Bank of England admits engineering the property boom!!
20 March 2007, 06:49 PM
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Bank of England admits engineering the property boom!!
This is pretty staggering really, former BoE governor Edward George has admitted the BoE has been keeping interest rates artificially low to engineer a consumer spending boom to prevent UK plc going into recession - he has said his legacy is to "sort this out"...
Sky News: BoE Takes Property Blame
This really is pretty staggering! How they are going to "sort this out" will be very interesting - interest rates firmly on the upside I suspect - especially with a jump in inflation just announced.
Sky News: BoE Takes Property Blame
Originally Posted by Skynews
The group that decides the interest rate deliberately fuelled a consumer boom to boost house prices and personal debt so that "UK Plc" could avoid recession.
Former governor Edward George said the Monetary Policy Committee "did not have much of a choice" in the matter.
The MPC members were battling to use interest rates to prevent the UK being dragged into a worldwide economic slump, he explained.
And, he said, his legacy to the MPC - which decides the rate - was to "sort out" the problems that policy had caused.
Lord George - who headed the Bank for a decade until June 2003 - revealed that he knew the approach was not sustainable as he gave evidence to a committee of MPs.
The terrorist attacks on the US in September 2001 caused a stock market crash in the US, and a sharp fall in the global markets.
"We only had two alternative ways of sustaining demand and keeping the economy moving forward: One was public spending and the other was consumption.
"We knew that we were having to stimulate consumer spending; we knew we had pushed it up to levels which couldn't possibly be sustained into the medium and long term.
"But for the time being, if we had not done that the UK economy would have gone into recession just as has the United States.
"That pushed up house prices, it increased household debt ... my legacy to the MPC if you like has been `sort that out'."
"We tried very hard not to do more than we needed to keep within the inflation target limits but we knew that that was going to cause problems later on which are still with us."
Concerns have been raised that the present official rate of inflation does not reflect the everyday experience of many voters.
Former governor Edward George said the Monetary Policy Committee "did not have much of a choice" in the matter.
The MPC members were battling to use interest rates to prevent the UK being dragged into a worldwide economic slump, he explained.
And, he said, his legacy to the MPC - which decides the rate - was to "sort out" the problems that policy had caused.
Lord George - who headed the Bank for a decade until June 2003 - revealed that he knew the approach was not sustainable as he gave evidence to a committee of MPs.
The terrorist attacks on the US in September 2001 caused a stock market crash in the US, and a sharp fall in the global markets.
"We only had two alternative ways of sustaining demand and keeping the economy moving forward: One was public spending and the other was consumption.
"We knew that we were having to stimulate consumer spending; we knew we had pushed it up to levels which couldn't possibly be sustained into the medium and long term.
"But for the time being, if we had not done that the UK economy would have gone into recession just as has the United States.
"That pushed up house prices, it increased household debt ... my legacy to the MPC if you like has been `sort that out'."
"We tried very hard not to do more than we needed to keep within the inflation target limits but we knew that that was going to cause problems later on which are still with us."
Concerns have been raised that the present official rate of inflation does not reflect the everyday experience of many voters.
20 March 2007, 07:25 PM
#3
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Very interesting indeed. Thankfully I've got a relatively small mortgage in relation to the value of the house. PLus I'm on fixed rate (if I'm reading the situation properly), so I hopefully won't be hit too hard......
One can only hope
DAn
One can only hope
DAn
20 March 2007, 08:08 PM
#4
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8% Interest Rates and 10 % Mortgage Rates within 12 months.
10% is the long term average for Mortgages so it's nothing unusual .... just that those who are too young will not have the faintest idea of what is about to happen
10% is the long term average for Mortgages so it's nothing unusual .... just that those who are too young will not have the faintest idea of what is about to happen
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anyone? plz lol
20 March 2007, 10:28 PM
#9
what i dont get is, if they encouragaed people to buy big mortgages at 4% etc and these people are on variable, what do the banks gain by putting interest rates back to 8% when they know 90% of people will forfeit their mortgage ???
surely they dont want houses to be given back to banks,they want the wonga for it in a mortgage ??
if they sell the house they wont get back what they "gave" to the sellers bank etc etc ?!?!?
or am i well off the mark here ???
surely they dont want houses to be given back to banks,they want the wonga for it in a mortgage ??
if they sell the house they wont get back what they "gave" to the sellers bank etc etc ?!?!?
or am i well off the mark here ???
20 March 2007, 11:02 PM
#10
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The Banks do not control the rate ..... the worldwide situation does.
They don't give a tit about any loss they face - they simply reclaim the property and the debt remains with the defaulting buyer who they will chase forever, until they are refunded.
They don't give a tit about any loss they face - they simply reclaim the property and the debt remains with the defaulting buyer who they will chase forever, until they are refunded.
20 March 2007, 11:07 PM
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Shock horror - You mean the MPC have been using interest rates to control the economy
What you have failed to mention PeteM95, is that the period under discussion was between the middle of 2001 and late 2003. Hardly news
What you have failed to mention PeteM95, is that the period under discussion was between the middle of 2001 and late 2003. Hardly news
20 March 2007, 11:11 PM
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bollox as usual Pete - The point of the Eddie George story is that the MPC have been using rates to try and stop the British economy from being pulled down by world trends. The only reason that inflation was up last month was a couple of extra stealth taxes introduced by those two halfwits in Downing Street - If we see 10% mortgage rates this year it wont just screw homeowners - it will screw the entire country for the next 20 years. That will be b.Liars real legacy
20 March 2007, 11:25 PM
#14
bollox as usual Pete - The point of the Eddie George story is that the MPC have been using rates to try and stop the British economy from being pulled down by world trends. The only reason that inflation was up last month was a couple of extra stealth taxes introduced by those two halfwits in Downing Street - If we see 10% mortgage rates this year it wont just screw homeowners - it will screw the entire country for the next 20 years. That will be b.Liars real legacy
You're just being dramatic! The 15% interest rates the Tories gave us in the late 80's only buggered the Economy for fifteen years
20 March 2007, 11:26 PM
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This is news to people? Since so much of the UK economy is now consumer driven a way to avoid recession is to make sure people keep on spending by making debt cheaper. What would you prefer, put a million or two on the dole?
21 March 2007, 01:25 AM
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I thought that the Govt handed over decisions on interest rates to the BoE for this very reason 
to take any political slant away from it. BoE do what is best for the UK, no more, no less.
TX.
to take any political slant away from it. BoE do what is best for the UK, no more, no less.TX.
21 March 2007, 09:42 AM
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21 March 2007, 11:06 AM
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25 years fixed at 5.79
30 year fixed no ERC at 6.09
I bet the lenders all wish they had your insight psl, cos they are going to get creamed when rates hit 10% this year
oops - hang on - they have already bought the funds at a fixed rate from the wholesale market, so borrowers will be OK and lenders will be OK. Much of the wholsale market is funded by govt bonds, so it looks like only the govt will get stiffed. Once again it comes back to Tony and Gordon. Maybe you should give them a ring and let them know they are shafted
30 year fixed no ERC at 6.09
I bet the lenders all wish they had your insight psl, cos they are going to get creamed when rates hit 10% this year
oops - hang on - they have already bought the funds at a fixed rate from the wholesale market, so borrowers will be OK and lenders will be OK. Much of the wholsale market is funded by govt bonds, so it looks like only the govt will get stiffed. Once again it comes back to Tony and Gordon. Maybe you should give them a ring and let them know they are shafted
21 March 2007, 11:23 AM
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And of course this news comes out just when the Budget is being announced.
Bury bad news with a bigger news story.
My 5 year fixed rate comes to an end in November, just in time for interest rates to rise. Great !!
Luckily I have a relativly low Mortgage but I'm still going to be paying a fare few quid more per month.
Bury bad news with a bigger news story.
My 5 year fixed rate comes to an end in November, just in time for interest rates to rise. Great !!
Luckily I have a relativly low Mortgage but I'm still going to be paying a fare few quid more per month.
21 March 2007, 11:41 AM
#24
21 March 2007, 11:49 AM
#25
I just think the whole worlds economy is built on a house of cards, even more so in the western countries where consumer debt is very high and encouraged. I certainly don't know anyone other than Scoobynet members that doesn't have any debt.
Roll on another recession and a lot of people will be completely screwed. You may have a fixed mortgage but still hard to pay that without a job.
Roll on another recession and a lot of people will be completely screwed. You may have a fixed mortgage but still hard to pay that without a job.
21 March 2007, 12:26 PM
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The BoE is a Central Bank owned through sleight of hand by private individuals and does what's best for the international banking system not the UK. The Goverment have no real control over it at all.
21 March 2007, 12:32 PM
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Les
21 March 2007, 11:51 PM
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