Yesterday the Bank of England stepped into the financial market and put their foot down by limiting mortgage borrowing to four times salary. Yes it had been rumoured but was not expected. So why now?
The banks says we need a fire-break around mortgages to stop 'reasonable' behaviour becoming risky or 'irresponsible'. How does the bank see the countries recovery today as they currently control £350 billion of gilts?
They say we have seen the fastest job creation period in written history, that is quite a statement. What it does not show is that half the people with new jobs are doing 20 hours a week instead of 40 hours a week and that the average hourly rate has dropped recently. So has the bank taken this into consideration?
They also say that three quarters of debt has a floating rate, in other words they will be affected by rate rises in future, but one of the most popular questions is, “When will rates rise”.
Yesterday the bank reiterated that when the country gets back to full employment, rates will start to rise slowly. Do they mean when everyone has a 20 hour job or when everyone has a 40 hour job?
It is expected that rates will probably rise by a quarter percent at a time until 2.5% is reached and that will be approximately in 2017. Considering savers have been screwed since 2008, is this really good enough?