Interesting Rates
The Bank of England have increased interest rates again. Great. Apparantly it's because they want to keep inflation in check. Admirable, but misguided in my unfinancially educated opinion.
The problem with increasing interest rates is that it makes the poor poorer and the rich richer. Well, it would if banks actually passed on rate increases to their savers, rather than reserving it for borrowers only.
Ironically one of the indexes used to judge inflation is called RPI, and it includes mortgage payments. Guess which index will be increasing next month, then?
Inflation is being driven by utility bills such as Electricity and Gas rising. Coming up shortly are big increases in university tuition fees and then next year will see council tax rises, too.
Of course inflation is going out of control, that's what you get when you have a government with no concern toward the middle classes. Although out of control is a bad statement, actually. It's about 2.4%. Compare that with Iraq at about 70% or Zimbabwe at about 10000000% and you see it's not too bad.
The problem with rising interest rates is that people don't earn enough to keep up with it. For my part, the past 3 years I've got a 1% pay increase. With inflation running at 2.4% I'm falling further behind every year. Typically my salary increase might just about cover my increased Council Tax. Because where I live might loosely be described as "London" we also have to pay the Ken Livingstone tax, which of course will jump up because the Olympics are going to be held there. I don't care about the Olympics and couldn't give a hoot that they are being held there. Incidentally, they are miles away from me so my area will see no benefit whatsoever.
So with my Council Tax going up every year, gas and electricity prices increasing and my salary not going up to match it, I fail to see how squeezing my last drop of free income (by which I basically mean our food budget) dry is going to help either me or the economy.
So it goes with house prices. I'm being frequently told by the media that the government is planning all sorts of nastiness with Council Tax, to take the value of your home into account. I don't think this will happen because there'll be a coup d'etat if it were to. The point is though that my rising house price is not my fault and isn't a benefit either, really. If my house were to go up in value by 10%, then guess what? The more expensive house I want to maybe buy has done the same. So my, for example, £200k house has gained £20k and the £300k house has gained £30k. So I'm now an extra £10k short. Well I'm glad the value went up then.
What I don't get is how they have gone up so much. I think it's a ploy by Estate Agents to push up their commission. They spout supply and demand as the reason, but it's always been the same. There are no more buyers today than there used to be, really. People may move around more and not stay in the same house for 30 years, but the total number of people and the total number of houses is still about the same. In fact there are more houses, due to John Prescott's plan to concrete over the entire south-east.
So given the ratio of buyers to properties must be about the same, the only reason for prices going up is because Estate Agents make it that way. Why put a house up for £180k when you could put it up for £200k and get more commission? Nobody questions the values; if it's up for sale at £200k then you offer a bit less and that's it. If it was up for sale at £180k you'd have done the same. Then it became a national sport, and still the buyers came. It's levelled off a litle but they are still going up. I bet my next-door neighbours mortgage is a fraction of mine as they've lived there a lot longer and therefore bought it cheaper. My parents mortgage payment was about a tenth of mine. I don't earn ten times what they do, either. A bit more, perhaps, but nothing like that. They bought their house about seventeen years ago for about £40k less than I paid for mine 5 years ago. Their house is about twice the size and currently worth at least double the price of mine.
I don't care how much my house is worth. What I care about is how much my mortgage payments are and how much my council tax is. Month-to-month finances concern me. My house price in twenty years does not.
The problem with increasing interest rates is that it makes the poor poorer and the rich richer. Well, it would if banks actually passed on rate increases to their savers, rather than reserving it for borrowers only.
Ironically one of the indexes used to judge inflation is called RPI, and it includes mortgage payments. Guess which index will be increasing next month, then?
Inflation is being driven by utility bills such as Electricity and Gas rising. Coming up shortly are big increases in university tuition fees and then next year will see council tax rises, too.
Of course inflation is going out of control, that's what you get when you have a government with no concern toward the middle classes. Although out of control is a bad statement, actually. It's about 2.4%. Compare that with Iraq at about 70% or Zimbabwe at about 10000000% and you see it's not too bad.
The problem with rising interest rates is that people don't earn enough to keep up with it. For my part, the past 3 years I've got a 1% pay increase. With inflation running at 2.4% I'm falling further behind every year. Typically my salary increase might just about cover my increased Council Tax. Because where I live might loosely be described as "London" we also have to pay the Ken Livingstone tax, which of course will jump up because the Olympics are going to be held there. I don't care about the Olympics and couldn't give a hoot that they are being held there. Incidentally, they are miles away from me so my area will see no benefit whatsoever.
So with my Council Tax going up every year, gas and electricity prices increasing and my salary not going up to match it, I fail to see how squeezing my last drop of free income (by which I basically mean our food budget) dry is going to help either me or the economy.
So it goes with house prices. I'm being frequently told by the media that the government is planning all sorts of nastiness with Council Tax, to take the value of your home into account. I don't think this will happen because there'll be a coup d'etat if it were to. The point is though that my rising house price is not my fault and isn't a benefit either, really. If my house were to go up in value by 10%, then guess what? The more expensive house I want to maybe buy has done the same. So my, for example, £200k house has gained £20k and the £300k house has gained £30k. So I'm now an extra £10k short. Well I'm glad the value went up then.
What I don't get is how they have gone up so much. I think it's a ploy by Estate Agents to push up their commission. They spout supply and demand as the reason, but it's always been the same. There are no more buyers today than there used to be, really. People may move around more and not stay in the same house for 30 years, but the total number of people and the total number of houses is still about the same. In fact there are more houses, due to John Prescott's plan to concrete over the entire south-east.
So given the ratio of buyers to properties must be about the same, the only reason for prices going up is because Estate Agents make it that way. Why put a house up for £180k when you could put it up for £200k and get more commission? Nobody questions the values; if it's up for sale at £200k then you offer a bit less and that's it. If it was up for sale at £180k you'd have done the same. Then it became a national sport, and still the buyers came. It's levelled off a litle but they are still going up. I bet my next-door neighbours mortgage is a fraction of mine as they've lived there a lot longer and therefore bought it cheaper. My parents mortgage payment was about a tenth of mine. I don't earn ten times what they do, either. A bit more, perhaps, but nothing like that. They bought their house about seventeen years ago for about £40k less than I paid for mine 5 years ago. Their house is about twice the size and currently worth at least double the price of mine.
I don't care how much my house is worth. What I care about is how much my mortgage payments are and how much my council tax is. Month-to-month finances concern me. My house price in twenty years does not.
posted by Nej at
2:57 pm
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