ChatterBank0 min ago
I'm No Economist But...
42 Answers
I don't see how ramping up mortgage rates for a few, which might filter through for some as increased rents, will reduce inflation.
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Andrew Bailey on half a million says those on low pay must not get more
BoE chief blames 'unsustainable' pay rises after interest rate hike https:/
BoE chief blames 'unsustainable' pay rises after interest rate hike https:/
An example for you, Hoppy:
One of the factors that's been pushing the inflation figures up recently is the healthy market in second hand cars. If people can easily borrow money to buy them, dealers can keep pushing their prices up. If, however, people struggle to borrow money at affordable rates, there will be less demand for the cars, forcing dealers to hold or drop their prices in order to get any sales.
It works much the same for anything else that people tend to borrow money for, such as home improvements and business expansions.
One of the factors that's been pushing the inflation figures up recently is the healthy market in second hand cars. If people can easily borrow money to buy them, dealers can keep pushing their prices up. If, however, people struggle to borrow money at affordable rates, there will be less demand for the cars, forcing dealers to hold or drop their prices in order to get any sales.
It works much the same for anything else that people tend to borrow money for, such as home improvements and business expansions.
Yes but, like everything in economics, the only people who really suffer from economic policy are those with the lowest (disposable) income. If you don't have a mortgage, or any other type of loan, then rising interest rates make no difference to you. On the contrary, if you have substantial savings, then they are of huge benefit to you!
It's similar to the negative equity that used to be everywhere in the late 80s / early 90s. Negative equity makes it difficult to sell your house but, if you don't want to sell your house, it makes no difference whatsoever to you, so long as you can afford the monthly mortgage payments.
Of course, it's easy to say that raising interest rates means that the rich get richer and the poor get poorer. That's true to a certain extent...
It's similar to the negative equity that used to be everywhere in the late 80s / early 90s. Negative equity makes it difficult to sell your house but, if you don't want to sell your house, it makes no difference whatsoever to you, so long as you can afford the monthly mortgage payments.
Of course, it's easy to say that raising interest rates means that the rich get richer and the poor get poorer. That's true to a certain extent...
...and further to chico's answer if existing debt costs more to service then less money is available to spend on other things. Thus we have sellers of goods and services chasing less and less money so they will reduce their prices thus inflation is curtailed. It doesn't happen in 5 minutes of course all this takes time to filter through.
