Moneyfacts Group plc, the UK’s leading provider of retail financial product data, has published the latest issue of its ‘INTEREST’ publication, which explores the damaging effects that a long period of cheap money has had on the economy and why a new but more conventional approach to monetary policy is long overdue.
‘INTEREST’ seeks to identify the effects, positive or negative, interest rates have on the main sectors of the economy.
The recent inflationary crisis brought the long-standing era of cheap money to an abrupt close. For savers higher interest rates have proved good news after many years of negative returns on savings. But for those who have grown used to ultra-low borrowing costs and mortgages, higher rates have proved painful, and prompted calls for rates to be brought down to more ‘normal’ levels once again.
But as John Hughman, editor of INTEREST magazine, notes, the past decade and a half of unconventional and ultra-loose monetary policy has been anything but normal. “Those with longer memories will remember that today’s rates aren’t high by historic standards. What’s changed is that ultra-loose monetary policy has inflated asset prices and forced homebuyers to borrow more.”
In particular, he says, unconventional monetary policies such as quantitative easing have created unwelcome economic distortions, and an expectation that central bankers will step in to support financial markets above all else. He points to research from the Bank of England that suggests the wealthiest 10% of households on average got £350,000 richer during the first five years of QE, more than 100 times the benefit seen by the poorest 10%.
He concludes: “QE was possibly a necessary response to the 2008 financial crisis but has persisted for far too long and with few obvious benefits to the real economy. The return of higher rates offers an opportunity to bring back a more conventional approach to monetary thinking, and ensure it works in tandem with fiscal policy to better deliver an economy that works for everyone.”
Read more in the latest issue of INTEREST magazine, which you can read for free here. https://www.moneyfactsgroup.co.uk/magazines-and-reports/interest/
The latest issue of ‘INTEREST’ also explores the movements to both the Moneyfacts Average New Savings Rate and Average New Mortgage Rate, which fell in the aftermath of the Bank of England’s base rate reduction.
The Moneyfacts Average All New Savings Rate began to fall almost immediately after the Monetary Policy Committee’s (MPC’s) decision to bring down Bank base rate on 1 August, dropping by 10 basis points to 3.82% over the following weeks. With inflation creeping up during this time, savers have seen a fall in the real return on their investments over the past four weeks.
The Moneyfacts Average All New Mortgage Rate fell by 15 basis points from the start of July to 5.65% on 1 August. This trend continued throughout August with the Average New Mortgage Rate currently sitting at 5.45%.
These average rates are available for analysis on request, in addition to the more frequently used average rates which are broken down by product type or term.
- ENDS
‘INTEREST’ is dispatched in advance of meetings of The Bank of England’s Monetary Policy Committee and is distributed free of charge.
Next Issue 25 October 2024. To receive the latest issue and sign up please visit: https://www.moneyfactsgroup.co.uk/magazines-and-reports/interest/
Have an opinion? Letters to the Editor invited:
interest@moneyfacts.co.uk - John Hughman, Editor and Lead Writer of ‘INTEREST’:
John Hughman has been commenting on economics and financial markets for more than 20 years, starting his career as an equity analyst in the City, followed by a long stint at the Investors’ Chronicle, the UK’s leading personal investment magazine, which he edited for nearly a decade.
Moneyfacts Group plc, the UK’s leading provider of retail financial product data, has published the latest issue of its ‘INTEREST’ publication, which explores the damaging effects that a long period of cheap money has had on the economy and why a new but more conventional approach to monetary policy is long overdue.
‘INTEREST’ seeks to identify the effects, positive or negative, interest rates have on the main sectors of the economy.
The recent inflationary crisis brought the long-standing era of cheap money to an abrupt close. For savers higher interest rates have proved good news after many years of negative returns on savings. But for those who have grown used to ultra-low borrowing costs and mortgages, higher rates have proved painful, and prompted calls for rates to be brought down to more ‘normal’ levels once again.
But as John Hughman, editor of INTEREST magazine, notes, the past decade and a half of unconventional and ultra-loose monetary policy has been anything but normal. “Those with longer memories will remember that today’s rates aren’t high by historic standards. What’s changed is that ultra-loose monetary policy has inflated asset prices and forced homebuyers to borrow more.”
In particular, he says, unconventional monetary policies such as quantitative easing have created unwelcome economic distortions, and an expectation that central bankers will step in to support financial markets above all else. He points to research from the Bank of England that suggests the wealthiest 10% of households on average got £350,000 richer during the first five years of QE, more than 100 times the benefit seen by the poorest 10%.
He concludes: “QE was possibly a necessary response to the 2008 financial crisis but has persisted for far too long and with few obvious benefits to the real economy. The return of higher rates offers an opportunity to bring back a more conventional approach to monetary thinking, and ensure it works in tandem with fiscal policy to better deliver an economy that works for everyone.”
Read more in the latest issue of INTEREST magazine, which you can read for free here. https://www.moneyfactsgroup.co.uk/magazines-and-reports/interest/
The latest issue of ‘INTEREST’ also explores the movements to both the Moneyfacts Average New Savings Rate and Average New Mortgage Rate, which fell in the aftermath of the Bank of England’s base rate reduction.
The Moneyfacts Average All New Savings Rate began to fall almost immediately after the Monetary Policy Committee’s (MPC’s) decision to bring down Bank base rate on 1 August, dropping by 10 basis points to 3.82% over the following weeks. With inflation creeping up during this time, savers have seen a fall in the real return on their investments over the past four weeks.
The Moneyfacts Average All New Mortgage Rate fell by 15 basis points from the start of July to 5.65% on 1 August. This trend continued throughout August with the Average New Mortgage Rate currently sitting at 5.45%.
These average rates are available for analysis on request, in addition to the more frequently used average rates which are broken down by product type or term.
- ENDS
‘INTEREST’ is dispatched in advance of meetings of The Bank of England’s Monetary Policy Committee and is distributed free of charge.
Next Issue 25 October 2024. To receive the latest issue and sign up please visit: https://www.moneyfactsgroup.co.uk/magazines-and-reports/interest/
Have an opinion? Letters to the Editor invited:
interest@moneyfacts.co.uk - John Hughman, Editor and Lead Writer of ‘INTEREST’:
John Hughman has been commenting on economics and financial markets for more than 20 years, starting his career as an equity analyst in the City, followed by a long stint at the Investors’ Chronicle, the UK’s leading personal investment magazine, which he edited for nearly a decade.
