Any hope of a near-term drop in interest rates appears to have been wiped out by a statement by Bank of England governor Andrew Bailey.
In a statement to a north of England news service, Bailey says the UK economy's potential to grow is “lower than it has been in much of my working life.”
Last week the independent Office for Budget Responsibility - in a statement issued at the time of Chancellor Jeremy Hunt’s Autumn Statement - said that while it expected the UK economy to grow by 0.6 per cent this year, the outlook for the near future was not as good as previously predicted. It cut its growth outlook to 0.7 per cent in 2024 and 1.4 per cent in 2025 - down from previous forecasts of 1.8 and 2.5 per cent.
Bailey told the Chronicle Live website: "I recognise higher interest rates do have effects. They do have effects on mortgage costs, and they also have an effect on rental costs because they feed through. What I would say, to be honest, is that if we don't get inflation down, it gets worse."
"I've very much used this analogy of a game of two halves. They're not equal but a lot of what we're seeing at the moment, including that inflation came down a bit over two per cent, and that's very good news, is the unwinding of these inflationary effects of these external shocks.
"I'll make a distinction between the inflation effects and the cost of living effects because the cost of living effects are important but that's the sort of price levels, and I recognise they're still high. Inflation coming down stops them going higher. We're going to see some more of that unwind effect but we're not going to see another month, I'm afraid, where it's going down two per cent because of that. A lot of that's on the Ofgem methodology on energy prices.
"By the end of the first quarter next year, when a lot of that unwind will have happened, we may be a bit under four per cent but we'll still have two per cent to go, maybe. And the rest of it has to be done by policy and monetary policy. And policy is operating in what I call a restrictive way at the moment - it is restricting the economy. The second half, from there to two, is hard work and obviously we don't want to see any more damage.
"I'm very conscious of the position of the less well off but we do have to get it down to two per cent and that's why I have pushed back of late against assumptions that we're talking about cutting interest rates or we will be cutting interest in anything like the foreseeable future because it's too soon to have that discussion."
The Bank has raised interest rates on 14 occasions in recent times in its attempt to tackle rising prices, which have soared largely due to energy and food costs increasing in the aftermath of the Covid pandemic and Russia's invasion of Ukraine.
Interest rates are currently at 5.25 per cent, a 15-year high.
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This is not really news 📰, I have factored this going on for many years.
With you on this Simon, all my budgets done on 7.5%. Getting the mortgages on 5 year fixed before all this kicked off last year shields me from some of the pain.
Bailey on his political rant again, a lot of the issues are actually down to the BoE not reacting quickly enough.
We thought Carney was doom and gloom. Has Bailey ever made an accurate prediction?
Mortgage rates are no longer high but near long term averages & we have often had periods when inflation was well over the Govt's target furlong periods. Everyone needs to get used to it!
I can’t recall a time when the inflation rate has ever hit the Gov’s target!
Mortgage rates may be near long term averages but house prices went up to match monthly affordability of much lower rates.
Now either house prices have to drop (unlikely it would be enough to fully regain a balanced situation) or wages have to rise or people have to get used to spending a far higher percentage of their income on housing.
It certainly bakes in annual rent increases for the foreseeable as we try to cover the massive mortgage increases we have had this year and prepare for ones coming up. Section 24 makes a bad situation a whole lot worse.
So to Mr Andrew Bailey its a game to us its very serious and you can’t say inflation is separate from cost of living although I would say putting up interest rates causes inflation instead of controlling it.
What’s missing here is all the other issues that’s ignored and not factory in. Removal of S.21 the introduction of S.24 the huge costs of licensing and Compliance the different Regulatory and Tax treatment of Private landlords as apposed to Corporate and Institutional landlords who are given an unfair advantage and are only recent arrivals. We built the Business that they want and we are now frowned upon.
Interest rates rising suddenly within 12 months, about 14 times would hurt both the occupiers and btl owners, even when this have been factored in. It is not just high interest rates, also the costs of maintenance to add on. The workmen have suddenly put up their costs, partly after covid and partly high rates affect them, as well. So for LL's have costs to contend with and loss of s24. I have managed to fix most of my mortgages to less than 3% for 5 years and pay interest only so I have some left over to pay off my residential mortgage within the next 9 months. I would like to sell 2 properties within the next 18 months, when they get empty. I am not sure, whether it will sell for the price I want, though similar properties for sale in that location tells me, they should sell for the price I want. I might smarten them up after the tenants leave. This needs cash, though.
Yes, half decent tradesman now command a £1000 per week, which equates to £200 per day.
This is almost double the figure that I used to pay.
I was quoted £3000 for plastering which would take less than 5 days.
I put up £100 worth of heavy duty
Iining paper instead, taking 3 days to hang it and 2 days to emulsion it myself.
A plasterer expecting to earn £150k pa.?
Beats studying to become a brain surgeon!
Good lord, a £100 a day. That’s barely minimum wage for a tradesman! I think £200 a day has been about right for the last 5 years.
I was down visiting my son in London and Pimlico plumbers/joiners and even the estimator is £136/hour.
£1000 a week for a proper tradesman is not unreasonable. I know a joiner who’s van insurance is £1200, tool insurance £1000.
£52000 a year before costs isn’t an astronomical wage.
£100 a day is a very distant memory. Pre COVID it was around £175. Now it's at least £225 for someone decidedly disappointing. The most recent carpenter I used was £225 a day. He would turn up after he'd done the school run, spent half the morning on his phone telling people he was fully booked for 3 months, took his wife to work at lunch time and then wanted to do the school run again at 15:15. I'd booked him for 10 days but he only turned up for 7 so we finished up doing half the job ourselves. The quality of his work was appalling this time whereas 3 years ago he was very good.
The ability to earn £50K+ is absolutely standard for construction workers if they work full time.
I don't believe tradesmen are on £200 a day, I think the new ones might be and the ones that work for the big companies probably. But self employed appear to be on a lot more than that. Recently I had a quote from window fitters for 4 windows, ground floor. One to one and a half days work 2 man team. They quoted £3760 windows cost £985. Needless to say I did it myself. I know a kitchen fitter whom also qualified as a sparky in 6 months is easily on £2000 per week.
They are all Limited Companies, and whom can blame them!
I agree 100% Andy, I was just trying to flag up that £200 a day is by no means a lot/expensive now.
I heard that brickies in some highly active areas (Manchester) are on £2/brick and some can lay 500 A DAY!
"some can lay 500 A DAY! " - not even the best hens can match that!
Sorry, but I couldn't resist.
This is why we have to do as much of this work ourselves at least we turn up on site before 10 am
As for Andrew Bailey, he has contributed to the problem. He should never have allowed rates to go up the last 2 times they were raised. We would still have the same inflation.
I do think though where we now find ourselves we need to stay, otherwise sends the wrong message.
This bluster he is coming out with is just bluster, rates will come down in the Spring, but not by much. If I was a betting man i'd say 4.75% going into the Autumn next year, we need to encourage the economy and the rates right now, though not historically high are not helping.
The housing market will improve for sellers as lenders will drop their rates as longer term they know, on the current forecasts that it is now a downward trajectory.
Lenders are now saying they have cash they need to lend, otherwise they’re not trading.
Andy very good congratulations. As it happens I replaced 5 No. PVC white DG windows with Rosewood Cills, fire escape hinges, trickle vents & Child catch restrictors, replacement windows for Aluminium dg windows that had hard wood frames and had served their time really all
1800mm x 1200mm over 3
Floors. Not a problem as all work done from inside including internal glazing with those Euro Cell Units, although you can’t go ahead of yourself and have to do the foaming (takes time to cure) & mastic prior to installing the double glazed units. I think your units were very reasonable I expect to pay double that + vat for quality. I could have left the hardwood frames but for aperture dimensions restrictions and the need to comply with 600mm fire escape openings. The work didn’t end there all the old one and glass has to be got rid of. Yes you could pay £200. pd in London or even for a couple of hours if it’s a call out.
Responsible landlord, £2. a
Brick that’s why they have gone back to rubbish cladding and in the 60’s & 70’s a Brickie wouldn’t be kept if he didn’t lay a 1000 a day on facework.
Don’t forget to factor in the Brickyard labourer the cost of laying the Brick has to cover him as well 👍
I think £2500 a week should cover that ok!
Worth every penny better than the high rise I see the black clouds of smoke coming from in Reading.
Absolutely
Good rescue though and who could not love Glen the crane operator for telling the media to do one. Just loved it. Not forgetting the lads on the ground as Glen could not have done it on his own.
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