The UK’s cheapest-ever fixed-rate mortgage goes on sale on Friday as a price war continues to drive home loan rates to record lows. The “lowest ever” deal, priced at 1.09% for two years, raises the prospect that home loans allowing people to fix their monthly payments for less than 1% could be just days away.
This adds on to this.
On 20 April, HSBC began offering a five-year fixed-rate home loan with a 1.99% rate – the first time a deal of this type has been available at below 2%.Mortgage rates are at record lows and homeowners can fix for two years at just 1.18 per cent, and for up to ten years at less than 3 per cent. This is - to anyone of a reasonable vintage - incredible. And this is at a time when the UK is "supposedly" growing at around 2.7% p.a.
I know what I think of this, and what I think it is telling us about the true state of the economy, but for you I think it reinforces the idea that monetary policy is extraordinarily loose, and we could head into the next downturn with nothing available for the central bank to fend off a recession, except QE and... negative interest rates. Think about this; you will have to write about the standard theoretical models, but once you have completed your nice chunky paragraphs, your chains of analysis, you can also offer up the evaluation point: Have the central banks over-cooked it with their loose monetary policy, and have they missed their exit points? This tweet by James G Rickards suggests they have (on the US economy):
Expansion now 72 months old. Average post-1980 expansion = 76 months. Time for#Fed to cut rates. Oops, they forgot to raise them! Hmm.#QE4
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