OT : Inflation & Compound Interest.

[Crumbly65]

Can those of you more mathematically adept than me, or more financially learned, care to take a punt on what £1,500.00 in 2001 would be worth today in 2023?

I'm sure there's a formula or something for calculation, but it's beyond me.....

[simon1959]

£2,680.13

No calculation required, the BoE sorts it for you!

https://www.bankofengland.co.uk/monetary-policy/inflation/inflation-calculator

[Mycroft]

Future value = present vale x (1+i)ⁿ where x is 1500, i is the interest rate (here the average inflation rate) and n the number of years (22).

If you use CPI to measure inflation (big if - it's political as hell and bears little relation to real household costs, plus the UK used the higher RPI measure until 2010), then 'average' inflation between the 2 dates has been +/-2.6% (assuming average inflation for 2023 of 9%), then you get:

1500 x (1.02614)²², which gives you £2,646ish.

[Crumbly65]

Mycroft, you're an absolute star!  Thank you sir.

[Mycroft]

Mycroft, you're an absolute star!  Thank you sir.

Thanks Crumbly. I'd accept faded star 

[ChrisJC]

Does that answer the question though?

If you had £1500 in 2001, there is a certain basket of goods you could have bought with it.

If you had £1500 in 2023, how much of the basket could you purchase? You couldn't buy all of it as prices have risen.
I think you would only be able to buy 57% of what you could have bought then.

Chris.

[w3526602]

Hi Crumbly,

So how much has the price of similar new S2 chassis risen in that time.

Related  ... four or five years ago, we bought our present bungalow. Our lender agreed to treat our loan as a new mortgage, rather than the normal second mortgage. A  they were advertising. A very quick and easy transaction. Memory says we are paying 4% COMPOUND. I believe we are paying a few hundred pounds more than expected, each month,as Barbara wants to keep ahead of the interest increments.

A few weeks after it was all done and dusted, the lender wrote, offering a small cash reward for any suggestion that would help them recruit new customers.

I wrote back, pointing out that most banks and building societies require the loan to be repaid before you die. The Second Mortgage (Equity Release) lenders don't require repayment of the loan until both husband and wife do die.

The cheque arrived by return of post.

I see that our lenders are now offering first mortgages to over 55s, in the national press. The advert seems to indicate that the borrowers are not required to make any repayment, at all.

It is not a good idea to borrow in this way, to buy a depreciating asset, such as a motor car. Compound interest can hurt.

I believe that the time it takes for the loan to double, assuming no repayments are made, is by dividing 72 by the rate of interest. In our case that would be 72 divided by 4%, which equals 18 years. Against that, you can factor in the extra payments we are making, and the increase in the value of our house ... last time I looked it had appreciated by nearly £40,000. But it can also drop, before it's time to settle up.

Be careful.

602

PS. The Black Death (which preceded the Great Fire of London) caused a great "redistribution" of wealth in Europe, benefitting many.

[Larry S]

Per the Federal inflation calculator I use it comes in at £2,613.73.  It is based on the buying power of goods and services - such as a loaf of bread in 2001 compared to now.




Larry

[GlenAnderson]

Hargreaves Lansdown's inflation calculator uses RPI (Retail Price Index), which is a better reflection of everyday goods.

https://www.hl.co.uk/tools/calculators/inflation-calculator

That puts £1,500 in 2001 at £3,331 in today's money ...

[GHOBHW]

not to jump off topic, but houses on my street in the early 2000s were 20k for a 3-4 bedroom house, now you need a small loan for one. same houses too...
along with prices increases in everything, no wonder young people can't move up now.

things rise fast.....

I remember talking to someone and they said they bought a richards chassis in around 2006 for £600 brand new, not sure if that was the going price or not.

wish things were that cheap now.

[GlenAnderson]

I think a lot of us are old enough to fall into the "inflation" trap, particularly the recent period of high inflation we're seeing.

I used to laugh at my dad getting outraged at the cost of stuff when I was a kid; "50p?! For a portion of chips?! That's ten bob! When I was your age you wouldn't have been able to carry ten shillings worth of chips!"... "mumble, mumble, grumble, decimalisation, crime against the working class, mutter, mutter...."

My Land-Rover cost £450 in 1993. That's a whisker under £1,300 in todays money and they were very much more plentiful, and cheap, back then.

My Marsland chassis was a few pounds under £1000 in 1998, IIRC, which is nearly £2,400 adjusted for RPI.

[Alan Drover]

I had the chassis on my Series 3 replaced in 1997 for a total cost of £1,200 including labour.

[TimV]

I used to laugh at my dad getting outraged at the cost of stuff when I was a kid; "50p?! For a portion of chips?! That's ten bob! When I was your age you wouldn't have been able to carry ten shillings worth of chips!"... "mumble, mumble, grumble, decimalisation, crime against the working class, mutter, mutter...."

I think I can remember 10p for a portion of chips - that was two bob in old money!

I also remember 14p for a pint of beer and the same for a pint of scrump ...

[autorover1]

I am feeling old, I remember a portion of chips costing 6d . (2.5p)

[cswagon]

And me, a tanners worth of chips and a pickled onion for an extra penny.