Economics Nerd Central/ The Global Inflation Thread

[Bennyton]

The Ward next to mine, Caversham Heights, voted mostly Tory in the most recent council elections.

This is the cheapest house in the area not on some sort of scheme, £579k:

Check out this 3 bedroom terraced house for sale on Rightmove

3 bedroom terraced house for sale in Uplands Road, Caversham Heights, Reading, RG4 for £579,950. Marketed by Bridges Estate Agents, Caversham

www.rightmove.co.uk

I'm so glad I didn't buy in London.

 

[Bennyton]

Yep, albeit I had a chat with a retiree over the weekend who claimed it's all a nonsense and in my day we simply didn't have holidays abroad, unlike young people these days.


They had just come back from a holiday abroad.

HBB, you've lived in the youKay for a long time now.

I've come to the conclusion that ALL tories, ALL of them, are small brained lizards, and don't care about anyone outside of their immediate circle.

Would you agree, or am I being a bit harsh?

 

[Bennyton]

I've got 400k left on the mortgage, due to renew in 2027, current rate is 1.6%, new rate, if it's 6%, will leave me in a pretty bad place.

Need to throw a few lump sums against it like, but with creche fees, etc, I'm shagged.

Lads this is some dose.

 

[Stacky]

HBB, you've lived in the youKay for a long time now.

I've come to the conclusion that ALL tories, ALL of them, are small brained lizards, and don't care about anyone outside of their immediate circle.

Would you agree, or am I being a bit harsh?

They do not even care about each other or other Tories and they will readily stab each other in the back to get the top job / big bag of dodgy £££.

Even if it means destroying the country and economy even more so.

Rishi Sunak even boasted about not even knowing any working class people.

 

[How bad boy]

HBB, you've lived in the youKay for a long time now.

I've come to the conclusion that ALL tories, ALL of them, are small brained lizards, and don't care about anyone outside of their immediate circle.

Would you agree, or am I being a bit harsh?

Bit harsh. Few of my wife's family are Tory voters, they've mostly been brainwashed by media beholden to right wing interests. Lovely people, but having poison poured in their ears on a daily basis.

I've got 400k left on the mortgage, due to renew in 2027, current rate is 1.6%, new rate, if it's 6%, will leave me in a pretty bad place.

Need to throw a few lump sums against it like, but with creche fees, etc, I'm shagged.

Lads this is some dose.

Lot can happen in 4 years.

I'm preparing for it now, have taken what I would expect to be the payment in 2027, and set half the difference into savings. Take some of the pain now, start adjusting to higher payments and by the time it comes to remortgage, should have a decent sized pot to pay a chunk of it down.


I'd be surprised if salaries aren't rising in real terms by this time next year too. Unless you're getting shafted, your salary should be rising at a rate significantly higher than your interest rate, s relative terms, your mortgage is going down fairly rapidly.


To bring that to life, sticking those numbers into a calculator and assuming you're on a 20 year mortgage, little under £2k a month and £80k a year household income, by 2027, you'd have £329,882 outstanding.
In current terms, you go from 5x to a smidge over 4x income.

If you get say 6% pay rises a year, your income by 2027 would be £101k, which means your mortgage is only 3.3x income.

If you take that back to today, with a 6% mortgage, it'd be the equivalent of £2,160 as a monthly payment, so not a crazy amount more

 

[Bennyton]

Bit harsh. Few of my wife's family are Tory voters, they've mostly been brainwashed by media beholden to right wing interests. Lovely people, but having poison poured in their ears on a daily basis.

Lot can happen in 4 years.

I'm preparing for it now, have taken what I would expect to be the payment in 2027, and set half the difference into savings. Take some of the pain now, start adjusting to higher payments and by the time it comes to remortgage, should have a decent sized pot to pay a chunk of it down.


I'd be surprised if salaries aren't rising in real terms by this time next year too. Unless you're getting shafted, your salary should be rising at a rate significantly higher than your interest rate, s relative terms, your mortgage is going down fairly rapidly.


To bring that to life, sticking those numbers into a calculator and assuming you're on a 20 year mortgage, little under £2k a month and £80k a year household income, by 2027, you'd have £329,882 outstanding.
In current terms, you go from 5x to a smidge over 4x income.

If you get say 6% pay rises a year, your income by 2027 would be £101k, which means your mortgage is only 3.3x income.

If you take that back to today, with a 6% mortgage, it'd be the equivalent of £2,160 as a monthly payment, so not a crazy amount more

Aye that's the thing m8, I haven't had a raise since 2020, the Mrs is in the same boat, the jobs market isn't as good as it was a couple of years ago, and the purchasing power of the pound is still super low.

We're awaiting a Series B at the current place, after that it's all sunlit uplands apparently, otherwise I'll have to work with some Yanks, I dunno, we'll have to see.

Childcare is a bit of a ballbreaker too, it'll be 2200 pcm when we have a second one, to take that home, you need to earn an extra 50k pa, Northern Ireland doesn't have any childcare schemes either.

Scary stuff,

That ends my household budget rant, carry on with the high brow economics thread m8s.
B

 

[CaptainSensible]

UK inflation stuck at 8.7%, higher than the market consensus forecasts, so it'll be higher interest rates from the BoE tomorrow.

For contrast, Eurozone inflation for May had dropped from 7% to 6.1%.

The UK is not in a good place, stagflation, albeit without the high unemployment https://www.investopedia.com/terms/s/stagflation.asp

Ah Jaysus, hardly much of an insight!!

Tomorrow's increase has been baked in for ages and has nothing to do with today's inflation numbers.

However what these numbers have done is increased the probability of a July hike to 76%.

Things to look out for are the vote was 7 to 2 the last time and expected to be the same this time around. Obviously 8-1 hawkish and 6-3 dovish, also Bailey's speech will be the main event of the day not the rate hike which has been a given for weeks.

 

[How bad boy]

Aye that's the thing m8, I haven't had a raise since 2020, the Mrs is in the same boat, the jobs market isn't as good as it was a couple of years ago, and the purchasing power of the pound is still super low.

We're awaiting a Series B at the current place, after that it's all sunlit uplands apparently, otherwise I'll have to work with some Yanks, I dunno, we'll have to see.

Childcare is a bit of a ballbreaker too, it'll be 2200 pcm when we have a second one, to take that home, you need to earn an extra 50k pa, Northern Ireland doesn't have any childcare schemes either.

Scary stuff,

That ends my household budget rant, carry on with the high brow economics thread m8s.
B

Just had a second one, I feel that pain. Bonus cancelled, personal business slowed down significantly, it certainly isn't boom times.

Ah Jaysus, hardly much of an insight!!

Tomorrow's increase has been baked in for ages and has nothing to do with today's inflation numbers.

However what these numbers have done is increased the probability of a July hike to 76%.

Things to look out for are the vote was 7 to 2 the last time and expected to be the same this time around. Obviously 8-1 hawkish and 6-3 dovish, also Bailey's speech will be the main event of the day not the rate hike which has been a given for weeks.

The magnitude is up for question too though, would have thought 50 points.

If inflation had come out substantially lower, below 8%, I would have expected lower or even none at all

I'd have thought July hike is almost certain now.

It's really not the right way to bring inflation under control, especially in a cost of living crisis, with structural supply side issues (e.g. Brexit) and a flatlining economy. But the government have decided not to change the BoE's mandate, nor do anything to counteract the worst of the negative effects, so it's time to randomly ruin the lives of a bunch of middle class people for the sin of having a large mortgage not on a long term fix.

 

[How bad boy]

It's quite clear that the last decade has been very unusual. Historically low interest rates and very little consumer price inflation.

That said, it's not like there has been no inflation in that time, just very little that has turned up in the CPI:

housing costs have been captured in RPI, at least in theory, in practice, it's considered to be a really bad measure of inflation.

CPIH which does at least in theory capture housing costs, doesn't actually reflect house prices directly.


I believe (because I will admit my data could be better) that interest rates have been too low for too long, on the mistaken belief it wasn't creating an inflation problem. It was, it just wasn't captured and addressed properly.

 

[Stacky]

+now that people struggling with their mortgages rising will have to go to their boss and ask for a pay rise which will increase the costs of goods and services thus contribution to inflation.

Up to just over a year a go interest rates were very low for a very long time and energy costs were on the floor with C-19.

Mind you everybody saved up and payed down debt etc during C-19 years for a rainy day?