3 more years of low rates have damaging impacts on many Londoners

by Dr. Ros Altmann

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Should three more years of record low rates really be a cause for celebration? Certainly, many Londoners will benefit from the bonanza of minuscule mortgage payments and rising house prices. However, just one third of Londoners actually have a mortgage, while low interest rates have negative impacts on the many other groups. Younger people will be hit by the rising rents resulting from higher house prices. Savers will see their income and capital eroded by inflation remaining higher than interest rates. Low rates are bad for pensions and pensioners too, as low annuity rates make pensioners permanently poorer. It does seem strange that rates should be expected to stay so low, when growth is rising and inflation remains high. Wasn’t it encouraging too much borrowing and relying on rising house prices that led to the crisis in the first place. Surely, more of the same is not what we need. One can’t help thinking that this may be more about good politics than good policy.