Today Britain votes on remaining part of the EU

[mikeymikec]

can somebody explain me why negative mortgage rates are bad for the borrower?

I've never bought a house and I'm not a financial professional in any way, but I would guess that this is negative equity by another name - you buy something on loan for say £50,000, then by the time you've finished paying for it, it's only worth £40,000. It puts you in a bad position to buy another house. Also people witnessing negative equity in action are a lot less likely to buy a house?

 

[buckshot24]

I've never bought a house and I'm not a financial professional in any way, but I would guess that this is negative equity by another name - you buy something on loan for say £50,000, then by the time you've finished paying for it, it's only worth £40,000. It puts you in a bad position to buy another house. Also people witnessing negative equity in action are a lot less likely to buy a house?

I think this is another issue. A negative rate is when the interest being charged to borrowers turns negative. When the rate is tied to something external this can happen.

http://money.cnn.com/2015/04/22/investing/negative-mortgage-rates-europe/

 

[sontakke]

so you get check from the bank rather than you sending a check to the bank for your mortgage. so please explain me again why that is a bad thing?

are there people who think paying 20% mortgage interest is better than paying 2% mortgage interest?

 

[agent00f]

so you get check from the bank rather than you sending a check to the bank for your mortgage. so please explain me again why that is a bad thing?

are there people who think paying 20% mortgage interest is better than paying 2% mortgage interest?

Negative interest rates are more indicative of possible underlying problems than a problem per se.

To understand this requires some background math on how/why interest rates are set. Fundamentally if I loan you $100, I will want back more than $100 because there's some risk you default. However if I think money will be worth more in the future (ie deflation, a bad thing), I can accept <$100 because that <$100 will still be more than the $100 of now. Similarly on houses/assets, if the asset will rise in value, even if you default I get the (more valuable) house and sell it for my money back. You can differentiate between these two by comparing rates, and it seems negative rates are across the board than just housing, which if these are our two options it appears more the former.

The other key option to consider is that the base rate on interest/loans is often from the central gubmint bank to private banks. The gubmint isn't bound by individual capitalist greed, and uses the rate as a control knob to regulate the larger picture. For example if more spending is necessary to keep the economy going, it can essentially create more money/spending by making borrowing it cheaper (or in this case paying people to borrow/use it). In a vacuum this creates inflation, which isn't necessarily a bad thing if other factors are causing deflation.

In the grand scheme of things none of this is caused by brexit, but uncertainty can discourage spending/investment, which the government will try to counteract. Overall the goal in modern capitalism is maintain stability and a modest inflation (and ostensibly modest interest rate).

 

[fskimospy]

so you get check from the bank rather than you sending a check to the bank for your mortgage. so please explain me again why that is a bad thing?

are there people who think paying 20% mortgage interest is better than paying 2% mortgage interest?

Whether that is bad or not all depends on inflation. It can definitely be a bad thing.

Currently Europe is facing deflation so these negative interest rates you are seeing are a very imperfect way to fight that. Deflation is really bad so this is definitely a problem.

 

[shady28]

I think this is another issue. A negative rate is when the interest being charged to borrowers turns negative. When the rate is tied to something external this can happen.

http://money.cnn.com/2015/04/22/investing/negative-mortgage-rates-europe/

That is not what negative rates are.

Negative rates are when the central banks charge other banks for parking their cash with them, instead of paying them interest.

This gives banks an incentive to make loans, because it costs them to just sit on cash.

Edit : What should be concerning about negative rates is what it means insofar as the banks view on risk. When the banks are happier drawing 0.5% interest (or 0%, or paying 0.1%) than giving a loan out, it implies that there are few credit worthy investments out there.

 

[sontakke]

To understand this requires some background math on how/why interest rates are set. Fundamentally if I loan you $100, I will want back more than $100 because there's some risk you default. However if I think money will be worth more in the future (ie deflation, a bad thing), I can accept <$100 because that <$100 will still be more than the $100 of now.

I must be missing something. Under that condition, wouldn't you rather keep your money under your mattress rather than loaning it to me at negative interest rate? Please explain how money would be worth more but the currency you have under your own mattress would be worth less. This is like Click & Clack investment where one gets 50% return of the invested money!

Negative interest makes sense if you think that you have no physical security to keep the currency under your own mattress or the bank charges you "storage fee" to keep your money on their books.

I understand the central bank controlling the rate it charges to the bank but has it ever translated in to negative mortgage rate ever? That is how this rat hole started.

 

[shady28]

I must be missing something. Under that condition, wouldn't you rather keep your money under your mattress rather than loaning it to me at negative interest rate? Please explain how money would be worth more but the currency you have under your own mattress would be worth less. This is like Click & Clack investment where one gets 50% return of the invested money!

Negative interest makes sense if you think that you have no physical security to keep the currency under your own mattress or the bank charges you "storage fee" to keep your money on their books.

I understand the central bank controlling the rate it charges to the bank but has it ever translated in to negative mortgage rate ever? That is how this rat hole started.

See previous post, that is not what negative rates are.

 

[agent00f]

I must be missing something. Under that condition, wouldn't you rather keep your money under your mattress rather than loaning it to me at negative interest rate? Please explain how money would be worth more but the currency you have under your own mattress would be worth less. This is like Click & Clack investment where one gets 50% return of the invested money!

Negative interest makes sense if you think that you have no physical security to keep the currency under your own mattress or the bank charges you "storage fee" to keep your money on their books.

I understand the central bank controlling the rate it charges to the bank but has it ever translated in to negative mortgage rate ever? That is how this rat hole started.

In practice, that's why negative rates aren't very negative, because you're essentially assuming someone else has a safer mattress than you do (the difference can't be much). You for example are generally not a safer bank than an actual bank, so they probably won't give you anything to use your mattress, but can charge you to store money in their mattress.

If a negative mortgage rate specifically is the case, I'd assume it's some kind of central gubmint subsidy policy to get people into housing. In practice, the gov has different divisions each with their tools to affect policy, so the tax people (congress in the US) can give a tax cut, or the monetary people (central bank) can play with interest rates.

 

[Naeeldar]

http://www.zdnet.com/article/brexit...e-warns-it-could-move-headquarters-out-of-uk/

So Vodafone looking at moving. Banks are pulling out some % of their workforce. Yep this is a good thing for London and GB - should absolutely be peachy for workers there.

Frankly the entire Brexit move is just plain appalling. If GB continues forward it's guaranteed to be a nice sized hit to the global economy. I had a call with a VP from a fortune 500 financial firm yesterday. She's based in the US now but from GB and she is absolutely embarrassed by it all - frankly because she knows how bad it's going to hurt the country and global economy.

 

[BeeBoop]

I'm from America reading American news which can be biased. So I'm wondering, is it bad in the UK? Are you guys really regretting the Brexit vote? Do you believe you guys will be in recession?

I would like someone from the UK to answer.

 

[sontakke]

Best tweet seen: (GaryDelaney) "I feel sorry for the Conservative party, I know all about when it's like when your johnson unexpectedly fails to stand at a crucial moment."

 

[LegendKiller]

I'm from America reading American news which can be biased. So I'm wondering, is it bad in the UK? Are you guys really regretting the Brexit vote? Do you believe you guys will be in recession?

I would like someone from the UK to answer.

Ftse 100 is at or higher than pre-vote levels.

Yeah, huge pandemonium, the world is ending because soros said so. Never mind these asshats make more money on increasing volatility.

Gotta love all of the panicked people above. What did I say? Nobody fucking knows what this means or how it works out, so don't panic.

Where is our resident junior rainmaker, better yet, baby sprinkle, now? Probably programming some spreadsheet for a vp as the lowest cog on a deal team in jersey city.

 

[Blackjack200]

Best tweet seen: (GaryDelaney) "I feel sorry for the Conservative party, I know all about when it's like when your johnson unexpectedly fails to stand at a crucial moment."

Ewan McGregor called Boris a spineless wise and beautiful woman on twitter.

 

[Svnla]

Soros - exit is as bad as 2008 crisis - http://www.businessinsider.com/soros-brexit-has-unleashed-a-crisis-as-bad-as-2008-2016-6

.

 

[LegendKiller]

Soros - exit is as bad as 2008 crisis - http://www.businessinsider.com/soros-brexit-has-unleashed-a-crisis-as-bad-as-2008-2016-6

.

Fuck soros. He made his bundle off of dB going down, he is probably short the world which is why he wants to sink Europe.

 

[PrincessFrosty]

I'm from America reading American news which can be biased. So I'm wondering, is it bad in the UK? Are you guys really regretting the Brexit vote? Do you believe you guys will be in recession?

I would like someone from the UK to answer.

I'm from the UK and voted out and I'm not regretting my decision, we knew there would be some fallout and that was expected, but the FTSE 100 and 250 are back to where they were pre-referendum and the pound has been on the incline slightly.

I don't think we'll go into recession, the 2 year window for negotiation with the EU is going allow us to negotiate some trade deals with these countries and others we previously couldn't due to EU law. Only if we really fuck up trade negotiations do I see us risking a recession.

The (older) Brits are used to weathering hard times it kind of defines us to some degree, and there's a lot of scared baby liberal teens who feel entitled to the world who are worried but generally speaking we'll get our head down, work hard, make the deals we need to and move on. I don't see this as a big deal at all, certainly not worth the cost of losing our sovereignty.

 

[PrincessFrosty]

http://www.zdnet.com/article/brexit...e-warns-it-could-move-headquarters-out-of-uk/

So Vodafone looking at moving. Banks are pulling out some % of their workforce. Yep this is a good thing for London and GB - should absolutely be peachy for workers there.

Frankly the entire Brexit move is just plain appalling. If GB continues forward it's guaranteed to be a nice sized hit to the global economy. I had a call with a VP from a fortune 500 financial firm yesterday. She's based in the US now but from GB and she is absolutely embarrassed by it all - frankly because she knows how bad it's going to hurt the country and global economy.

The problem is that in the UK a massive amount of people are in London, these banks and financial institutions have too much sway with the government for their own selfish interest, this leads to policy which is too geared to suit these large businesses and not balanced with the little guy.

The vote won because outside of London there is still MILLIONS of Brits who do not live this lifestyle they run and work at smaller businesses that deal locally and they're being screwed by global/EU rules that are designed for these huge multi-nationals and people are sick of it. Most of these people don't care if a load of these financial institutions start losing cash. These large businesses have done nothing for ordinary people with ordinary jobs the wealth they bring to the country isn't seen by these people. And the cost of all this trade is the country flooded with low skilled migrants who put pressure on public services causing average people to suffer. All the private bankers with private medical insurance and private schools in the big cities don't feel it and they don't give a shit, so it takes the peoples voting power to end this nonsense.

So basically the common man has voted for themselves and this means big business isn't going to get what it wants anymore, if that gets driven elsewhere then it doesn't hurt the average people. So it's a case of striking a balance between these 2 polarized things.

 

[K1052]

I don't think we'll go into recession, the 2 year window for negotiation with the EU is going allow us to negotiate some trade deals with these countries and others we previously couldn't due to EU law. Only if we really fuck up trade negotiations do I see us risking a recession.

This is the part that would worry me. Two years really isn't a lot of time to negotiate everything with the EU, implement all the law domestically required, and negotiate/execute (at least) dozens of separate agreements with other countries. Also, that the EU is going to bow to UK demands for a better than Norway style deal is a very dubious prospect given that the one thing they seem to all agree on is that the UK will be made to pay for leaving and can't expect the benefits of a very favorable trading relationship with the EU and avoid the costs. Also as I recall an extension past two years requires unanimous consent which is less than likely.

 

[K1052]

being screwed by global/EU rules that are designed for these huge multi-nationals and people are sick of it.

The UK will have to comply with most, if not all, EU rules and regulations in order to secure a trade deal that is anything short of disastrous compared to present.

 

[rpanic]

If other countries bail from the EU will the the British come out ahead being the first to do so?

 

[mikeymikec]

The problem is that in the UK a massive amount of people are in London, these banks and financial institutions have too much sway with the government for their own selfish interest, this leads to policy which is too geared to suit these large businesses and not balanced with the little guy.

The vote won because outside of London there is still MILLIONS of Brits who do not live this lifestyle they run and work at smaller businesses that deal locally and they're being screwed by global/EU rules that are designed for these huge multi-nationals and people are sick of it.

Every UK city I checked voted remain. London is not mostly comprised of banks, there are tonnes of business types there that would still be there if the "financial centre" wasn't.

Do you actually have any evidence to support your claim that so many businesses are getting screwed by EU rules? Why do you think that a vote for brexit is going to change the fact that a) we live in a global economy and b) Europe is still our next-door neighbour and c) as K1052 said, we're going to have to play by many of the EU's rules in order to trade with them.

So basically the common man has voted for themselves and this means big business isn't going to get what it wants anymore, if that gets driven elsewhere then it doesn't hurt the average people. So it's a case of striking a balance between these 2 polarized things.

LOL. You still think that this vote is a victory for the commoners. It isn't, for all the reasons I posted in the other brexit thread. The "common man" needs big business. Big businesses have the government's ear to ensure that the rules don't get in their way. If they don't get their way, then they take their jobs elsewhere. Global economy, remember? AFAIK it's not as if the UK is sitting on top of some resource not to be found elsewhere.

 

[mikeymikec]

double post

 

[norseamd]

Every UK city I checked voted remain. London is not mostly comprised of banks, there are tonnes of business types there that would still be there if the "financial centre" wasn't. Do you actually have any evidence to support your claim that so many businesses are getting screwed by EU rules? Why do you think that a vote for brexit is going to change the fact that a) we live in a global economy and b) Europe is still our next-door neighbour and c) as K1052 said, we're going to have to play by many of the EU's rules in order to trade with them.

LOL, are you actually trying to have a discussion with a Trump/UKIP partisan? This is going to go real far.

 

[agent00f]

Ftse 100 is at or higher than pre-vote levels.

Yeah, huge pandemonium, the world is ending because soros said so. Never mind these asshats make more money on increasing volatility.

Gotta love all of the panicked people above. What did I say? Nobody fucking knows what this means or how it works out, so don't panic.

Where is our resident junior rainmaker, better yet, baby sprinkle, now? Probably programming some spreadsheet for a vp as the lowest cog on a deal team in jersey city.

Amusing coming from the guy who was just saying this is only market volatility. Might want to figure out why the currency value is less effected by the interest rate cut just announced.