Why Aren't Interest Rates Dropping?
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- Опубліковано 31 січ 2024
- The MPC announced today to hold rates and gave insight into when we can expect them to fall.
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0:25 Six voted to keep the rate, not three! There are nine members of the MPC, and the votes were six to hold, two to increase, and one to cut. I rush to get these videos out same day and missed this mistake in the edit sorry!
Food inflation is certainly going to rise from today´s import border checks...I am not convinced rates wont go back up.
We will forgive you on this occasion 🤓
Ah yes but... It's an easy mistake to make. In fact there used to be six. In fact there were six this morning. They'd gone up to nine by this evening. Inflation is that pervasive.
@@mikerodent3164 🤣🤣 I wish I said this
Fingers crossed they go up again!! we need delfation!
@@chriswills9437
The fact the government had an entire decade of low interest rate loans where they could have done huge investment in housing, technology, transport yet instead did nothing, is very depressing. Almost as much as how much money we lost, by not setting up a sovereign wealth fund like norway did with it's oil.
Edit : saying Norway population is smaller is a revelation to nobody it is worth £1.15 tillion, it is nothing to dismiss. Let alone the fact it is our oil.
I often think about this… the wasted opportunity to level up the country.
Instead we just got promises of a northern powerhouse that never happened a cancelled Hs2 and years of bickering over Brexit.
Dunno if this is useful info to u but Norway is part of the BRICS now too. So is Saudi Arabia as of late. Means like 85% of the worlds oil production is now all in the BRICS. Make of that what u will 👍
Tories are out, they’re done for
@@DamienTalksMoney not a waste for the politicians
politicians keep on stacking paper while the electorate keep re-electing them to break even more promises. I can't quite figure it out, must be a fetish or something
It's worth noting that Norway has less than 5 million people. So, its 50% share of North Sea oil was worth so much more per head of population than the UK. To compare our situation with theirs is a distortion of the reality that we faced as a nation.
I'm a simple man, I see Damo, I learn something new, then I click the 👍
Legend thank you!
@@DamienTalksMoneyyour channel deserves more mate, best finance channel on UA-cam, especially for Brits. 👌
I don’t need an emergency fund. The government will bail me out. Oh no I’m not a big business, crap.
Rishi has just donated 2.5 billion pounds of taxpayers money to Ukraine which could end up in pockets of fraudsters instead of donating weapons, materials and expertise.
F
Firstly 40% on benefit are in work
Were currently having to spend 20 billion on housing support because we don't have enough social housing its been asset stripped and average wages have declined since 2010 by -7%
and
Secondly a robust social safety net reduces income inequality lifts people out o poverty and is benefit to the economy not a drain @@Hustwick
@@Hustwick I was on benefits at one point, it is not all sunshine and rainbows that everyone thinks it is. Especially if you are single
I was about to say that bailing big business out is also bailing you out if you're employed there, but then I remembered that quite often the bailouts imply lay offs. Since you lose your job either way, maybe there shouldn't be any bailouts.
'I don't want you to be one of those people' You're a top man Damo 👏👏👏
Hi Darren! Hope you are good mate.
Thank you as always for watching
Real people watch these videos and yeah I want them all to be ok and to navigate this period well.
I spoke with and Egyptian today ( I have a place here out in the desert) she said she works for Tui call centre. She asked me " UK in a problem? Many people are calling the help line saying they cannot afford thier booked holidays as they have lost thier jobs"
Wow!! This is very telling anecdotal evidence
@@DamienTalksMoney I lost everything in the 89/91 crash. Bought a massive house in London - was 23. Did 10 years of negative equity. I sold last quarter of 2007 as was all the same signs. Read Fred Harrison after I had worked it out. He predicted both crashes to the quarter years before. He recons now will be 2026. Best way to know if recession is coming is ask a London cabby if business is good. If he says yes, there is no ressesion. If people have stopped getting cabs as they can get the tube, you know it's arrived :)
Sht I work for another UK tour operator. So far business seems good but I am worried for 2024/5
This country is a nightmare.
I've taken on a second job and as a result I'll be around £4K over the upper rate tax limit.
That £4K will get taxed at 40% AND I'll have to pay back around 40% of the child benefit my wife gets for our two boys.
She doesn't work, so we are not a 'high income' household.
So punitive.
If you can, put the extra money in your pension, that way you don’t get taxed on it.
@Ecomongery cheers - that is what I am looking into. Just annoyed about having to dip into my emergency fund to do so.
The middle classes of Britain will get fucked over, over the next 2 years.
Check what your taxable income is (I.e. what you can subtract for any current pension contributions) then just pay in enough to your pension to keep you below the threshold.
@@Ecomongeryyou do get taxed when you take it out though so not really goood
Asset stripped and sinking gradually back into the sea. An absolute shambles of a country.
When you’ve sold even public services like fucking water supply to foreign investors you know your government is a shit show.
Unfortunately I've been told I'll be made redundant in April. However, thanks to learning bits of personal finance. From My education and watching you, Damian. I've found myself with an emergency fund and a fairly sized portfolio. Which eased the pressure on myself, allowing time to look for a job I want to do.
So thank you for your content 🙌🏼💪🏼
You should be so proud of yourself and strong/empowered to search for an employment/self employment that deserves u
"venus aligned with mercury" love it haha, should have mentioned mystic meg :) keep up the great work bud, really enjoy your down to earth videos
I'm British, moved to Japan in 2015 aged 30 and I'd never consider moving back. The standard of living is really quite low for most people, I just never appreciated it until I emigrated.
As a person studied in Japan and lived in Asia for decades, living standard is quite low here, even I am in London.
I lived in Japan for years too. Eventually the lack being able to read and write to the point I could help myself rather than rely on the good will of others got to me, as if I was handicapped . That and the false flattery and cynical attitudes and I worked for a MNC not a teaching job personally - would I ever consider going back there no chance. For me the best place to work in Asia was Singapore but to live Thailand
Homogeneous society’s are the BEST.
England imported the third world and has now become the 3rd world. If your cities are swarming with Bangladesh and Somalia then don't act suprised when the country goes to pot.
'Loosening the labour market' will do nothing to lower the inflation when an average UK wage is under £15/hour anyway.
So much of UK economy is now minimum wage that there's simply nowhere to fall.
I would love to know what percentage is minimum wage work
@@DamienTalksMoneyMore importantly median salary is 27k, £13ph assuming an average of 40 hour weeks.
I tried to research with my class why a 2% target, never heard the NZ story.
@@DamienTalksMoneythe new minimum wage of £11.44 works out to nearly £24,000 on 40 hours a week, so that captures quite a lot of the workforce who are just below the median salary
Great video dude. Thanks
Thanks for putting the BOE descion into perspective... keep this up and your analysis shared with us all
Fantastic break down and sound bites.
Damien, you are always on point with your video's, thank you for what you do!!!
Thank you so much for watching them!
Damien thank you for all your help.
This is really telling. Definitely need to up my skills and have a plan B incase I get the boot. Thanks Damian x
I was once put 'at risk' of redundancy a few years ago, its was one of the hardest times of my life having worked for 20 years. with the same company. I would have received a decent pay off but many there wont. I defo agree, if you can, have an emergency fund and cut out any waste i.e subscriptions etc., do it. Do you really need Netflix, amazon prime? Luckily for me I found a new role within the same company but for 3 months, I couldn't sleep.
I’ve been through redundancy at a few companies, and the “consultation” exercise was nothing more than ticking the legal requirement boxes regarding meetings and timings of passing on information.
Stress levels go through the roof when I was younger wife 3 kids house debt etc you can imagine the worry.
Too often politicians/ media people will talk about financial needs and what should be done without any thought to the impact on people. Most normal people don’t have access to mates who can steer them to consultation positions, paid seats on boards or commissions. Look at a lot of MP’s and those who leave politics and the roles they seem to obtain.
I’ve recently retired 2 years early after another redundancy finances are OK, but I have ten years left on my mortgage with 3 years of a fix still to go, so hopefully by the end of 2026 we will see rates a bit lower.
That is happening right now in my company :( I suspect it will happen in plenty more this year.
@@MightyDrunken good luck, I know that the consultation period can be slightly longer depending on age ( I was over 60) although the bummer is the agreed 1 1/2 weeks wages for every year has a maximum compulsory limit about £600 a week, (30K year) it’s then at a companies discretion if they pay more than this. One of mine a multi billion dollar turnover company paid the minimum. I don’t buy their oroducts unless I have to
Unfortunately redundancies will become the norm over the next 18 months.
Sometime redundancy is a good thing.
Nice one Damien I’m definitely focussed on building that emergency fund we’re in for some tough times in this country…
hey I really like your take on these subjects, and the light way you present it with little jokes. great at explaining! Keep doing what you do😊
Thank you
Nice one 👍 especially the emergency fund advice. But i appreciate not everyone is in a position to do so .
BoE sources: "trust me bro", "it came to me in a dream", "we made it up".
It came to me in a dream is hilarious 😂
Thanks Damien, a really great video that was really well explained and offers very sound advice. You are doing a real service for people.
Very good advice here!
07:30: "This is America". It happens all across the western world. If I were a manufacturer of consumer goods, I would consider production costs and local wages. Within the EU, it happens that businesses processing food tend to relocate from countries like Germany to Poland, because the wages in Poland cost them less. Hence, they can sell more in western countries because they wouldn't have to increase much their prices in accordance to western wages. Inflation is higher in the eastern part of the EU, but given the wage disparity, a small increase in the west has a higher impact.
Making it up as they go along.
Damien, thank you for consistently delivering fantastic, insightful and quality information. Thoroughly enjoy your content!
Thank you so much James mate!
Excellent content 👏🏽
Positive video Damo. ❤
Premium bond rates have dropped to 4.4% from 4.65% at least somethings dropping....ohh not good
Another great, honest video. Thank you.
Thanks for for always watching!
I love your videos Damien they’re so informative and educational. I wish you had your own financial media studio you could educate the country to be smarter and better with their money and actually promote REAL economic data and how to interpret it 👍❤
Thank you so much for this lovely feedback
Can we get an update video on your personal portfolio
The most annoying thing for me is that we know that current inflation is not caused by people spending too much and too much money supply. It is caused by supply chains and profits. Something high interest rates do nothing about. They are bashing a square peg into a round hole and we are all getting splinters. Yes the bank of england has limited tools and not one tool to deal with the current issue, it should therefore petition the government to change policy, instead of punishing the average person, who is also being the most effected by inflation (obviously the poorest in society the most).
Prices stop rising ( in some cases at least) when people stop simply paying the bill and asking the boss for a rise simply because their money is diverted to paying their mortgage ( in some cases) which isn't included in inflation calculations, surely the idea being to stop people and businesses just keep passing the parcel on prices as demand for goods / services drops off.
@@nnnn-mn8ud but the biggest payments people have a month is food, housing and heating, you cannot, stop paying for them because you'll d ie. Your concept only works when people have an over abundance of money and are just throwing it overheating the economy.
@@nnnn-mn8udMortgage costs are included in the CPIH - The consumer price index plus housing costs. But the headline rate is only a aggregate rate. Individually, you will have your own personal rate of inflation depending on the goods and services you buy. If you were on Universal Credit, your rate of inflation would have been nearer 20-to 30%,as poor people spend more of their income on essentials. And as shortages due to geopolitics and climate change are only due to increase, inflation is here to stay. And the real price of money is being paid. With Zero-rate Interest Policy, it was a coordinated effort to rebuild banks balance sheets after 2008. It was a subsidy to the banks. Cutting interest rates so low created a false impression of the real cost of money, and that means the price has to return to normal eventually as the financial system wasnt repaired. Its still broken. All we've got is a lot of debt and not much to show for it for ordinary people.
I disagree - plenty of tools at the Bank of England!
@@aktolman such as...
I set one of my by to lets on a 5 year fixed deal, due to the amount id save over the first 2 years , that will ofset the difference for the rest of term
Thanks for the video. Your end messages rang all too clear today with my wife being told she is being made redundant. Absolutely devastated. We're in a relatively good financial position with emergency savings but we've both been investing hard for years to help come retirement so cancelling those direct debits today nearly broke me. Sickeningly these rate hikes seem to disproportionately impact people like us who need a mortgage and occasionally loans while those with stacks of cash are enjoying the boost to their savings! Stay strong all❤
I am so sorry to hear you having trouble at the moment. Thank you for sharing this. I hope you find the financial security you deserve and that your partner finds work soon again.
What short memories you have. For years property owners benefited from low mortgage rates & higher property value while savers who are trying hard to get a deposit were penalised with awful interest rates.
@@Mute040404I can assure you I recall it just fine. I also went through the pain of saving up for a deposit in a low interest rate environment while renting before finally buying in 2016. You have my sympathies, no doubt it is even harder now due to inflated house prices. It is fair to say my slight envy is not directed at those trying to get on the property ladder. We all know someone with no mortgages or loans that are just reaping the benefits on their vast savings pots! I hate that I think that way as it makes it an us vs them scenario when in reality they haven't done anything wrong! It just seems to me that the group being hit hardest by this is the group that can least afford it!
@@watk-qx1mk don't need to preach or willy wave to me pal. The debasement of currency since the world came off the gold standard and the practices that fiat has allowed has caused significant damage to personal finance and will continue to do so into the future
For 15 years savers have lost money year after year. Anyone who didn't follow the governments lead and run their lives on credit, have been heavily penalised, and remember 5% is still fairly low. There have been times when rates were at 15%.
Postive vibes!!! 🎉
All a conscience of a debt based economy and the debasement of the currency, keep on stacking 👍
Thank you Damien for impressing the importance of an emergency fund. My greatest fear in 2020 wasn't the disease but the social impact and the economic fall out especially in the following years. I'm fine, I've always been a good planner cause I started my first finance job after the 1990s Australian Recession, saw the fallout from tech bubble, 911 & GFC but I do worry for my colleagues, neighbours, friends and family who are already struggling yet aren't confident they can turn it around.. people need encouragement & faith in themselves.
Rates aren’t high enough to combat inflation. Something will need to break before rates drop. In other words, need large layoffs to bring down inflation.
Inflation is the creation of money
When Venus aligned with mercury haha, good one
The 0.5% base rate was the abnormal rate thanks to the 2008 “Great Recession”. 3% is back to the norm
Totally agree with you that interest rate predictions cannot be taken seriously... last financial crisis when we were supposedly heading for a credit crunch, logic would suggest that rates have to go up to attract lenders. Nope they just drop rates to zero.
I just don't see the interest rates going down much at all this year if any. The one good thing that's happening with the interest rates increase is that people coming to the end of their mortgage deal are paying down their mortgages. Santander in their results announced overpayments are up 78% v 2022.
Great video as ever, even if its still a little bleak 😢 .. looking forward to the positive vibes !!
I’m coming in with a proper feel good one haha
At 4:30 you said "by 2024" when I think you meant "by 2027"
They have one master the star
Lol when Venus aligned with Mercury. Oh that’s crazy. 😂😂
9:03 no worries. Thanks always for your point of view and good advice. Yes. Things could be getting bad soon. We need to be prepared. A new bank crisis is ahead, so we'll see...
We need a market correction across the board
the world’s view of interest rates and inflation are some of the most unscientific quirks in modern neoclassical economics
top man as usual, the ramifications are yet to be felt. I see ppl around me losing jobs and mortgages renewals are due which are a dangerous combination
Very dangerous combination… could spell a bit of downwards pressure for the housing market
Central banks 'appear' to be able to control interest rates just by making declarations. But it is not that simple. They cannot just say - we'll set it at x%. They have to buy/sell in the market to such an extent that the interest rate 'self' adjusts. If a foreign entity will not buy what your selling, the commodity = money, with say a 3% rate, then you will have to offer it at 4, 5, or 6% to make it more appealing. It can be very expensive to lower the rate and a bank can just - not afford it. If your currency becomes unattractive, because the govt. overspends causing massive inflation, then no one will want it internationally... except at higher rates. Thus, the one main way to address the issue is to tell govt. not to overspend = balance the budget.
Core inflation lags CPI usually by a year or so. Therefore if central banks keep interest rates high, after cpi is clearly back to pre covid lows, just because core inflation hasn’t dropped in lockstep, they will probably cause a depression and the decision will be out of their hands, they will be forced to cut
It's the same as always they're always too slow to react either way. Great for people with liquidity right now.
I wonder what the price of Marmite is in Birmingham? A friend asked me.
It's worth about 15 minutes, if you catch my drift.
Still historically low
regarding mortgage rates. Mortgage rates are generally higher than the base rate. We are in a weird time at the moment as rates drops are expected so mortgage rates are actually lower than the base rate. In the future if the base rate is 3% or 4% and expected to remain there for the medium term don't expect mortgage rates to be lower than +0.5% of the base rate. I would consider this in my calculations. When I ran the numbers based on the best 2 and 5 year fix I could get, for the 2 yr to be a better option my next 2yr would have to be 3.5% or lower and I see this as the best scenario in 2yrs so I was happy to fix for 5 yrs. This is not advice just something to consider. Also remember you may need to pay multiple product fees by taking lots of short term deals which can increase the costs a lot.
I swear short term fixes are there for the banks to boost profits via product fees
Commercial banks source funds for mortgages from money markets, swap markets etc. The interest rate is usually lower than BoE base rate..at least now.
I like you, and you sincerity.
Thank you John! That means a lot.
I heard 2% is about the ammount of gold that gets mined and added to the global supply
That would make sense if the dollar was still Gold backed but it's not. Fiat currency is essentially a Ponzi scheme.
Correct. Lots of central banks are loading on gold like mad….it is your asset and nobody’s liability. It seems they lost faith in paper money & assets. Something is brewing….
Why does it take 9 of them? They got it badly wrong a few years ago and lost control of it
Thought you might have mentioned the IMF warning to not cut tax rates in the next budget.
Its pretty obvious you can't cut tax when you borrowed 130 billion last year & interest rates are 5%
With geopolitics the way they are, not a chance will inflation adjust down. Do the BoE even look at energy costs? This is not demand driven.
The 2% inflation target being as ''the optimal'' came back before the fractional reserve banking system takes over and reflects the inflation rate of Gold. Back when governments where pairing the value of their currency based on the amount of GOLD they were holding
Fees for services need some inflation, they have been left behind while everything else has gone up.
What has the butterfly effect been due of the short premiership of Truss? Capitals markets had a minor catatonic episode.
Selfishly, having no debt and FINALLY having the ability to save, albeit minutely, for the first time since i left school 27yrs ago, i'm enjoying the high interest rates as i save up my emergency fund
Surely it's our reaction to the shocks which caused the problems.
These are not high interest rates they are normal.
I personally think part of the reason we are in this situation is because of the low interest rates set by the banks, for billionaires it's just a way to borrow billions for free and buy all everything up using it like houses, and all the land the big house builders in the UK which they just hoard. Any land I used to see up for sale just sold instantly, I would love to build my own home but I don't see any house on those pieces of land that sold even though a lot of them already had planning permission for houses on them.
The cat is not amused
As a saver, The 5% (3% I see) would mean that I could retire if the interest rates stayed where they are. At the moment my interest would cover my monthly bills. Without interest rates at 5% I dont see how I could ever retire.
Interest Rates are not elevated at the moment, i would say they are relativity low going by the track record of the last 40 years. The root problem is rates went far too low making money easy to borrow thus house prices went up as a result of price discovery. I understand that higher rates hurt but we need them higher to force house prices down to make repayments sensible. Money has to cost more for the free market to work or we will stay at home and do nothing while the money comes if for little or no effort.
Still happy that I went with a 5 year fix at 5.3% in September
Yeah I see nothing wrong with locking in a fixed rate deal you know you can afford.
Hi Damien i think we need a market correction across the board. I do think certain sectors should be protected such as steel where we night need products or resources in the future if a war broke out, which could be a possibility.
ive noticed an uptick in redundancies in the news. Ive taken it as a sign that we need to build up a savings pot to create a buffer because i dont think my job is secure.
I am sorry to hear your job is not secure but you are doing the right thing. Well done
That was a very factual, sober assessment, avoiding sensationalism, which is very much appreciated. One question: Since rates are still below their long term average, why would a rate increase cause a significant increase in unemployment?
Because zombie companies that aren't profitable or debt ridden will end up failing. If you read the news businesses going bust last year was the highest since 2011.
With so many prices set to rise each year
In a baked in inflation such a broadband with a CPI+xx% surely more rises will increase in the coming months
BOE incompetence is outstanding, they are more likely to slam the UK echonomy to being stagnant for an extended period of time. 3% inflation is perfectly managable and we would get positive growth with wage growth.
Thank you Damien for saying what BoE skeptical skeptics have been claiming for years, which is that they don't have a better understanding of the economy than the rest of us and are just muddling their way through monetary policy.
This is evidenced by how their Interest Rate decisions are made retrospectively, based on recent historical data, not predictive models.
BoE have got the inflation predictions wrong so many time, bit optimistic.
You don't really have to wait to see what the BoE has to say when the monetary policy committee make a statement. Just look at what the FED has said and it will ultimately mirror them.
Hey Damo,
Would you consider a video about high income child benefit charge? More and more people are falling over the HICBC. Demonstrations on how to reduce your adjusted net income would be brilliant.
Regards
I’ll like to see them high for longer so i can get more return on my savings at lower risk
First time house buyers are waiting until rates reduce which will caise even more issues shortly
The government and the BoE believe rising interest rate controls inflation, when it actually stokes inflation by increasing borrowing costs for householders and businesses. They would do better by reducing or holding energy costs. Instead we have seen steep increases in costs and taking money out of peoples pockets to spend in the shops, thereby increasing the risks of a recession.
Borrowing money at a higher interest rate is not part of the inflation calculations.
The problem right now are the "external factors". People will always point to money printing but with concerns over oil, grain, shipping, increased war activity etc etc. You want a strongish pound to keep import costs under control.
Problem is our economy relies on real estate and the banking sector, both of which need lower interest rates. We be fukked.
Interest rates don't effect inflation enough as too many properties are owned outright. Fiscal policy must be used against inflation.
Should I fix or stay on SVR mortgage now?
Fix. And remember to breath.
There are 9 voters on the MPC, not 6.
More austerity after austerity.
What austerity? Did the guardian tell you that. Look at government spending. What austerity.
Inflation is tax. Built-in.
even if they know something they will not share it with us but it looks like they know s...
I think the fact that the country/government has absolutely no control over inflation is the issue.
Read this as there is more chance of rates staying the same or increasing. The alternative way to read this is... The BOE have no idea what they are doing
Why would you remortgage now instead of when the interest rates have gone down? Genuine question, I'm not trying to be confrontational. I would do the opposite and you understand this better than me, that's why I'm asking
3-3.5 is where it will be long term.
It's not inflation, it's speculation!
I tell you one thing for free...I'm glad my investments are all ex-UK. With my house and my job being located here I already have more than enough exposure to the UK economy.
Amen … I remained overweight for home bias but now shifting the other way!
I would go even further and say the whole of Europe is a joke. It cannot decide if it wants to be a socialist welfare society or a capitalist one. What is clear is that it cannot be both… you cannot tax to death the wealth creators to hand out to the inactive as eventually you run out of cash!
Ex-UK and Ex-Europe is the way forward for the next 2/3 decades!
I'm no expert but seems with savings the last couple of years has been the best for ages with interest rates so I'm happy whether I'm better off with rising costs who knows.
I have wondered why people accept a 2% inflation target and not a 1% or 0. I know why they don't have a 2% deflation target, and say any deflation is bad. They need to keep the government debt manageable, and that 2% inflation gives them easy money to spend. maybe that's the only reason why they target 2%.