I don't think there are any good options, just "let's try something else and hope it's not worse". Over here, the BoE gets slammed for not increasing interest rates, and the cost of living is still horrific. In Canada, the BoC did increase interest rates, and the cost of living is still horrific. So, how do you win?
The way you win is not throwing huge amounts of money at everything in sight, choking the supply lines and then wondering why the supply-demand balance is thrown wildly off when everything opens suddenly. Leaving interest rates as low as they have been for as long isn't a good way to win either. Sadly we can't fix either, given we don't have a time machine. What that almost certainly means is that the people at the very top who got the free money will do just fine, thanks very much, and the little people (the likes of you and I) get to pay the price for years to come. Increasing interest rates, which is usually pretty good at dampening demand, may not be the best tool when the problem of rising prices is an issue of restricted supply as much as too much demand. If there were an easy way of returning the supply chains to their pre-COVID state that would probably work too. Sadly so much has been so badly disrupted it's going to take a while for that to get back to normal. Throw in the ever-rising prices of energy (partly thanks to the Ukraine issue) and it's hard to see what to do about it, aside from winding the clock back and not being so dependent on one nation for energy supplies. Endless subsidies to domestic users does little more than pump government money into the coffers of private companies, who then have no incentive to ever reduce prices because the government is paying. The alternative, of people literally freezing to death through the winter, isn't really an acceptable playbook either. At least a windfall tax on the energy suppliers takes some of that profit and uses it to help the people who are being hurt, but that in turn creates other distortions in the economy. I fear the fundamental problem is that so much bad stuff has been baked into the economy for so long it's going to take a lot of pain to get it all out again, and invariably the people who feel the pain are the ones at the bottom of the heap. ETA: People are howling about "increasing interest rates" and we haven't even got to 5% yet. To battle inflation Paul Volcker style we'd need to be looking at interest rates of 12-15%. Of course Volcker could get away with that because he didn't have to consider a national debt of $31,000,000,000,000 and growing daily. But people have bought the lie for so long that "high house prices are good", many people have bought into the market at high prices (often wanting nothing more than a roof over their head - this isn't just about landlords or reckless property buyers) and, if interest rates rise into double digits the housing market will slump. No politician wants that to happen, particularly anywhere near a looming election. So they pump more money into the system, artificially prop things up, and kick the can down the road for the next guy to deal with. Sooner or later someone has to deal with it.
I liked it better when I was extremely depressed and didn't care so much about everything outside my head. Over here it wouldn't just slump, but lead to repossessions for... millions? tens of millions? Us included. The problem hasn't just been low interest and prices and whatever, but that governments have built a society on top of that. It's just not feasible to go back to like, 12% mortgage rates. That's not what they built.
That's a key part of the problem - so much has been built on the expectation that rates will stay low forever and prices have risen to reflect that. A housing market based on variable interest rate mortgages leaves so many people vulnerable to things entirely out of their control. It's hard to have much sympathy for the people who lie on mortgage applications, who mortgage to the absolute maximum just so they can keep up with the Joneses, or take out multiple mortgages in the hope of striking it rich in the market. The trouble is, as you said, people who wanted nothing more than a roof over their heads and some stable housing get caught up in the mess when it all goes down. (Edit: When I bought my house in 1999 the standard variable rate was around 6% and part of the process was making sure I could still afford the payments if rates rose. When rates were down at 2-3% I got the impression few people even considered what might happen if rates went as high as 6% - when I refinanced my mortgage in around 2005 I don't recall any questions about how affordable the payments would be if rates went back up) The reality is that if interest rates are to be used to fight inflation they have to be higher than inflation. That means double-digit interest rates. The alternative is to find some other way to fight inflation, or to let inflation run out of control. Price controls might appear to fight inflation in the short term but don't tend to work well in the long term - unless they are paired with some kind of rationing all that's likely to happen is shelves will be stripped bare in short order and never restocked. Higher taxes might work in the sense that when people have less money they buy less stuff, but that hits the middle classes hardest while the lower classes still get little or no relief (demand for things like food and fuel is fairly inelastic) and the upper classes hire accountants to avoid paying the taxes. How to raise interest rates to fight inflation without throwing millions of people who did nothing sillier than try to buy a place to live onto the streets is a tricky one. Perhaps the government could essentially enter into some kind of swap contract with banks, requiring them to pass the benefits on to their customers, to turn floating rate mortgages into fixed rate mortgages. At least that would give people a safety valve to stop them from being made homeless. How to restrict it so that the people who have one property that they use as their residence benefit while the people who have 25 properties they use as AirBnBs don't would be another matter.
We were rate-tested up to 6%, I believe when we bought -- and we didn't get a ~2% mortgage (closer to 4%). The mortgage itself was more than we wanted to pay ideally (by about £350 pm), but we are still well within our gross for the month. Even if our mortgage doubled we could survive that (albeit we'd be very close to truly house poor). But again, it's everything else on top of that. It's not just rising interest rates. Agreed with your other thoughts.
When the market is cooling, definitely. Hard to see much benefit for the banks in owning a bunch of houses they have to insure, maintain and protect from squatters and that continue to decline in value while they try to sell them. Especially if the foreclosed owners don't have a lot of equity in the place, meaning the bank is unlikely to ever recover the losses they'll almost certainly incur disposing of the house. That said the banks can only tolerate people not paying the mortgage for so long before the message is sent that the payments are optional and more people stop paying. If everybody stopped paying their mortgages it would be interesting to see just what the banks would end up doing about it. When the market is booming I don't imagine they particularly want the houses but if they can recover their loans and maybe turn a profit they can lose in "administrative charges" or similar then they are probably less averse to the idea.
NIce walk in the woods. I went out with my wife at the weekend and spent much of the walk wishing I'd taken my camera. So today I took it, and got what I hope are some nice pictures.
Got another run in. One of the local roads is closed for resurfacing and not even passable on foot so I have to rethink my routes. I've come up with another option but don't care for it much. I can bypass the resurfacing but that leaves my routes short on distance and I'd rather not deal with that. I can add a few loops around some housing but it always feels a bit weird doing laps around the same few houses. Now I'm looking over the pictures I took in the woods the other day. Some of them include leaves....
Just hauled off a truckload of leaves to the dump. The snow is really starting to creep down the mountain. Our job site has about 8" of snow - probably more now.
Yicky bug. I'm trying to summon the motivation to run some more cabling. I've got a bunch of switches ready to roll so just need to get the back boxes put in place and run the wiring. Most of it should be easy enough but there's always that unexpected gotcha that derails stuff. And I still need to figure out where I can get a custom door - the local place that sells doors and windows wanted to fit an inner door frame inside my existing door frame, and I really don't want to be dealing with that. And I don't want a white plastic door - if it isn't made of wood it needs to look like it is. Two very competing goals - I fired up my coding platform again and took a look at an old project I kinda forgot about. It will be good to get that brushed up and maybe even finished off. And then, to compete with my attention, I managed to get an adapter to connect my old Nintendo Game Cube to my TV. I had all but given up on ever getting that working again but couldn't quite bring myself to get rid of it. But now I figured out what I needed, and it works. Obviously compared to modern game consoles it's a bit pedestrian but the games are every bit as playable as they ever were. It's just been so long that I struggle with the fastest cars I unlocked on the driving games - at the time I could steer them around the course quite easily but now they seem to spend more time driving into things. Guess I'll have to start near the beginning and work my way up again.
If you worked at Twitter or Google or ZuckFace you would be all up to speed on your newest games and working on your spot on the US Olympic ping pong team
You seen this yet RK? https://www.supremecourt.gov/Docket....10.03 - Novak-Parma - Onion Amicus Brief.pdf
When I first got the game Burnout I got pretty good at it. That was nearly 20 years ago and although I can still burn rubber with the best of them I seem to be depressingly good at burning my clutch and engine as well... for now I'm sticking to automatic transmissions and trying not to set fire to anything along the way.
Fun With Wires. While my wife was raking leaves (I'd have left them over winter but she really wanted them raked up) I got busy running cables. It's really tedious trying to feed cable, pull cable, feed cable, pull cable etc, especially when feeding and pulling happen on different floors and I can't just leave a coil of cable while I drill more holes to feed it because it would be too close to the furnace. So far I've run some 14/3 between two switches, rerouted some existing cable to go through holes I drilled rather than freely hanging and started to connect some of the wires together. I also ran another piece of cable ready to connect it to another switch, which needs to be replaced from a 3-way switch to a dual 3-way switch. Now the biggest problem I have is trying to figure out how to connect 9 earth wires together inside a single box. At a push I could get away with only 7 of them and I might be able to kludge something to only need 6 but even that is more than I can easily handle with what I have. I need to find some push-fit connectors that will take that many wires because I'm already pretty tight in the back box and don't want to be dealing with multiple large wire nuts if there's any way to avoid it. I can see a trip to the hardware store in my future.... Once this is done the room I'm working in will have the switching required to be able to control the ceiling light and fan from both entrances, as well as having double controls for the lights and fan on the porch.