Should I fix my rate or take out a tracker?
Article Published: Tuesday, July 14th, 2009
Well first of all you should check out this website under frequently asked questions, which is full with evidence, graphical, very scary reason why you just might want to consider fixing your mortgage. The longer the better!!.
Let just set the scene first of all. We are in unchartered territory, never in history have interest rates been at these historical low levels. It is a measure of just how much trouble we are in that the bank and indeed all governments have had to reduce interest rates just to keep everyone solvent. The completely mad idea is to get you consumers out there to start spending again...like you should be.
The opposite effect has actually happened, much to the consternation of those in the know. You have cut back on frivolous spending and heaven help us all, started to save. The is quite contrary to the whole idea of living in a capitalist based economy, which is based on creating capital by the issue of debt.
Most western governments have now used up one of there most important tools in stimulating the economy. Interest rates. They can't go any lower so they have to resort to quantitve easing to create money out of thin air in order to stimulate the economy ((ie) get you spending again and running up some more debt ). The sad fact is that without debt there is no money and the powers that be, know this only too well.
All this extra money they have created has disappeared down a big black hole called deflation. It has not had any effect simply because the new issue of money can't keep up with how quickly money is being destroyed. If you want a clear idea of this then look up fractional reserve lending on the internet. Just to simplify matters if you deposit £1000 with a bank then this allows them to create new money by lending part of this to someone who needs to borrow. They then go and deposit in another bank, which then enables that bank to lend to someone else. Your initial £1000 deposit can end up creating new money to the tune of £8000 if the reserve ration is 8:1. It is a simple an ingenious way of creating wealth, however if it works this way it also works in reverse. That is if you default on your loan, then the reverse happens and your £1000 default causes a contraction in the money supply of up to £8000. Now you know why all this new money has had no effect what so ever, as it just keeps disappearing.
Now once this defalation period has finished, all this new money no longer disappears and actually starts to expand like it was supposed to do in the first place. Trouble is like a genie let out of the bottle it is very difficult to stuff it back in. Inflation is the life blood of a capitalist based economy and that is exactly what they are so desperately trying to stimulate. Again I reiterate money is debt and they have to continually increase debt to create more and more money that is necessary to keep the debt bubble going. The key here is controlled inflation. The powers that be know they have not got a clue how take all this extra money back out of the economy, except by increasing interest rates.
So we are back to our original question. Hopefully either you can make your own mind up or you are happy to stick your head in the sand and ignore the facts.
By Steve Wood - Director of Echelon Mortgages Ltd
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Should I fix my rate or take out a tracker - Tuesday, July 14th, 2009
Mortgage borrowers rush to fix as rates rise fast ! - Saturday, June 27th, 2009