大象传媒

You assume that all those in favour of a change last time (including big Merv) will still be in favour of a change today - that ain't necessarily so.

Your analysis seems to suggest that the only reason to raise interest rates is to raise mortgages and consumer borrowing costs.

There is a much bigger picture at play here - for example private equity and hedge funds borrowing colossal amounts of money to finance deals in the city.

If anything interest rates have been too low for too long. By continuing to be behind the curve on interest rate rises the MPC risk letting inflation continue to grow above target.

By letting borrowing get as out of control as it clearly now is, the MPC risk a "credit crunch" where due to mounting bad debts and perceived risk lenders stop lending to many people altogether, and asset prices collapse.

Prof John Meullbauer is smarter than I. His analysis for HM Treasury concluded that nobody could be sure that changes to variable rate mortgages had more significant impact on aggregate household spending than in Euroland. Because many British mortgagees didn't vary their actual payments when rates went down or up. They just allowed the length of their mortgage terms to flex by a few years. JM also reported that many lenders only re-calculated necessary payments once a year, so the changes would be lagged anyway.
Moreover, (I add) brand new mortgages would start at the current rate and that might have a earlier impact on marginal variations in house purchases and re-mortgages. That would have a lagged effect on consumers net savings ratios over a cumulative time period. So no need for alarm then.

Very interested to hear what you were saying on Radio 4 this morning and again in this blog about the effects of people coming off fixed rate mortgages. This sounds to me like it has the potential to have a huge effect on the economy, especially if we do see another rise today.

Do you think we are now looking at a realistic possibility of a late 80s style housing crash? The present situation, where really quite well-paid people can't afford to buy even a small flat, strikes me as something that doesn't need very much prodding before the whole thing comes crashing down.

If real inflation were taken into consideration (how many years ago did the house price index get removed & why?) then interest rates would be in double digits now.
It is incredible how blinkered most people are, the low interest rates have suited the government due to the associated spending (basically of housing equity & credit) that has kept this countries economy afloat. The economic crash is looming, we all know it but just don't want to acknowledge it....

Why don't they make the voting anonymous? Or at least semi-anonymous. Surely this would then save any embarrassment.

"...MPC members would forever have to be thinking about the politics of how they vote as well as the economics, which would be unlikely to improve decision-making."

You're not seriously trying to suggest that the MPC members' votes are not affected by political considerations, are you? Mr Brown may have entranced you by his talk of Bank of England independence, but you don't think, do you, that he really delegated any significantly important decision-making to a body over which he didn't maintain an overwhelming influence? The chances of the MPC taking a decision on interest rates that hasn't been pre-approved by Mr Brown is about the same as that of Lord Hutton coming to a conclusion that would have destabilised the establishment. Zero. For all the BS, neither the MPC nor Hutton were put in place to reach independent conclusions - they're there because they will attract, erroneously, the sort of gravitas to which a genuinely independent authority is entitled.

Evan, great review - except yes: peoples previous votes could change so its not ''one switch''.

Having said that, I have been saying exactly what you have, since it became known the Govenor wanted a rise last month and was outvoted.

Its inconcievable he will have changed his mind this month or he will look unstable; its inconvievable he will be outvoted twice in a row - so there you have it - rates will be up whether its required or not.

The case is not made for another rise, at this time in any case.

My view would have been to wait until the next inflation report - but them I am just a no-body.

This makes depressing reading for someone like me - who is financially responsible and also priced out of the housing market.

We seem to have reached a stage where monetary policy is primarily based on how to avoid shocking excessively indebted homeowners, rather than notions of sound economics.

"Meryvn's put" - the perception that the Bank of England will always step in to avoid house prices falling or significant mortgage problems - means that my sensible and responsible choice: not to take on levels of debt that I can't afford, is leaving me increasingly done over a financial barrel, forced to rent and see my savings erode whilst the indebted herd is rewarded.

Serious moral hazard going on here - and it's leaving me increasingly disenchanted and sceptical. More backbone BoE!

If I have no debts other than my mortgage, why should I have to pay more because other people get into too much personal debt and can't control their spending habits? Surely there has to be another way rather then penalise everyone?

One solution is for the Chairman to vote only in the event of a tie.

Ohhhh please; lets stop any more talk of a housing crash - it simply is not going to happen. Perhaps for some its more to do with wishful thinking than common sense.

Please dont post lots of anecdotal 'evidence' to back up any 'crash' theories - because theories are what they are and incomplete ones at that.

The UK growth figures are revised up, the UK forecasts between 2007 and 2010 all show solid trend growth; the UK continues to boom and inflation is set to fall, there is a massive undersupply of housing which is set to continue - blah blah blah.

Dont sit there for another 5 years hoping for a property crash - just as many have for the last 5 years.

There was a daft ''theory'' just like this 5 years ago when owners ''sold up'' and hoped to buy in lower after 'the next crash' so called experts were predicting - what happened?

I dont need to tell you!

Interest rates are already too high. Many people, mostly the poor or those on low incomes, are suffering greatly. The rich coudn't care less. Why do poor people have to suffer because of rich business' greed, in putting prices up? There must be other ways of getting inflation down. The government should cap increases in rail fares, council tax, utility bills, or any other fees charged by the government - eg prescription charges, passports, etc, to show an example to business. The government controls 43% of GDP and is one of the worst offenders in putting prices up. If people are spending too much then increase taxes. If rates go much higher it could result in economic meltdown.

Evan,

As an economist myself, I'm not sure everyone does think rates will necessarily go up today. When I answered the latest monthly Reuters survey my suggested probabilities were more or less the same as yours (65% up 25bp, 35% no change) and I suspect this was pretty typical. But the headlines in the media on the survey results almost always focus on the 'main scenario' prediction, which for me and most other economists was for a rate rise. So blame the media not the economists please for smoothing over the probabilities!

I agree by the way that Mervyn King being outvoted is not the issue. The MPC members vote on their view of the evidence, as they should. I think the majority of the MPC are likely to conclude that the balance of the evidence points to the need for a further precautionary rate rise today to keep inflation on or around target two years hence. But there are clearly arguments on both sides and another close vote is likely.

Talk of "no crash ever" is beginning to sound like wishful thinking, given the current events taking place on the credit market surrounding CDOs and so on. But you probably don't know anything about that.

Evan has pretty much hit the 'nail-on-the-head' without trying to panic people too much..but they should be panicing..massively! Those fixed 2 yr deals are all coming up for renewal-in real terms that means that an increase from 4.75 to 5.75 if they push the rate up this month & that means the monthly repayment on an interest only mortgage goes up 20%! Also considering 6% of new mortgages in recent years have been sub prime this spells doom and gloom and major re possessions & this means property glut & that means house price crash!The problem is increased since very many people have been borrowing up to the limit on equity release/ credit cards etc and it won't take much to set the 'domino' effect into motion. I remember the late 80s when the 'bubble' burst & all the signs are there. I was lucky having no debt at that time and luckily selling my house and buying one for 拢475,000- the owners had wanted 拢635,000..believe me when the crash hit..it hit!LITERALLY OVERNIGHT NOTHING WAS SOLD AND NO ONE WAS BUYING... But if you had to sell then you were in real trouble! All this with the fall in US bond prices meaning the cost of borrowing is set to rise still higher,debt so elaborately packaged and inter linked globally & so called 'hedge' funds not used for 'hedging' but as a speculative gamble, Retail & Consumer Price indices that mask the TRUE rise in inflation..Oh dear!! Sell up, unload the debt and prepare to weather the storm..it's going to be a very big one this time!

If you want a good example of my feelings that the irresponsible majority are setting the agenda look no further than the 大象传媒 online story 'Interest Rates: your stories'.

The three 'stories' are all the same - indebted people who don't want interest rates to go up. Two of the three stories are of people who have increased their mortgages (or have taken out another mortgage) to cope with having spent too much money on credit cards.

How about a new strap line: "Interest rates: appease the stupid"

Any chance of interviewing someone who thinks controlling inflation and run away spending is a good thing?

Evan, I saw you on News 24 putting the case that rates should not have been put up in order to avoid an overshoot, something you also allude to here in your "wait and see" comments.

I think that in the long term an overshoot might be no bad thing. A period of increased interest rate volatility would surely be reflected in fixed rate mortgages, which would (I assume) incorporate increased hedging costs to deal with the increased uncertainty over future rate projections. This in turn would make them a less attractive retail product, and help to wean people off them.

If you view fixed rate mortgages (alongside other more sophisticated mortgage products which are being flogged to less sophisticated shoppers) as a way to blunt the effect of interest rates as a tool to fight inflation, then anything which turns the consumer away from them is probably a good thing.

I'm sure Evan's spot on - a time bomb will go off later this year and early next as the fixed rate mortgage deals expire. This rise may be a rise too far too soon. It may turn out to be be a tough Christmas for some families and retailers.....

I'm not an economist but I am a mortgage payer and my very basic view of interest rates and the recent number of rises is this -
On the one hand inflation is higher than they would like (ie: I pay more for a basket of goods) therefore, They increase rates and take some more money from me...great!!!
whilst I understand that the mechanics are more complicated, this is how if affects me on the 'shop floor'...I Bet Merv King doesnt have a mortgage but lots of savings!...

This may be a naive question; how effective are interest rates at controlling inflation anyway? If the result of a raise is an increase in the cost of living for a large percentage of the working population wouldn't this lead to inflationary pay demands and settlements?

all this fuss about nothing:

1) There are ALWAYS 2 - 3 year fixed rates about at less than bank rate (there is one now for 5.40% for 25 years!)

2) Add wages rises over 2 - 5 years and minus other rising costs - on average people are better off (see how many now say 'what wage rises?')

3) Check increasing mortgage payments against rising rents over last 5 years - mortgages are winners hands down (and are STILL paying less % than in 2000!) and renters have not made on average 拢100k capital profit.

4) 0.25% rise? get over it.

THANK YOU MATT!! for your wise comments published at No: 20 above.

The media always manage to slant their headlines and pick out a one legged 85yr old single parent living on state handouts, on 40 cigs per day, massive loans all at 400% and a bottle of vodka per day to boot.

They can then declare how much worse off ''SOME PEOPLE'' are (that great catch-all 'some people').

Well yeah! THEY will be.

Robert cargill is convinced there is no prospect of a crash because the economic forecasts are sound and there is a shortage of supply.

Just over a year ago people in the US were saying the same... and now look what's happening. And in Ireland too... booming economy, immigration, lack of supply and now prices are falling.

The problem is there may be a shortage, but that is only because those who wish to purchase first homes are competing with speculators and BTLers. As IRs rise, those become less attractive investments and when prices stabilized, the wise speculators will leave the market.

And when prices start to drop, eventually the more stupid speculators will be forced out too.

There is no shortage of property; there are no tented cities in the UK or overflow of people on the street. It is just a question of ownership vs tenancy. Expect to see large swathes of BTL-land returned to owner-occupiers in the next few years as the UK inevitably follows the economic path of the USA and house prices drop.

IRs will keep until borrowing and the resultant inflation is under control. And sadly for some, that means that the only prospect of IRs coming down is when house prices are significantly lower.

People are perhaps happy to increase their indebtedness to cope with profiligate spending patterns, and/ or in same cases to secure a toehold on the 'property ladder'; both groups cannot escape market realities!
In the former the costs of not curbing their spending will be higher borrowing costs; while for the latter the overheated housing market is calming down in all areas including the exorbitant London and S.E. - so what they stand to lose in extra mortgage costs might be mitigated by greater price stability. Indeed 'Buy to keep empty'landlords are more likely to release properties on to the 'to let' market, if they are less certain of significant house price inflation,in turn increasing available supply,which should further moderate house price inflation.

With everybody obsessing about their mortgage repayments (myself included!) and leveraged private equity buyouts, what we have all missed is public spending and taxation. Remember the Government is affected by rising interest rates as much as the rest of us. The Government's mortgage is 拢504 billion, and you think you have problems!

The public sector has taken more and more of this nations resources in raw materials and people. All those bright new hospitals took a lot of concrete and steel to build and people to staff them. This has been paid for mainly through gradually increasing borrowing. Luckily for Mr B, this coincided with a change in pension fund rules that forced them to buy more Government debt, giving him a captive source of funds and lower long term interest rates. Handy, eh?

However, with the pension fund crisis abating (as more schemes are closed or better funded) as well as international factors in the long bond markets, this cheap money is drying up. The government is on the equivalent of a fixed rate mortgage for most of its debt, but sooner or later current high rates will feed through and a 1% rise is an extra 拢5 billion a year to find.

With his debt becoming more and more expensive the Chancellor will have little choice but to either raise taxes or cut public spending and make more public sector workers redundant. This risks tipping the country into recession.

The ex-chancellors profligacy is coming back to bite him - or should I say us.

Robert Cargill, let me paraphrase your post for you:

"It's different this time! It's different this time!"

There is going to be an ALMIGHTY global crash, although it will probably come when the Yuan revalues and the Bank of Japan increases interest rates on the yen. The carry trade has been one of the main factors propping up ludicrous UK prices. All the talk of prices being caused by low levels of UK housing stock will be seen in retrospect as the weak rationalization it really is. People see a phenomenon and reach for the nearest easy-to-understand explanation. The reality is that property prices are stupidly high because too much cheap money is sloshing around in search of a home. And the apparent strength of the UK economy is a debt-fuelled chimera as well.

Totally agree with post #30..

There are clearly lots of the buy-to-let property owners who have done very well "gambling" on the UK property market over the past 10 years or so. Clearly thinking they know all about economics since they have made good money from property in a "one way market" - I remember thinking I was that clever investing in Tech shares just before the Dotcom crash of 2000..

Yes in fact the shortage of property is an illusion - yes lots of people want one, but it's only demand if they can afford them (one of the first laws of economics).

I very much agree that the current asset price bubble is due to far too much global liquidity in finance markets (see post #30). The bubble moved from stocks to property in early 2000 and has stayed since..

It's easy to see from the US that it's now reversed back from property into stocks (property market in freefall, whilst the DOW at record levels).. Yet stocks are very liquid, and any further shocks to the system might cause panic to stock markets..

Whilst I agree that the UK does have different property issues than the US, I really don't see how we can avoid a similar "correction" if global capital markets tighten further. I'd guess once the property market here starts to fall, it will drop back quite quickly - a 20% drop sounds about right to me, to get back to sensible price to incomes ratios..

I just really hope our service based economy can absorb any correction without a full blown recession..

Surely if the inflation target is 2% and it has been over 2.5% for 6 months then we have to get it down to 1.5% for 6 months to balance it out i.e. Increase rates.
That's basically the law of averages.
Do the Maths Cargill et al!!!

Well said Kaitain. It's NEVER different this time.

UK interest rates for the big players surely doesn't make any difference. they borrow from Japanese banks where interest rates are 0.5%. The only problem would be if the Yenn increased in value which surprisingly has been exactly the opposite for the last few years.

My Prediction:

World problems will be when the loan bad debts become reality and the insurance/assurance companies that insured them cannot cover them.

UK problems will arise when unemployment hits the economy which is inevitable.
Too many public sector jobs which have to be paid with taxes.

Either taxes have to go up (result in inflation and then interst rate increses) or redundancies in the public sector need to be made.
How it will be:

1) Government makes redundancies in the public sector jobs/consultancy contracts.

2) loan repayments will stop being made.
3) people will hand the keys to their highly mortgaged properties to the banks and opt for personal bankruptcy (lasts only one year now) and be entitled to a council/housing association house.
4) house prices will fall.
5) Company profits will fall due to lack of sales and lack of consultancy work for the government.
6) resulting in corpoation tax revenues for the governemnt falling
7) Companies will have to make redundancies meaning less revenue for the government in the form of PAYE/NI deductions.
8) Government will need to pay out Unemployment/Housing Benefits already having less revenues coming in from taxes and therefore needs to charge the remaining more taxes:
BACK TO STEP ONE

The only reason that this has not happened yet is because:
1) people are subsidising their income with loans based on the growing equity in property.
2) foreign investment into the UK economy.

Evan's predictions were spot on.

What's next by September?
6.0% - two-thirds and peaking at this level.
5.75% - one-third

Fixed rate mortgages - one reason the UK has not joined the euro is that the UK economy responds differently to interest rate rise. As mortgage repayments increase with interest rates consumption falls; whereas in the euro zone most mortgages are fixed and consumption is less immediately affected.

Do your comments today mean that the UK is becoming more like continental Europe and perhaps closer to joining the euro?

Well the reaction to yesterday's rise in the base rate is to push the yield curve even higher up.

To those on this blog who are forever asking for rates to be jacked up to 6.5%; you can stop asking now, they are already there!

The swap rate market is showing fixed rates for 2-5 year loans at 6.33%. Add in a lender's profit margin of 0.5% and (in the commercial property market) you cannot get a fixed rate at less than 6.8% - usually 7%-7.5% and more if you are less than brilliant covenant.

This will be reflected in the residential markets soon with a choice of 6.75%+ variable or 6.5% fixed. If they are offering less than 6.5% look a the small print for the huge arrangement fee, the lock-ins at SVR after the fixed period ends and the massive early repayment penalties.

No-one is going to make a profit in property (resi or commercial) by buying at current prices and borrowing at these rates. And the same conditions will apply across all the debt markets.

The BOE needs to do nothing more to base rates, the capital and currency markets are doing its job for it. Its 1989 all over again!

Matt from post #39 could you tell me where I can find out the the rates of the swap rates?

In my mind the only person who benefits from house prices going up are the banks as we have to borrow more money of them. People seem to be blinded by the thought of there house going up in value. Thinking it means they've got more money to spend. When clearly it's a illusion.

Huw Sayer (#36): Well, I'm no economist, but your calculations look OK to me. Time was when it was a lot cheaper to buy than rent. But I don't think that's true any more. It seems to me that the BTL market is saturated, which has kept rents down while house prices have kept spiralling upwards.

I moved house last year, and I did toy with the idea of letting my old house rather than selling it. But the maths really didn't stack up. I would not have been able to get anything like the same money in rental income to cover the extra mortgage interest I'd be paying. Effectively, I would be taking a gamble that house prices would continue to rise at the same rates they have been doing for the last 10 years or so. Maybe they will, but it's not a gamble I was willing to take.

Conversely, if I were not a home owner, I think I'd be quite happy to carry on renting and take a chance on a drop in house prices before buying.

Evan - you are an entertainer not a commentator. I wonder if you were ever a commentator.
Write about the BoE and why they are doing what they are doing in ignoring money supply growth, massive energy bills, huge tax rises all side by side with virtually free money. Why have the BoE let asset prices go out of control - what does it say about their priorities ?
Frankly the BoE members dont care about inflation so long as there is credibility for the city. Why is this ?
The government doesnt care about inflation so long as it is in assets not wages. The Far east did the governments job regarding goods inflation and technology has done it for services inflation. The BoE has been a bystander in the asset bubble - again, why is this. Why don't you use your pen ? do you know your subject ?

Time you really started to earn your living and write about WHY the BoE do what they do, rather than a pointless remark about quarter point interest rate rises.

I so certainly believe that the people who write comments to this post have more knowledge and grasp of the economy rather than the writer himself. NO OFFENCE EVAN.
I have disagreed with his views for months. And now he repeats what I was saying months ago on his blog.

I would really suggest people to read blogs 30 to 39. And you will find more knowledge for a judicial decision rather than the original post.

Talk about the valuatio, futures market, you get it all.
Brilliant comments to an ordinary post.

Im not so sure Evans predictions add anything new.

The best way to predict interest rate changes is just to read the board minutes for the previous change, they usually give big 'hints' as to what they will do next time.

Heres my prediction:

Interest rates will continue rise as long as inflation rises, and will fall so long as inflation falls. If my prediction seems predictable and much like Peter Smeichels commentary on the 大象传媒, well then keep in mind its no different to what Evans predictions are.

well at least my posts got people talking; as usual, most of the replies are by 'short termists' the very thing they accuse ''speculators of''

You know what? IF prices fell by 10% over a year (which they have not in the USA), having increased by 100% in the previous 5 years - I do not consider that a crash. If they then 'stay' at that level for the next 10 years - I and people like me am still in substantial profit; not only from my capital growth but also my increasing rent roll.

I know my business inside and out - you probably know yours - but you dont know mine like I do.

Your logic can easily be applied also to any other savoings vehicle you have - probably your rubbish and expensive pensions, ISA's or whatever, so you are really not talking about ''housing'' but everything - and if you are right an ''the crash in comming'' then we are all doomed; including you lot.

I dont accept the analogy of the dot com boom; that was a flash in the pan of a new era, property has been around a long time - so your comparison is flawed.

How come you are not saying Gold is going to crash because you quote its 300% higher than it was? Weird you pick one asset class, but not others and yet you all talk about a global crash.

If there is one we all suffer, but I rekon by holdin my assets which have substantial equity in them - I will come out on top, it may take a little time, but at least I have assets that will still be in demand.

By the way, dont think I will be the least bit concerned if prices did dip a little in the second half of this year (so dont come back here claiming you were right) - as I said earlier, I, and many like me, started from a very low base - basically people such as me are bomb proof - I wodner what the effects of a ''srach'' will be on your assets? and more importantly, how they can recover in time.

By the way, I have been listening to all of these comments and more for 30 years.

All I can say is, as soon as I stopped listening to people such as the gazillions of know-it alls, I started building myself substantial wealth.

Look at the so-called''crash'' of '92, examine for yourself if you bought a house at the peak and held on to it for 5 or 10 years! The facts speak for themselves, so check them out.

People sppear to view a ''crash'' as the end of the game; it is not - thats the time to play on!

I dont really need any lessons from the said doom-makers on what I have done, because I have the facts and the knowledge; everyone else that seems to comment upon my position - as usual, is wide of the mark. Some of the comments here are hillarious, never mind ill-informed.

I have excellent debt/equity ratio, something most FTSE companies would die for, I live in large properties and travel first class. Please dont give me lectures on what I do and how I should not be doing it.

My retirement income from rents alone will keep my in private jets!

What will your pensions/savings do for you? Do I care if rates go to 6%+? Nope! That means more renters for me!

Did you know that between 1984 and 2004 net worth of 55 to 59 year olds (now) rose by 97% whilst for 35 to 39 years olds it fell 10% (adjusted for inflation)?

Some posters seem to take great pride in the fact they've left our children with no money, and future children no planet due to their wonderful jet set lifestyle.

A lot of respondents to my posts on here go to great lengths to oppose my stance that I am a very happy property investor.

It has occurred to me that their fundemental flaw is that whilst they keep banging on about a 'crash' (that will not come) and how I will then basically be wiped out - they appear to have assumed that I have bought all of my substantial investments right at the very top of the market, and hence any 'crash' will take my portfolio value to less than my equity and it will stay at that level permenently and forever!

In the words of Lady T ''Wrong, Wrong, Wrong''

Have fun! I am. In fact, today I am off buying more in central London! Byeeeeee

Isn't it interesting that Mr Brown keeps pushing the idea of 25 year fixed rate mortgages.

At least someone seems to think that rates have still got a way to go....
and probably someone worth taking notice of.

Robert, quite a speech you give in message 44 45.
A quick Google of your name suggests might have given it before!?

80 or 90 pounds Evan? Really - you need to put less Beluga in your trolley...

Sir Evan
You should give yourself a pat on the back about the interest rate rise! Well done...
But will this solve the crisis? I dont think so as the hegemony of the housing market, along with many other comparisons seems to be losing their potential to smooth over...the boom and bust cycle has finished for a while as we all seem to adjust to the movements

Huw re message #52

The price of oil, grain, Chinese pork and bio-deisel will not change if the MPC puts up interest rates.

The MPC should resist the temptation to jack up interest rates in response to imported inflation. These prices are simply not responsive to UK domestic interest rates.

OK so if the pound rises, the 拢 price of dollar denominated commodities will fall, as will other imported goods, but the downside is that the higher rates needed to jack up the pound to this extent is likely to be over-kill for the domestic economy generally and our export industries will be crippled unnecessarily.

The right response to risng international inflation is to use diplomatic and political means to persuade those countries with over-heated economies (China and co) to increase their own interest rates.

The MPC should restrict itself to responding to inflationary pressures that raising domestic interest rates can directly affect, such as asset prices, wages or output prices.

Wage inflation is subdued and output prices remarkably stable. The only blot on the landscape is asset prices - mainly property. Commercial property is already suffering (just look at the FTSE property sector index if you want to see evidence of that) and residential will soon follow.

The MPC should resist the temptation to put up rates further until the effect of the last 5 rate rises is more apparent.

Evan you don't update your blog enough.

When I was at school I was always told that you have monetary and FISCAL policy.

Why isn't the government trying to curb spending by using fiscal policy - because its a vote loser!! So they continue to allow the MPC to adopt a one dimensional approach to economy management.

Raising interest rates is a sure fire way to make the rich richer and the poor poorer.

I agree that the ROI of property at the moment is poor but property is not like other forms of investment. People need to live somewhere. BTLers could bail out but pay a massive tax bill (so thats a no go), people could sell their homes but they gotta live somewhere. You can't compare the property market to stocks and shares.

Economists are theorists, businessmen are real world practitioners.

2 things to consider. 1) Please can anyone wanting to get on the BTL bandwagon think twice (you're too late);and 2) If you own you're own home (and its your sole property) don't sell it.

Evan, Why don't you predict now for what will happen in August.
大象传媒 report for your reference

I can predict with more certainity than the 大象传媒. Should I not be in the job. Any vacancy? Maybe not. It could get worse :)

My prediction for august: They will hold. They will be judged to be acting more on emotion than facts and figures.

But got to add some facts. Last year Oil went down from $78 a barrel to $55 in the begining of this year. Which lead to the inflation coming down to 2.4% now. As there is a lag for its effect. Now its $77 today. This will also have a lag to come in the next couple of months you will see it.

Over to you.

I though inflation was an increase in the supply of money. And rates rise to stem the rise in issue of money. and money has been being printed at a 14% rate fuelling "a money issue boom" and therefore inflation will be 14%. and now interest rates have to catch up. All symptoms of a fiat money economy. Why did they sell us money on the cheap? .. to get it back with big interest! bring back the gold standard.. oh no we've none left, standards or gold.

Hi, instead of waiting for a crash like 92'why not shift to Euro which is moving very well against the Dollar , and let the Pound stay up to a higher value, it will ease the interest rates & inflation.

When you started your blog, you sort of promised to try & avoid talking house prices. Alas I fear that rises in interest rates & their effect on mortgage holders is far too close.

One thing I've never understood is why rises in interest rates are considered good for the economy, but taking money more evenly from the population by tax rises is unacceptable. Somehow, squeezing the pockets of the poorer population, well those poor enough to have to borrow so they'll be watching the pennies already, doesn't seem to me to be a recipe for controlling inflation, especially as it puts their money into the pockets of those rich enough to lend.

Could you explain the economic theory here?

Unlike the author of this blog who plays safe with figures and percentages. I predicted on 18 July 2007 that no rate change will come this August. Response No 58

I still stick by my prediction that they will go up within the next 2-3 months latest by Nov 2007 when the current high oil and food prices prices will flow into the system.

You must remember that higher Oil prices does not only effect oil prices but it has a ripple effect across the economy. Everything else also goes up at a higher level than oil. As oil gets used in production and transportation of everything. This would also include cheap exports from China will also go up in price.

Hence higher prices than before which is higher inflation. Mervin King thought that Oil prices will go down and the inflation (rate of increase of price) will flow out of the system. But they have done just the opposite they went down to $55 and now back to $78. This would give a more interesting figures. The change from a year ago is almost nil but because they went down and came up. Funny figures will turn up.

Now that's what I call a blog

God, I should work in finance or betting :)

In addition to my response 64 where I talked about interest rate rise with in 2-3 month latest by Nov 07. Remember this was posted on 2nd Aug Today you have bank saying

Why would they rise interest rates when inflation is currently BELOW target?

They're going to more than likely keep them the same.

To little inflation is just as bad as too much you know....

btw i would lioke to thank you asw you have help me with my a level economics resurch