Convince me that Rates are not going to the moon...

TheGreatBear

What makes you think that during a period of deflation the interest rates will rocket?!? In the mid nineties Japan was in a similar situation as ourselves and rates were kept at below 1% for an extended period and even then they didn't sky rocket. Personally, i feel that rates will hover around the 1% mark for the next 18 months and then gradually creep again to around 5-6%. I dont think we will see rates of 12-15%! Just my personal opinion and that of many of my clients who work in the city.

Regards

beecher

TheGreatBear wrote: »

What makes you think that during a period of deflation the interest rates will rocket?!? In the mid nineties Japan was in a similar situation as ourselves and rates were kept at below 1% for an extended period and even then they didn't sky rocket. Personally, i feel that rates will hover around the 1% mark for the next 18 months and then gradually creep again to around 5-6%. I dont think we will see rates of 12-15%! Just my personal opinion and that of many of my clients who work in the city.

Regards

I suppose it is all in the definition of 'rocket'. If they go from 0% to 6% that'll seem like a rocket to anyone who has got used to a low tracker! I think 8% might be more likely than 15% but it is all guesswork. I remember fixing at 8% and being told by an adviser that money wouldn't get any cheaper!

I think deflation may be followed by hyperinflation once we get in to quantitative easing mode.

Wickedkitten

Amblin wrote: »

Thats the phrase I was looking for "Risk Averse".

Im thinking that leaving it till Feb 22 should be enough time for Nationwide to pass on any cut made this month?.

They are passing them on from today. We got our decision in principal from Nationwide on Monday and they said they would wait until today to put the app in so we can take advantage of the rate cut.

Fliss_M

beecher wrote: »

I'd be overpaying as much as possible while on low rates - this will reduce the capital outstanding and allow you to gradually reduce the overpayment as interest rates rise. I think people who get used to paying interest rates of 2 or 3% are going to be in for a bigger shock than people those who do so.

Thats the plan but this next year am using it to pay off my credit cards instead. Then it goes on the mortgage.

My personnel feeling is they will stay this low, if not lower for 2009, possibly 2010 but then creep up to 5-6%.

After that, who knows! But I would fix for 5 years if I had the option. In hte long run in the current climate, its probably the best thing.

Amblin

TheGreatBear wrote: »

What makes you think that during a period of deflation the interest rates will rocket?!? In the mid nineties Japan was in a similar situation as ourselves and rates were kept at below 1% for an extended period and even then they didn't sky rocket. Personally, i feel that rates will hover around the 1% mark for the next 18 months and then gradually creep again to around 5-6%. I dont think we will see rates of 12-15%! Just my personal opinion and that of many of my clients who work in the city.

Regards

Yep! I made the Japan point earlier.

I'm just not sure we are being told the full extent of the problems. I am average Joe, with a decent home. My LTV is 50% and it's taken me 22 years of work to get to this point. I have a wife and children whose interest I want to protect. I have no credit cards or loans other than my mortgage. I was raised that if you don't have it you can't spend it. I have not contributed to the problem. I just need to shelter from it. Its been a long time since we had high rates. They slip from the memory.

Again, I think if we could get the truth and some cast iron reassurances, many could move on from this situation.

Heres an interesting link. Look at '89!

http://www.moneyextra.com/dictionary/Interest-rate-history-003455.php

I appreciate your reply, though I believe nothing from the city any longer :cool:

Amblin

beecher

Amblin wrote: »

I'm just not sure we are being told the full extent of the problems. I am average Joe, with a decent home. My LTV is 50% and it's taken me 22 years of work to get to this point. I have a wife and children whose interest I want to protect. I have no credit cards or loans other than my mortgage. I was raised that if you don't have it you can't spend it. I have not contributed to the problem. I just need to shelter from it. Its been a long time since we had high rates. They slip from the memory.

Why are you worrying about losing your home if youre LTV is 50% and you have no credit cards/loans? Why don't you fix for 5/10 years and then forget about it? Does it matter if interest rates go up or down in the that time for you personally if you do so? You'd be sheltered as you seem to want.

No-one can tell us the extent of the problem because no-one knows how it is going to unfold - it depends on so many things. We won't have a carbon copy of anything which has happened elsewhere, ie Japan.

Amblin

beecher wrote: »

Why are you worrying about losing your home if youre LTV is 50% and you have no credit cards/loans? Why don't you fix for 5/10 years and then forget about it? Does it matter if interest rates go up or down in the that time for you personally if you do so? You'd be sheltered as you seem to want.

No-one can tell us the extent of the problem because no-one knows how it is going to unfold - it depends on so many things. We won't have a carbon copy of anything which has happened elsewhere, ie Japan.

I worry because I'm already at full working capacity (no hours left in a week!). Though I have acceptable headroom, I want to maintain a cushion in the monthly household budget. I have rationalised all utility services, got the best deals on everything. Though rising cost of food, energy (which can only get worse), taxation are all nibbling at the cushion.

A 3 or 4 point move would put me close to if not at capacity. More than that and I have a problem

That's why I worry. I'm just trying to get the best value from everything, cos its hard work to earn it in the first place, let alone having to give it away when I don't have to!

You make valid points!

Cheers

Amblin

TighterThanTwoCoatsOfPain

TheGreatBear wrote: »

Personally, i feel that rates will hover around the 1% mark for the next 18 months and then gradually creep again to around 5-6%. I dont think we will see rates of 12-15%! Just my personal opinion and that of many of my clients who work in the city.

Regards

I dont think any really expects rates to hit 15% again, but then how many HONESTLY predicted a BOE rate so low and so fast?

If the BOE rate hits 6% with 2 years and most would agree its quite feasible, there will be ALOT of very unhappy people sitting on their BOE+2% trackers begging for mercy (assuming they didnt jump on the way up - if they arent tied in)

a tracker on 3.5% now might look peachy... me, i'm fully convinced that my 10 years fix at 5% will be a long term winner for me, but then I'm quite risk adverse and wouldnt be touching a high margin tracker with a fee at the minute.

beecher

Amblin wrote: »

I worry because I'm already at full working capacity (no hours left in a week!). Though I have acceptable headroom, I want to maintain a cushion in the monthly household budget. I have rationalised all utility services, got the best deals on everything. Though rising cost of food, energy (which can only get worse), taxation are all nibbling at the cushion.

I get that, and fixing for 5 or 10 years at a rate which you're happy with and which leaves you a cushion seems to me to be the best option. If you don't pick the lowest ever available 5 or 10 year rates, the peace of mind sounds like it'd be worht it.

treb1971

I expect the cost of fixed rate mortgages to come down over the next three months, as the difference between swap rates and mortgage rates is (I've read) 2.8% - an unhealthy gap. This is the difference between the rate at which the banks lend to each other, vs. the rate at which the banks lend to us.
I've also heard commentators state that banks are going to be 'challenged' for two to three years. If this is the case, interest rates will not go up. The low BOE rate helps the banks.