Mortgages and The Bank of England

The Bank of England has twice forced interest rates up and pushed the prices of government bonds down sharply in recent months. The first time was around the time of the Kwarteng budget, when the falls in bonds the Bank caused by announcing a large sales programme and hiking Bank rate were made worse by the excess holdingsĀ  of such bonds through special fundsĀ  that pension funds could not afford to own outright. The falls in bond prices ledĀ  to the need for someĀ  pension funds to sell more bonds to raise the cash to cover the losses and cash calls on the LDI funds.

A government bond is a savings instrument. The government borrows say Ā£5 bn for 5 years. The people who put up the money are promised a payment of say 4% a year on the money. So if you lend the government Ā£100 you would get Ā£4 of interest every year for five years and would then get your Ā£100 back. If you want your money back earlier you can sell the bond on to someone else. If interest rates have risen since you lent money to the government the price of the bond is less than you paid for it, so the buyer will get a higher return than you were getting. The government will carry on paying Ā£4 of of interest and will repay the Ā£100 to the new owner.The new owner buying at less than Ā£100 will get a capital gain on repayment of the full Ā£100, and will get a higher interest rate than 4% as Ā£4 of interest is more than 4% if the cost of the bond has dropped below Ā£100. Buy the bond for Ā£90 and you get 4.44% interest for the rest of its life, and a Ā£10 capital gain at the end.

In recent days we are living through a re run of last Autumn. The Bank is persisting with a large sales programme of government bonds it bought up in 2020-21 and earlier . It continues withĀ  clear signalling it wants interest rates to go higher . The Bank has the sole power to decide what Bank rate should be, the rate that controls the interest rate on overnight borrowings and deposits. The power to decide the price of bonds is shared with the Treasury, who have to sign off on Bank of England bond buying and selling, and who have to pay all the losses on sales.

The rate of interest a saver can get on a 2 year or 5 year government bond depends on the price of these bonds in the market. When the Bank wants the 5 year mortgage rate to go up it can sell bonds to get their price down, as well as talking the market down. Banks and Building Societies offering 5 year mortgages will set a rate related to the latest government borrowing rate in the bond market.

As my recent PQ revealed, the Bank so overpaid for government bonds when it built its huge portfolio that it may now incur losses of Ā£49 bn just this year on holding them and selling some at very depressed prices.Ā  It would be a good idea if the Bank got to the Bank rate it thinks it needs this week and stays there whilst inflation come down. It should also stop selling the bonds and making such huge losses which taxpayers have to pay. Mortgage holders are facing enough pain without the Bank trying to force up the mortgage rates even more.

74 Comments

  1. Mark B
    June 20, 2023

    Good morning.

    The thing that I would like to know is, with all these extra people in the country supposedly paying taxes, NIC and ENIC, why does the government need to borrow any money in the first place ?

    1. Cuibono
      June 20, 2023

      Yes we should be thriving what with all the new enterprise and entrants into the professions etc.
      Is it more likely that a country of many ethnicities is less likely to rise up against a detested government?
      Again just another aspect of ā€œdivide and ruleā€.

    2. PeteB
      June 20, 2023

      Mark,
      The thing I’d like to know is why nobody will ever focus on the pain and lost value that savers have endured over the last 10+ years of negative real returns?

      1. a-tracy
        June 21, 2023

        The people of choice to pay for the banking crash of 2008, those with the deepest pockets and all, let’s grab their ‘unearned income’ from savings they’re having to hold because pensions are underperforming and we don’t all have final salary pensions. When Labour get in, they’re promising more punishment because their unionised defined benefit pension-protected workers don’t get hit by it.

    3. Gabe
      June 20, 2023

      Well they just low wasting it. Especially if some of their mates benefit directly from this waste and/or corruption!

      1. Gabe
        June 20, 2023

        just “like” wasting it

    4. Narrow Shoulders
      June 20, 2023

      Ssshhhh don’t you know they contribute more than they take except when you factor in infrastructure costs, health and education and the indigenous workers displaced (voluntarily or involuntarily) by their presence.

      Net zero is neither cheap nor productive either, especially with a growing population from warmer climes.

    5. Lynn Atkinson
      June 20, 2023

      Funding Ukraine is costly, the USA are in for USD 180 Billion at least so far. Then we have to take on China too and House their populations, obviously.
      British politicians have responsibility for the world you know.

    6. Shirley M
      June 20, 2023

      Mark B. You know why! According to Merkel it takes (or used to take) EU250,000.00 for each immigrant. That was a few years ago (2016) so costs will have risen. Illegals will probably double that, or more, with the costs of checking and their inability to gain legal employment, but no doubt many will earn via criminal behaviour which is tax free and accompanied by benefits.

  2. Peter Gardner
    June 20, 2023

    Perhaps the independence of the central bank is not always right. Japan has other problems but not this one of the bank getting monetary policy wrong. Both banks are independent. Australia’s Reserve Bank is accountable in broadly similar ways to the Bank of England but Australia does not have the problems UK is going through. Is the problem simply one of competence? Has liaison between the central bank and the Government broken down? These other countries do seems to do it better than the UK. Why is the UK so bad at it? Personality clashes? Differences of political views? Disagreements about economics? One difference between UK and Australia is in the size of the national debt (97% of GDP and rising in UK), small in Australia (34% of GDP). Has the extreme level of debt in UK pushed normal control mechanisms beyond their ability to control properly?

    1. formula57
      June 21, 2023

      @ Peter Gardner “Australia does not have the problems UK is going through” – it might have worse, since interest rates have risen steeply, yet with the housing market showing inflationary pressures and consumer confidence plummeting.

  3. Peter Wood
    June 20, 2023

    Sir J,
    You keep saying the Treasury, ie, the tax payer, has to cover the BoE’s losses on selling Gilts at below purchase price. Surely that is an indemnity only, not real cash? Why would the BoE pay money to an entity that it owns 100% of? Obviously the nation stands behind the national bank. The BoE can carry a loss on it’s notional balance sheet for ever. There is no need for Treasury to find cash from current year budget.

    Reply They do pay to stop the Bank of England going into negative capital.

  4. Gabe
    June 20, 2023

    SHERELLE JACOBS today in the Telegraph:-

    “The Bank of England must pay for wrecking Britainā€™s economy, Its disastrous groupthink has landed us in a doom-loop, with high inflation and painful interest rates.
    No lectures on Brexit – or indeed anything else – from former governor Mark Carney please. His policies contributed to where we are now.
    It is hard to know whether Mark Carneyā€™s latest outburst should be greeted with derision or dismay. The former Bank of England governorā€™s claim that Brexit is to blame for Britainā€™s sticky inflation is such arrant nonsense that one wonders whether Carney is suffering from a case of managerial messianism.”

    But Sunak while Chancellor surely deserved even more of the blame for his tax to death, borrow, print, currency debase and piss down the drain agenda combined with open door immigration.

    Carney and Bailey have both been totally incompetent too. How are Sunak’s five promises going? Looks like he will fail on all of them to me. Wrong on climate change, on Brexit, on currency debasing and on inflation. Bailey even gave us 40% personal overdraft rates for all. Not fit to run his own piggy bank!

    1. Mark B
      June 21, 2023

      I believe Carney had form when Governor of the Bank of Canada. He cut base rates and did a good job in avoiding the worst of the recession for them. Trouble was, it created a property bubble.

    2. Martin
      June 22, 2023

      The flip side logic is that if the Bank of England was correct about Brexit and its impact on the UK economy then it should have tightened the money supply earlier to reflect the lower economic activity! A classic case of not practising what it preached.

  5. Bloke
    June 20, 2023

    The Bank of England runs like fitting a drain to your boiler.
    It generates immense waste and all-pervasive domestic damage. Plumb crazy!

  6. Cuibono
    June 20, 2023

    But has it really been such a good thing for people to borrow so much?
    Is it so great to see fields and fields of ugly, 230-ready houses?
    Has mass home ownership really done people many favours?
    Speculation and greed have ruined this country.
    And too much free money has not helped.

  7. DOM
    June 20, 2023

    Neo-Marxism is expensive to finance. Covid is expensive to finance. The mass immigration weapon is expensive to finance. State authoritarianism is expensive to finance. As is Green fascism. As is racial, feminist and transgender politicisation. Covid was the gateway to the authoritarian progressive agenda and again, very expensive to finance.

    Maybe our kind host should delve deeper into why it is most of this debt is raised to finance the LIBERAL LEFT agenda that is tearing the West apart and will, as they intend, destroy all that we have known

    The crap surrounding the progressive blonde idiot (Johnson’s complicit in what we are seeing) is in a wider sense completely IRRELEVANT

  8. Sakara Gold
    June 20, 2023

    Britain is developing a successful life sciences industry centred around the universities. Generating Ā£94 billion in 2021, Britain lags only the United States in activity according to consultants McKinsey, driven by discoveries that have come out of colleges in Cambridge, London and Oxford and aided by a centralised health system for clinical trials.

    Industry figures, from biotech bosses, property developers and life science investors have all spoken of a growing frustration with the lack of a coherent approach in Britain to everything from serviced laboratory space to funding, talent, suppliers, affordable homes, transport, water and renewable power.

    It is typical that this government is spending far more time on infighting and protecting reputations lost during the disastrous pandemic response than building the specialised life sciences business parks etc that this nascent industry needs

    1. Mark B
      June 21, 2023

      It is because we have people more capable of just talking than doing. The current incumbent of Number Ten and his predecessor but one were a case in point.

  9. Gabe
    June 20, 2023

    What a lot of hugely unpleasant MPs on show yesterday to defend Harman’s kangaroo court and attack Boris – Caroline Lucas, Dianne Abbot, Harriet Harman, “Brexit means (fake) Brexit May, Thangham Debbonaire, Caroline Lucas…

    Not that I am a big fan of Boris – he was wrong on net zero, delivered a botched Brexit and got almost every single thing on Covid (and the economy) completely wrong.

    1. rose
      June 20, 2023

      Corbyn abstained. He knows what it is to be witch hunted and scape goated and hounded out of his party and now his seat.

      Those harpies were loathsome, lying and smearing and preaching hatred. The worst one was Mrs May, our most duplicitous PM, giving her nauseating sermon on high moral behaviour. She who lost three Brexit Ministers, two Brexit Secretaries of State, a Foreign Secretary, and a Northern Ireland Minister over her double dealing. She who parted company with the truth pretty well every time she went to the Despatch Box.

      The most shocking thing was how someone like Bob Seely could possibly have voted with them.

      1. Mark B
        June 21, 2023

        And she also lost her majority after her ‘Weak and Wobbly’ election campaign. If she went when she should have went she would have been the shortest serving PM in history. Well, up to Liz Truss’s overthrow at least.

        Hardly a woman of reputation our Theresa.

        1. Gabe
          June 21, 2023

          +1

  10. Mickey Taking
    June 20, 2023

    As I said recently mortgage rates will mean Conservative defeat in the next GE, but there are plenty of other mechanisms to force a mess from the next government.
    The WEF/ Tories have written a note for the PM’s office drawer, it won’t say ‘we spent all the money’, it will say ‘sort that lot out!’

  11. Roy Grainger
    June 20, 2023

    The BoE thinks high interest rates, and hence hight mortgage rates, will reduce inflation by giving people less money to spend. But it is reported now Sunak is thinking of giving “help” to mortgage holders effectively reducing the interest rates they are paying and so increasing inflation. Wouldn’t it just be easier for Sunak to set the BoE rate directly ? Independence of the BoE has hardly been a great success.

    1. Mark B
      June 21, 2023

      Interest rates only affect borrowers and savers. If you are neither they have zero effect either way.

      If you want to control spending through taxation you need to raise VAT. That way it affects consumption on just about everything except the basics like food.

      iPhones are not made in the UK šŸ˜‰

  12. Mickey Taking
    June 20, 2023

    So who are the ‘not-magnificent SEVEN? (versus the 354).

    1. Mickey Taking
      June 20, 2023

      The seven Conservative MPs who voted against the report were Bill Cash, Nick Fletcher, Adam Holloway, Karl McCartney, Joy Morrissey, Desmond Swayne and Heather Wheeler.

      1. rose
        June 20, 2023

        And the best speakers were Bill Cash, Jacob Rees Mogg, Lia Nici, and Nick Fletcher. Boris, democracy, and the constitution may not have had the numbers but they had the reasoned and compelling arguments. There was no argument at all on the other side, just wild assertion, as on the committee.

        1. Mickey Taking
          June 20, 2023

          I don’t think the people out there witnessing dying relatives, not-visiting loved-ones, nor Care homes, 2m distancing, masks or else, no family meetings, little help with tradesmen to fix things, horror videos of hospitals, Ā£bns spent on wild useless Track& Trace, almost zero GP support or referral…..need to have an argument from ‘the other side’. They have an opinion first hand.

          1. Richard II
            June 21, 2023

            Incredibly, that opinion appears to be that lockdowns were a good thing, Mickey. At least if we are to believe recent opinion polls. So a majority of people still haven’t drawn the obvious conclusion from Johnson’s ‘workplace events’ that the Covid restrictions had little rational basis by late Spring/Summer 2020. The participants knew there was very little health risk involved by then.

  13. Susie Baxter
    June 20, 2023

    They’re trying to destroy the country. The economy, interest rates, inflation, mortgages, Net Zero, immigration, social policy, war with Russia. All of it is carefully designed to end in ruin.

  14. Sakara Gold
    June 20, 2023

    The BoE may well have some responsibility. But the reason why interest rates are at 4.5% and likely will reach 5.75% before the end of the year is due to the tremendous size of the national debt, now at Ā£2.4TRILLION, which equates to ~104% of GDP. The national debt is rapidy growing, not reducing – in effect we are borrowing money to pay the interest on our debts. Inevitably this will cause hyperinflation, which may have already started with food inflation now at 20%

    Gold bullion is currently on sale, as large tonnages of Russian gold are on the market as the war criminal Putin pays for Iran suicide drones and enormous quantities of N Korean artillery shells. Nobody wants Russian roubles due to Western sanctions; once again gold proves its worth as the asset of last resort

    1. Mark B
      June 21, 2023

      The national debt is rapidy growing, not reducing

      And guess who created most of that debt when Chancellor ?

      1. Mark B
        June 21, 2023

        Addendum

        They should have stuck with the Truss / Redwood Plan and worked to grow the economy and cut government spending.

        Oh well, it’s too late now.

  15. Donna
    June 20, 2023

    Since we are living through a re-run of last August, why aren’t CON MPs and the media demanding that Sunak and Hunt be sacked? They haven’t even learned the lessons of last August, let alone the lessons from the ERM debacle or the 2007/8 banking crash.

    “The Bank has the sole power to decide what the Bank rate should be…” Yes. And the Government has the sole power to decide who should be Bank of England Governor and to dispense with his/her services when he is so obviously failing and not up to the job.

    We are watching Sunak/Hunt’s Not-a-Conservative-Government being skewered by its failure to (a) sack Bailey and (b) rein in the out-of-control Quangocracy

    The ERM debacle led to 12 years out of Office. Another lesson not learned.

  16. Mickey Taking
    June 20, 2023

    Off Topic.
    Keir Starmer’s vow to position Labour at the head of a green power revolution started badly today after his plan for an eco-friendly journey to give a speech saw him get lost on a diesel bus in Edinburgh. The Opposition leader had planned to take journalists on a hydrogen bus to the venue in Leith ahead of an announcement on eco-friendly energy generation. But there was bemusement as the vehicle was replaced by a diesel, which then took a wrong turn on its way to the venue in the port area, with the driver having to be guided by a Daily Mail reporter. A Labour spokesman said the company providing the bus had had problems with the hydrogen vehicle but was unable to provide more information.
    Not just the driver who has got lost?

  17. Sea_Warrior
    June 20, 2023

    I think I’d be happier if the Bank stayed clear of bond operations.

  18. Stephen Reay
    June 20, 2023

    I have sympathy for mortgage payers. I remember paying my mortgage at 15% and no one giving a diddly squat back then. The BoE should have raised rates bigger and quicker like Mervyn king had said.
    Interst rate at 5/6% are considered to be the historic norm, it’s the price of homes which is the problem caused mainly by Conservatives policey.

    1. Mark B
      June 21, 2023

      Yes, but the amount you had to borrow was less (3-3.5 time your income) where as today it can be between 4-6 times.

  19. formula57
    June 20, 2023

    The Bank is likely untroubled by mortgage rates since they remain within the stress test limits that lenders used to decide if borrowers could cope. Meanwhile of course, savers having been ripped off for more than a decade, are not yet being adequately compensated for inflation.

    Fed. Chairman Powell admits inflation is not falling as expected. Likely central banks in affected economies will need to make a series of further rate increases but no-one knows how many and to what extent so the Bank perhaps cannot take your advice of fixing the rate and holding it. Powell said the other day (Post-FOMC Press Conference) ā€œWe are two and a half years into this. Forecasters, including Fed forecasters, have consistently thought inflation was about to turn down, and have been wrong. If you look at core PCE inflation, overall, over the last 6 months, youā€™re not seeing a lot of progress. Itā€™s running at a level over four-and-a-half percent, far above our targetā€.

  20. Ian B
    June 20, 2023

    Off topic, but still highlights and calls into question who did we vote for to Govern and Manage the UK. The BoE, the Treasury are still managed(or should be) directly by our 2 Chancellors that refuse to work as requested, but roam around creating Media sound-bites while in full neglect of their paid and empowered functions. And the Conservative Party, they dont care they want a quiet life

    ā€œIntegrity of Parliament must come firstā€ this phrase was bandied about quiet a lot yesterday.

    To me the phrase that those that ā€˜live in glass houses shouldnā€™t throw stonesā€™ then comes into play. Its a slim hope that the House of Lies will now start to take responsibility to ensure each and every MP steps up to their elected responsibilities. What would be nice to see is MPā€™s respond to being democratically elected to represent ā€˜allā€™ of their constituents in this United Kingdom. Perversely they find it hard to understand, it was they that where elected to represent their constituents and the UK, their party or their gang leader where incidental to the process.

    MPā€™s are there as our sole legislators, those whose responsibility of creating, amending and repealing all laws, rules and regulations that pertain to how the UK is run internally. They blow the Integrity of the UK Parliament out of the water every time they step back and suggest, that is others, others no one gets to vote for, others that cant be held accountable and other that have no responsibility have the right to over rule the UK Parliament and demand how the people of this country should act.

  21. agricola
    June 20, 2023

    I would like those financially more savvy than myself to start with a clean sheet of paper based on the premis that the current mortgage system is a failure. Governments can ride the results of their own mismanagement, individuals buying their own home cannot. They are the first skittles to fall.
    Government prints its own money whenever its needs exceed the tax take. There is a strong arguement for not spending beyond the tax take and even reducing it so that increased business activity produces the necessary tax.
    It may be niaive of me to suggest that government funds a new mortgage bank with created money that it lends to borrowers at a fixed rate for 30/50 years. If the rate was modest it would be affordable and predictable, bringing stability to the borrower. It would also be a first profitable government activity. As house buyers move throughout life they should take the facility with them.
    The widening gap between the price of houses and what people can afford is largely down to supply being mostly in the hands of a small number of monopolistic predatory house builders. They are aided and abetted by a planning system run by jobsworths. Resolve house building such that supply exceeds demand and it would add to stability. Close the tap on immigration and add further to stability. Build houses like cars in factories and you increase quality, specification, but reduce price due to volume.
    We are sitting on the ingredients of a national emergency. Take powers as did Churchill in 1940 to override the problems and the country would support it. Do nothing, expecting it to go away like an annoying wasp and the country will continue to sink into the mire with increased political instability.
    While on the subject of radical activity, SE Water, leaders in hosepipe bans should be forced to invest in an Israeli type desalination plant. Project to be run by Israelis not SE Water who after too many years have rendered themselves unfit to supply water to the South East.
    Enough for one day I think, I have a fence to repair.

    1. agricola
      June 21, 2023

      SJR, there is little point in complaining about the mortgage situation unless you offer solutions. I offer you a solution above which for some odd reason you refuse to publish. It might be an impossible solution but at least say why and offer a better one. For sure the existing one does not work for anyone aspiring to home ownership.

  22. Keith from Leeds
    June 20, 2023

    Mark B – The answer was that our governments have become addicted to spending money they have not got. Oh, for a PM & Chancellor who understands simple economics. The solution is to cut government spending to less than its income, but that would be painful & require tough decisions, but the waste in spending is such that it may be less painful than we expect. But the spending axe would have to fall on all quangos, all left-liberal think tanks, charities like Stonewall & all the organisations that drain money from the government to oppose the government.
    Equally, the nonsense of net zero would have to go, as that is completely wasted expenditure, trying to solve a problem that does not exist!

    1. Mark B
      June 21, 2023

      Is the correct answer šŸ˜

  23. Lynn Atkinson
    June 20, 2023

    Apropos your Tweet that the PM ā€˜did not vote for the Committee Reportā€™ as he ā€˜saw from inside Downing Street the working arrangements and how the officials organised events and food for those working there.ā€™

    Perhaps he did not vote because he attended illegal parties? He did not come to the commons because he did not want to be asked the question as he would have had to follow the Johnson route and lie to Parliament or admit that he too was unafraid of becoming infected.

    The real question is ā€˜why were all these people in Downing Street, Central Office and Imperial College unafraid of the ā€˜killer virusā€™? What did they know that we did not?

    Indeed, did they all lie to the Nation? The penalty for that crime is harsh indeed.

    1. Mark B
      June 21, 2023

      They want us all to think it was about bit of cake and a few fibs. It is not ! It is much, much more than that.

  24. DOM
    June 20, 2023

    A child can now legally self-identify as a cat and the law dictates we must both accept it and endorse it by addressing the cat as a cat. We have a Conservative government. Read that again. A child can now legally self-identity as a cat. We have a Conservative government

    Does this destroy John’s entire political beliefs and render him and his party utterly impotent in the face of an ideology that is destroying the very basis of our reality. This isn’t totalitarian, this is beyond that

    The Stonewall’s of this world and their DEI agenda is spiralling out of control and the Tory party couldn’t give a toss except protecting itself

    cheers mate

    1. Mickey Taking
      June 20, 2023

      and say I’m a woman and I don’t have a vagina. Or I’m a man and I don’t have a penis.

      1. Donna
        June 21, 2023

        I think I’ll self-identify as a 70 yr old and claim a State Pension …. with several years backdated since I haven’t been claiming it.

  25. Stephen Holloway
    June 20, 2023

    Great article John, I have a few questions for you:

    1) Why is the BoE answerable to no one with its policy making?

    2) what is there ultimate objective when their current policy is not controlling inflation?

    3) Why is the mainstream media, promoting a false narrative about the UK and inflation?

    1. rose
      June 20, 2023

      On number one, a Chancellor who was not a puppet as the Usurper was, would stand up to them and not sign off on their two ugly sisters of QE and QT.

  26. Javelin
    June 20, 2023

    All those who didnā€™t resist the pointless lockdown are to blame for high interest rates.

    All those who go along with the completely unproven climate change scam are to blame for poor economic performance.

    All those who support mass migration of low income people are to blame for high taxes.

    The public know that but the Government and MSM pump out endless propaganda.

    Eventually, like all evil ideas, reality will kill off the propaganda and those who push it will be on the wrong side of history.

    1. Donna
      June 21, 2023

      Well said.

      Reality is about to bite the weak-minded “just want a quiet life” sheeple and the delusional fanatics on their backsides.

  27. Denis+Cooper
    June 20, 2023

    Sir John, I have a different interpretation of the Ā£49 billion:

    http://johnredwoodsdiary.com/2023/06/16/written-answers-from-the-treasury-bank-of-england-compensation/#comment-1394221

    “I presume that the Ā£49 billion covers anticipated interest payments and capital repayments on the Bankā€™s portfolio of gilts, with perhaps a small part to cover any losses the Bank makes on sales. If the standard payments were not going to the Bank they would be going to private investors holding the gilts, but the losses on sales are different because they only arise because the Bank has bought too high and sold too low.”

    Because the government said:

    “HM Treasury has provisioned for Ā£49,100mn of cash transfers to the Bank of England this financial year.”

    and if that does not include the normal payments with respect to the Bank’s holdings of gilts, a portfolio valued at Ā£800 billion plus as I recall off hand – where else were those payments mentioned in the estimates?

    Reply the Ā£49 bn includes capital losses on sales and running losses on holdings

  28. Iago
    June 20, 2023

    Meanwhile the invasion continues.

  29. Winston Smith
    June 20, 2023

    For some reason The Bank of England feels the need to work in harmony with the Fed and the ECB even if it is against the best interests of the British tax payer. Why would that be, what is going on?

  30. William Long
    June 20, 2023

    I find it incomprehensible that no-one in the corridors of power seems to understand the simple truth you express, time and time again, that if the bonds now standing at a discount, are held to maturity, there will be no loss to the taxpayer. Has the Bank ever given any reason for persisting in incurring the losses?

    1. anon
      June 22, 2023

      The loss to the bondholder is baked in whatever the exit point. The rate of inflation exceeds the interest rate.
      Interest rate need to rise otherwise why would a rational investor buy bonds?
      Non productive spending not covered by direct taxation will become immediate inflation.

      Why they pursue extremely expensive and damaging polices is because of the likely intended result. Being an economic collapse and a control reset for plebs.

  31. Bert+Young
    June 20, 2023

    The BoE alone should not decide the fate of the interest rate . Its record is a bad one as far as accuracy is concerned and the knock on consequences of its decisions have a devastating effect on the lives of all . We do have to steer our way through all sorts of economic conditions and this skill is the prime responsibility of the Government – not the BoE . In the eyes of the world we are not an irresponsible country and our exposure to borrowing ought to reflect this .

  32. a-tracy
    June 20, 2023

    What is the rush to sell if a guaranteed agreed return is 4%? Workplace pensions are only returning around 1.5% at the moment.

    I also wonder, like MarkB, with all these extra-legal immigrants we are told are all fully contributing and hardly claiming NHS care of any social care, just how much are they contributing?
    We have more people in work than ever, more women (72.3%, 2m more since 2010) in work in the economy paying taxes, male employment rate 79%, the highest taxes the newspapers tell us for 70 years, pensioners still paying tax, the retirement age for women is up five soon six years (so still paying in Employer’s Employees NI and not claiming their state pension) just how much ‘real terms’ spending is going on because Labour keeps telling us ‘real terms’ spending has dropped on EVERYTHING.

    It seems women are doing more of the lifting now than in 1971. Male employment rate 91.7%, female 52.7%. Source Statista.

  33. agricola
    June 20, 2023

    One of the great motivators of world population movement especially around the Med.,is lack of water. No water, no farming, no food, people die or move. They move to where they perceive the problems are none existent, Europe.
    How about Europe, rather than fighting immigration, turn its efforts into creating conditions in dry countries, such that the people do not wish to leave.
    People emigrate to Israel, very few leave, not enough to cause a problem in Golders Green. 55% of israeli water comes from desalination or 5 million out of the population of 9.4 million benefit from it’s three plants. SE Water could solve their problems with just one plant on our south coast.
    Europe providing cheap clean water to countries bordering the Med would stimulate agriculture, sustain the population and reduce the desire to emigrate.
    Don’t think why it can’t be done, think how it can be done, and then do it. European finance, Israeli technology, and a bit of good old fashioned diplomacy involving mutual back scratching.

    1. Mickey Taking
      June 20, 2023

      You are talking entrepreneurs, we have governmental tax-to-death imbeciles.

    2. a-tracy
      June 22, 2023

      The companies running these water companies should be responsible. If they stop people from using water, they should reduce the rate they charge for every day of any restriction, like when your train is late, you can get the ticket price back.

  34. Ken Marshall
    June 20, 2023

    Terrible how the Bank of England is to blame for everything thatā€™s gone wrong since the Tories took power in 2010. Them, and the EU, judges, civil servants etc. But never the Toriesā€™ fault

    1. Mickey Taking
      June 20, 2023

      So what have the Toties done to reign in the EU, judges, civil servants etc. ?

    2. a-tracy
      June 23, 2023

      Ken, everyone I read is blaming just the government for the interest rate rise mortgage ‘crisis’. So if the government is to blame, the under 2% interest rates since 2009 and maintained until last year is their success. Historically interest has always been above 5%.

      Plenty of savers and pensioners disagreed with the <2% interest and no % gain on the money they were saving to top up their pensions. If the big banks don't raise savers' interest whilst screwing mortgagees, there are plenty of government savings protection digital banks that are offering better deals on current access accounts, and the big banks will have to follow pretty damn quick.

  35. Derek
    June 20, 2023

    It is shocking that the BoE remains “independent” with the same leadership after continually providing forecasts that were wide off the mark and consequently assisting our high inflation and the rise in rates we are now experiencing. Continuing QE long after its sell-by date was against all sound economic sense but the BoE ignored it. Not having learned a lesson from that debacle they now pursue a policy of selling bonds at knock down prices to do what? Raise the interest rates, as in closing the stable door after the horse has bolted. At what cost to us taxpayers? Ā£49B and rising with each service charge.
    To put Ā£49B debt in context, that money would cover the defence budget for 2023. Is it any wonder the armed forces (and others) are short-changed by the Treasury et al, when neither our Central Bank nor the Treasury can account for themselves? Will things change under a new government? I will not hold my breath while the current regimes still control our money.

  36. Original Richard
    June 20, 2023

    “It should also stop selling the bonds and making such huge losses which taxpayers have to pay. Mortgage holders are facing enough pain without the Bank trying to force up the mortgage rates even more.”

    This is all part of the plan and what was meant at COP 26 when our PM, then Chancellor said:

    ā€œSo our third action is to rewire the entire global financial system for Net Zero.ā€

  37. rose
    June 20, 2023

    I suppose this behaviour at the Bank is all a coincidence, I mean happening all over again just when Mr Hunt has mentioned taking 2p off the income tax.

  38. a-tracy
    June 21, 2023

    I think everyone forgets the cost of an extra day’s bank holiday in May. Everything goes up because the government cut a whole day’s turnover. Its no wonder inflation was unchanged; lots of people just stayed at home because their other costs have risen day trips are becoming too expensive and they need to conserve ‘just in case’ all the regular daily warnings in the news come true.

  39. ChrisS
    June 21, 2023

    The government is going to have to consider helping people with mortgages if Bailey is going to keep increasing interest rates.
    I would much rather see an end to his one-trick pony policy but if thyat is not possible, a return to mortgage interest tax relief would be a good start for home owners.
    Also, the crass tax penalty applied by Osborne to buy to let landlords needs to end. They have been singled out as the only businesses which fail to receive tax relief on legitimate business expenses such as mortgage interest.
    This was always a nasty, grubby little measure designed to discourage investors, yet the housing market would be in total collapse without millions of buy to let properties.

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