Renting out Mum's house

[JohnW2]

Inflation has to be controlled. The main method of doing so is to put up interest rates.
When that happens, it's big bust time, as all those with mortgages they can currently just about barely afford suddenly won't be able to afford them.

Although there have been occasional very brief falls in house prices, the trend has always been relentlessly upwards (see first graph below).

In terms of 'affordability', it's interesting that throughout the 20th century, average house prices remained largely unchanged, at roughly 4-5 times average annual earnings, but have risen to not far less than double that in this century.

Unless something truly dramatic happens/changes (in which case we'd probably have greater things to worry about than house prices), I don't think anyone should fear that house prices are going to fall in the medium or long-term.

Kind Regards, John

 

[plugwash]

Inflation has to be controlled.

It is ultimately a political choice to what extent to attempt to control inflation.

 

[JohnW2]

It is ultimately a political choice to what extent to attempt to control inflation.

It is, but, unless one lives in an 'insular' country (which almost no-one does), it's a political choice which has to take into account the need for international trade.

Kind Regards, John

 

[HawkEye244]

Inflation has to be controlled.
The main method of doing so is to put up interest rates.
When that happens, it's big bust time, as all those with mortgages they can currently just about barely afford suddenly won't be able to afford them. Particularly those with interest only arrangements.

True but what are the odds of that happening now seeing as the banks need people to borrow money which creates debt which is used to service existing debt and on and on it goes?

If the bank of England decided to put interest rates up to the point where they sink loads of mortgage payers they would be shooting themselves in the foot. Interest rates also need to be low to entice people into getting new mortgages. The system is built on debt afterall, isn't it ?

 

[Tetrarch]

It is ultimately a political choice to what extent to attempt to control inflation.

This is "was" - not "is"

The mandate to manage the interest rate with reference to an inflation target was given to the Bank of England on 6th May 1997 by Gordon Brown. Any attempt to remove that autonomy would be met with uproar and there is no conceiveable way that an electable UK political party would try it.

Regards

Tet

 

[JohnW2]

It is ultimately a political choice to what extent to attempt to control inflation.

This is "was" - not "is" .... The mandate to manage the interest rate with reference to an inflation target was given to the Bank of England on 6th May 1997 by Gordon Brown. Any attempt to remove that autonomy would be met with uproar and there is no conceiveable way that an electable UK political party would try it.

As you quoted, plugwash didn't say that decisions about changes in interest rates were political but, rather, that the decision as to the extent to which efforts should attempt to control inflation is a political one.

I may be wrong, but I thought that was still the case? In other words, is the "inflation target" which the Bank of England is expected to try to achieve not a political decision?

Kind Regards, John