One-year or two-year fixed rate bond?

codetown

Hungerdunger wrote: »

Assuming we can safely leave the money in savings for two years, does anyone know what the general consensus in financial circles is regarding interest rates in a year's time? Or do you have your own views?

There are different opinions, but on the short term I would predict it is quite possible that there will be one quarter point raise followed by two quarter points separate falls. The timing of this is not so easy to predict. I would say the raise is possible in September/October 2008 and the two falls in January 2009 and April 2009.

I would be betting that in August 2009 the UK base rate will be around 4.75%. Things might slow down even faster in 2009, so it is not impossible that in August 2009 the rate be at 4.5% (or lower if things go really bad for uk economy) (current graphs here: http://www.housepricecrash.co.uk/graphs-base-rate-uk.php).

One final comment: I am not too convinced that the base rate is the dominant factor in bonds anymore. The open market (with multiple nation coming in) and the desperate need for money of banks (with bank inter-lending prices beeing too high) determine a lot of good offers way above the base rate (and disconnected from it) anyway