bank employee, but I don't work in Monetary Policy side of the Bank so all I know is what gets published on the website).
Not when there's a cost-of-living crisis, as we're all being told there is.
100% agree.
100% agree.
The BoE can neither create nor destroy wealth. That's what taxes are for. The BoE is not elected and cannot levy tax. Parliament is elected, and can levy tax.
You tax everything == basic income for the State
You tax undesirable activities more.
You tax desirable activities less.
Now, the question is, what makes an activity 'desirable'? Is it social considerations? Is it environmental? Is it for the long-term benefit of the State? What if an activity is desirable on one angle, but undesirable for the other?
Like, smoking.
Smoking kills, therefore we should tax it more, because it costs the NHS lots of money. But then again, smoking kills, so we should tax it less because we save on pension payouts... Oh the decisions!!!
So when you hear some politician say "Oh we're going to cut taxes on [n]", that's because the Govt think that [n] is a good thing to do. Build offices. Speculate on land. Accumulate vast wealth in shares. Whatever.
Not when there's a cost-of-living crisis, as we're all being told there is.
100% agree.
100% agree.
The BoE can neither create nor destroy wealth. That's what taxes are for. The BoE is not elected and cannot levy tax. Parliament is elected, and can levy tax.
You tax everything == basic income for the State
You tax undesirable activities more.
You tax desirable activities less.
Now, the question is, what makes an activity 'desirable'? Is it social considerations? Is it environmental? Is it for the long-term benefit of the State? What if an activity is desirable on one angle, but undesirable for the other?
Like, smoking.
Smoking kills, therefore we should tax it more, because it costs the NHS lots of money. But then again, smoking kills, so we should tax it less because we save on pension payouts... Oh the decisions!!!
The energy price cap is one of the craziest things. The economics of it are full on wealth redistribution once again. Windfall tax, great, subsidising (shifting tax payer money) to the energy companies is madness.
But plays right in to the hands of the people who funded Truss' campaign.
But plays right in to the hands of the people who funded Truss' campaign.
Jacob
New Luddism. Awake and resist!
Cost of living crisis doesn't affect the better off so much, if at all. Taking a few more thousands from somebody who has millions is not going to affect their lifestyle, but quite the reverse for somebody on the edge.
It gets left out of taxation thinking that money is worth very much less to the better off. You can only eat one dinner, as they say.
Whereas for those on the edge just a few quid can make a huge difference.
Hence steeply "progressive" taxation can be quite equitable in terms of consequences, if not in cash.
Another thing which causes shock and horror is inflation. But it's good news for those with debts - the real value falls. It also can lead to painless price adjustments such as with houses; they can stay the same and hence lose relative value as prices rise, hence falling in price in real terms, but without dropping people into negative equity.
So, roll on tax rises and inflation, just what we need!
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sploo
Somewhat extinguished member
OK... as long as wages at least somewhat keep up with inflation - otherwise people are going to suffer.
I've watched my mortgage (a tracker) rise by nearly £300 per month this year already (and await the inevitable next big rise). Add to that the large rises in the cost of essential goods (food, fuel), and (for me anyway) being employed by a business that mostly has to buy in USD and sell in GBP (re the GBP getting "Trussed").
A perfect storm of Tory disaster capitalism, Brexit (see Tory disaster capitalism), post-Covid, and finally mad-Vlad invading the Ukraine... it's hardly a cheery picture for the plebs right now.
Tax is a dreadful tool. If you increase taxes all that happens is that those at the top move their money, or themselves to a lower tax environment. The top 1% pay most of the personal taxes in the UK, so if you tax them out of the country, then the tax burden falls more heavily on those left. Equally, if you tax business too heavily you simply see businesses move to a more tax efficient environment. This reduces employment and tax revenue. If you want the largest tax income for the country you move to a single rate for everyone. Yes, it sounds counter intuitive, but there are enough studies to demonstrate that this is the best system. With a low rate of tax, tax sheltering becomes un-necessary, and in fact you attract more of the seriously wealth people to move their tax domicile to the UK. The stumbling block is that the left, who are adamant that this a folly, ‘it’s the rich getting richer’ (the problem with this argument is they do anyway, but not necessarily whilst paying tax in the UK) and it strikes a cord with the larger population. Higher taxes stifles a country, reduces economic activity, the wealthy move out and the less wealthy are worse off.
An example of a low tax environment is Singapore. The max personal tax is 22% for nine residents, and a graduated scale up to 22% for residents. I’ve avoided Monty Carlow that has no income tax at all, the government derives its income from VAT.
An example of a low tax environment is Singapore. The max personal tax is 22% for nine residents, and a graduated scale up to 22% for residents. I’ve avoided Monty Carlow that has no income tax at all, the government derives its income from VAT.
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This is a line so very often repeated, but its a nonsense.
For example, do wealthy non-dom pay road tax on their cars in the uk? Of course they do. They're tangible objects that, whilst you can move them abroad, you cant both move them abroad AND use them to get around the M25 at the same time.
Or, say, council tax. You cant claim your building is abroad when its at the end of the road.
Income tax is all fuzzy. Tax the physical wealth.
And, if you think that will "limit investment", what will actually happen? Say the owners of Canary Warf have a tax on their physical assets, will they move Canary Warf away? No. Will they sell it? Maybe... Will they be more reluctant to decorate? I suspect not, as the ownership and maintenance will still present a profit. It will still earn money, just maybe not as much money as before (after tax).
The redistribution of wealth down the spectrum will stimulate the economy in compensation regardless.
We are at the stage now where wealth inequality is approaching feudalism. If the poor have no money to do much with at all, that is a massive cost to the economy. You cant stimulate things by simply giving the rich more money.
If you disagree, look at COVID. What was the government spend? 600 billion or something? I forget the numbers, but i think it works out about £15k for each human in the uk. So my 4yr old daughter should have £15k more in the bank... I should have. You should have. Your child, or grand child should.
But its not the case. So that money still exists. Its not vanished. Where is it though? Essentially its at the top of the wealth spectrum.
So we have just given "the rich" the lions share of £600 billion. And yet we are in this current situation. The proof is in the pudding. It just doesn't work giving out cash to the wealthy.
Flynnwood
Established Member
When Truss et al announced that mini budget of a big supply of debt (tax cuts), the markets reacted.
It's so bizarre (incompetence?) that nowhere in Downing St thought - that would not happen and pressed on anyway.
It's so bizarre (incompetence?) that nowhere in Downing St thought - that would not happen and pressed on anyway.
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Jameshow
Established Member
I disagree....
The top 1% covers drs, lawyers, CEO and directors, etc etc.
They cannot move out of the country!
Those that I have contact with, were dead against the reduction from 45 -40% income tax. The situation as it stands now is fairly fair and I doubt Sunak will change it much.
The benefits system needs to stop being a top up to low salaries and the multinationals need to start paying a living wage, then the tax burden will start reducing.
