Your Mortgage & Savings: Bank of England’s Impossible Choice

Hi most useful thank you.. what do you consider short term.. less than 1 year .. less than 5 years
Thanks

I might be wrong but I think everyone even bank of england is reaching to wrong conclusions ; inflation can happen due to two different reasons - high demand or low supply. If it is about high demand / high volume of circulating money , you raise interest rates to keep the money locked. If its supply based issue, raising interest rates will cause opposite impact or in best case no impact. Energy cost impact to product prices can't be prevented by interest rates , its like adding extra 10% VAT to product prices and expecting it to disappear if you raise interest rates :) the key is inflation can happen due to 2 different reasons and everyone is just speaking their default runbook , lets raise interest rates :)) you cant fight inflation in the same way , inflation caused by excessive money supply happend during the covid crisis is so different than inflation caused by tariffs or energy prices

so I invested quite heavily in treasuries last year for tax reasons to keep them in my ISA and sipp, and to move out of equities, aiming for more like 30% equity. 30% metals, 40% corporate and gov bonds. but the gov bonds have all gone down :( they are the 2 year duration ones but I need the cash soon so I am hoping we won't get too much more inflation otherwise they will tank further. Of course invested pre Iran war.

Perfect timing for this video. I have to refinance my mortage in 27, so I will set everything up with my bank and fix the rate as soon as the indicators move further towards scenario c. Being early might cost some fees, but a one-off payment is still better than locking in higher rates for the next 10 years. Thanks a lot Ramin!!!!

Can i buy gilts on vanguard?

Isn’t oil shock inflation self limiting in the sense that it’s not standard inflation, which has the potential to run away, oil shock inflation carries an inherent demand destruction element. So whilst you get a spike of inflation the real problem is the deflation in the medium term

US gilts are going up. UK gilts highest in 30 years. Japan's are the highest in history. Does this currently mean a global recession is pretty imminent?

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TUNE

Fantastic discussion
Excellent analysis
Thank you Sir

I had set my mortgage at 4.5% for 2 years because BoE said 2026 will have lower rates, now I'm screw. If I listen to your graph of better landscape in 2028 will likely be screwed again in 2 years ...will do though

The four channels framework is the clearest explanation of how an energy shock actually moves through an economy that I have seen. Most people stop at the petrol bill and never think about what happens two years later when it shows up in wages and pricing decisions. Which of the four channels do you think is most underestimated right now?

oops i bought some gilts before watching your video 🙄

Very interesting, thank you for covering this hot topic. I got curious and went to check what actually inlfation linked bonds on the market assume about future inflation covered in 3 scenarios. Note, that linked gilts use RPI while BOE scenarios projects CPI and RPI is somewhat higher by 0.7-1%. Using this assumption, linkers project slighltly WORSE than scenario C now !! So be prepared... BTW I loaded the linkers now in my low risk portfolio part...

Excellent video, thank you. I’m in agreement, I think scenario C is the most likely and the pessimist in me thinks the impact might actually be worse in that inflation will be higher than what the BoE has stated. With that in mind, I decided, rightly or wrongly, to fix my mortgage for 3 years. A 2 year rate was slightly lower but I don’t see rates recovering by then whereas a 5 year fix was more expensive but I want to be slightly optimistic and hope that things are “normal” in that timescale!

Thanks Ramin, I'm assuming they might need to publish in future MPC press conferences some additional scenarios, i.e. C++

It feels almost impossible to predict what will happen globally at the moment and so I locked in on a rate that I can afford for the longest period. Maybe the rate will go down to 2% maybe it will go up to 7% - I don't see the world becoming more stable any time soon but at least I can try and lock in my outgoings somewhere in the middle

Hey Ramin. Hope there will be an episode of the podcast next week. A two week gap is already causing withdrawal symptoms

Very happy I have paid off my mortgage this month ( was looking at a jump from 3.1 % to 5% + as an expat plus fees ) ...was dithering for months about whether to commit to another 5 years of lending...but the direction of travel does seem upward for rates with across the board consequences. It's studying your insights and explorations that have really helped me come to my decisions over the last two years Ramin.

I bought my first Gilts this week, I couldn’t have done it without these videos. Thank you!

It seems that every year for the past 4-5yrs the prediction has been that interest rates will fall back to about 2% in 2yrs time.