From The Telegraph:
David Cameron said that a future Conservative government will "keep mortgage rates low" so that homeowners can "go to bed with real peace of mind". The Prime Minister said that maintaining low borrowing costs would be the first priority of the Conservative's housing policy.
He attributed Britain's historically low interest rates of 0.5 per cent, set independently by the Bank of England, to the Government's deficit reduction program...
"When confidence falls, mortgage rates can spiral, homes become unaffordable, and families risk losing the roof over their heads. That was the risk Britain faced in the last recession. But this Government came to office set in place a long-term economic plan and showed the world we were managing our economy and as a result, mortgage rates have stayed very low..."
He said that a family with a £120,000, five-year fixed rate mortgage are spending £155 a month less than they would have been in 2010.
"This has made a real difference to families across our country. Instead of couples having agonised conversations about the mortgage payments late into the night, people are going to bed with real peace of mind because our long-term economic plan is working."
a) What's good for borrowers is bad for savers.
b) The current low interest rate environment is a global, long term trend. If anything, the 1970s and 1980s are looking more and more like a blip and what we have today is pretty close to 'normal'.
c) Low interest rates could be a result of weak economic activity as much as sensible economic management.
d) The Lib-Cons have reduced the annual deficit slightly, but have managed to nearly double the overall accumulated national debt since 2010; and it is the overall national debt which influences interest rates.
e) The absolute level of interest rates is nigh irrelevant, all that matters is changes. Once you have taken out a mortgage, clearly you benefit if rates go down; if you have savings you lose income; and if you want to buy a home in the near future you gain nothing because house prices rise inversely with interest rate falls. If you are saving up for a deposit, you are running to stand still at best.
f) What about the 'peace of mind' that job security, economic growth, a decent welfare system etc could provide? So what if people are 'saving' £155 a month in interest relative to 2010, if real wages had increased by their long term average of about 2% or 3%, then the average household would have gained a lot more than £155 a month.
Friday, 6 March 2015
From The Telegraph:
My latest blogpost: Seems like a strange thing to be boasting about.Tweet this! Posted by Mark Wadsworth at 12:57