The big fear is that central banks have massively over-done that attack. The likelihood – most especially in the UK where the transmission mechanism from interest rate rises into the real economy is very slow because we have so many fixed-rate mortgages
The UK has a very low – compared to many to most others – number of fixed rate mortgages.
#Come along now, this was one of the Gordon Brown tests about joining the euro. And a good and righteous such test too. Because the UK has, by comparison, so many more floating rate mortgages interest rates affect the UK economy *more quickly* than in other places.
You may want to rely on more recent information. Gordon Brown was twenty years ago – before our long run of low rates. The UK is almost entirely fixed-rate: https://oecdecoscope.blog/2022/08/29/mortgage-rates-are-rising-should-we-be-concerned/
More recent figures are still ~75% fixed rate.
O/T slightly
There’s a review of James O’Brien’s new book on the Spiked website. It’s fair to say the review paints O’Brien as a pompous tw@t. It has some good lines, which immediately conjured up another fvcking Paddy book-writer of our acquaintance.
https://www.spiked-online.com/2023/12/10/the-derangement-of-james-obrien/
British radio presenter James O’Brien is not easy to warm to. This is mainly due to his personality. A combination of moderate intelligence, a sense of public-schooled entitlement and a gargantuan ego has generated the event horizon of smugness – a man so full of himself it’s a wonder light can escape his presence. Sadly, thanks to his prominent media and social-media profile, we the public now struggle to escape O’Brien, too.
…….
Of course, such is his throbbing egotism, O’Brien was never going to let all that stand in the way of his career.
…….
Not content with smearing those he disagrees with as racists, xenophobes and proto-fascists, and indulging in bien pensant anti-Toryism on his weekday LBC show,
……
At least in O’Brien’s two books on O’Brien he knew a little about the subject matter (although sadly not enough to achieve any degree of self-awareness).
……
But he just can’t see it. He can’t accept the simple fact that people disagree with him for good reasons, not wicked ones. He can’t accept that some people don’t share his affluent, liberal worldview.
….
And it’s this overriding, near-pathological self-certainty that sustains his conspiracism, that allows him to write such a thick, myopic book,
As always, the question is “compared to what?” I agree, entirely, we are more fixed than we used to be. But most fixes are short term here. As opposed to 30 years in the US, 10 years in Germany…..
I like the American term, ‘teaser rate’.
My mortgage was fixed for the first 2 years then went to a tracker, ah ‘you got a teaser rate to get you started’ said my CO cousin.
Must be a growing part of the picture in the USA if they’ve a wee term for it.
Oh you speak the truth BraveFart. O’Brien has all assured wisdom of a 18 year old in his first year at a third rate university. Oxford possibly. Listening to his LBC morning show is sufficient to inspire axe murderers.
Good lad Arif…
Arif says:
December 11 2023 at 3:05 pm
The BBC is a left leaning news outlet but Richard’s breathless slightly deranged marxist rants hardly promote discussion…
+2
Reply
Richard Murphy says:
December 11 2023 at 3:58 pm
The BBC has been subject to extensive research asn is right leaning – hardfly surprising given its leadership
And as for me as a Marxist – I am a centre left, social democrat, charteed accpuntant who is heavily pro the mixed economy
Politely, you need to do some research
He’s a pro – Hamas lunatic who’s well to the Left of North Korea. Of course in line with the total shift of the Overton Window to the Extreme Left he thinks he is in the centre. The notion that the BBC, also well to the Left of NK on things like Trans is ‘right- wing’ indicates a departure from reality.
Bongo,
I don’t know if they pre date it but teaser rates were a big part of the problem that led to the US housing crises in the 2008. Then one year was the norm and they relied on house prices continuing to rise so sub-prime punters could remortgage at the end of that year. When house prices stopped rising and households with massive mortgages they couldn’t afford couldn’t remortgage the house of cards came tumbling down.
Obviously a lot more to it, especially those CDOs but that was one of the straws.
This is a reasonable read:
https://www.penguinrandomhouse.com/books/196113/the-greatest-trade-ever-by-gregory-zuckerman/
and the film The Big Short is based on it in part.
Other countries’ governments interfere with their mortgage markets. The U.S. government famously lets you “refinance” your fixed-rate mortgage at any time, penalty-free. In France the government has capped mortgage rates based on the average rate in the past quarter – which obviously doesn’t work when rates are rising. In the Netherlands, mortgage interest is tax-deductible. And so on. The UK mortgage market is relatively unencumbered.
Tim is right, good luck trying to get a fixed rate mortgage for longer than 3 years. Some very lucky people manage 5, but loads of us I suspect saw interest rate rises coming and will be coming off our fixed rates in the next 12-18 months.
Which makes me wonder if the Bank of England MPC would be able to increase interest rates very much higher. People are much more highly leveraged now than they were on Black Wednesday. Things would get ugly.
In Russia, for example, the interest rate is 15%, but if we woke up to 15% interest rates in the UK, Daily Mail readers would stage an insurrection.
The BBC is right leaning?
Is that why devout leftists John Humphreys, Andrew Marr and ex DG’s such as Greg Dyke state that it has a heavy left wing bias.
You’ve got to love the chutzpa of someone who appears to pick random facts out of his arse , to tell someone else to do some research. If he ever becomes self aware he’ll probably spontaneously ignite. Luckily for him and unfortunately for the rest of humanity that seems to be unlikely.
I’m still waiting for the bank to call and offer an early redemption discount on my 10 year fixed rate at about 1.6%, rather than the early redemption penalty they were so insistent upon.
Brits do not fix for 10 years.
Locally fixed is usually 3 to 5 years and a lot of fixed, I’ve been pointing out that the rate rises haven’t fully kicked in yet and there’s more pain to come, on the one hand only a small number of people are impacted at any time rather than a big hit, on the downside it’s going to take years to work through so going to be feeling effects for a while
When I took my UK mortgage out, interest rates WERE 15%.
If your mortgage is for 25 years and the rate is fixed for 5 years – is it really a fixed rate mortgage?
I don’t think it is to be honest.
Personally I would prefer a lifetime tracker as they are probably cheaper in most cases (I haven’t done the sums).