When will interest rates go up again?

penguine

Thrugelmir wrote: »

The BOE could lower the base rate at 0% for an extended period of time. As the economy may well take some time to turn round. We could well see low base rates for a couple of years.

Don't we need to raise interest rates though if we are to attract foreign investment in the UK economy? Or are we just going to forget about that and print loads of money instead?

Pobby

Dithering_Dad wrote: »

My current mortgage deal ends in April 2010 and then I'll be arranging a 5 year fixed rate, where I will fix the repayments so that the mortgage is cleared at the end of the 5 year period.

Bascially we need interest rates to stay low for another year and 2 months.

Can`t see IRs going north for quite a while yet. Ironic for me. When I was borrowing always had high IRs. Now I`m a saver it`s the other way around.

However, when I bought first in the 70`s wage inflation wiped out my mortgage for me so I have had times when it worked to my advantage.

Dithering_Dad

purch wrote: »

Also the depression that will come over all the Hyper-Inflation Hawks when they see all their carefully laid plans go up in smoke cos it never arrives.

What carefully laid plans?

Really2

penguine wrote: »

Don't we need to raise interest rates though if we are to attract foreign investment in the UK economy? Or are we just going to forget about that and print loads of money instead?

Not really a weak £ makes the UK a good place to set up devisions to ship in to europe etc.

Graham_Devon

I have been predicting 0% for about 7 months now to much scorn from a fair few. My predictions will still be up as they were on this forum, in my post history somewhere.

I also predicted the FTSE will bottom out at 2200 somewhere in this recession / depression. Which I still stand by.

0% rates for 16-18 months would be my prediction. Simply because we have labour in power at the moment, they will NOT let them rise before an election, as people will have got used to the lower mortgage payment, so the last thing they will want with an election coming up is peoples mortgage payments going up.

Tories will come in, they can't just put them up instantly, so will take 2-6 months. Then we should see a gradual increase to around 8% for the next few years.

And I don't believe the guff about the BOE being independant. If it's so independant, how come gordon can carry on yabbering about low interest rates in his speeches and what the labour party have done, and take credit when the interest rates are right? He simply says its independant when it all goes wrong.

purch

Don't we need to raise interest rates though if we are to attract foreign investment in the UK economy?

Raising interest rates, whilst the UK is still at the beginning of a long recessionary period will be the surest way to destroy the value of our currency !!!

Thrugelmir

penguine wrote: »

Don't we need to raise interest rates though if we are to attract foreign investment in the UK economy? Or are we just going to forget about that and print loads of money instead?

No need to attract foreign investment as the current exchange rates are enough incentive for people to invest. Though other than the Tower of London, Windsor Castle and the Angel of the North. I'm not sure that there's anything else to sell.

For the Government to raise money by selling Gilts , this is done by a tendering mechanism. The offered yield will need to be attractive but the market will determine the rate. This is set independently of the BOE base rate.

The whole point of a low base rate is maintain capital flows in the wholesale markets. Banks lend to each other daily using LIBOR. This rate is set by reference to base rates. Until banks deleverage their balance sheets low base rates will continue.

Generali

I know that lots of people think I'm an idiot for believing that what's going on vis-a-vis interest rates can't work, no matter how much the Government and voters want it to.

1. The Government wants to have the banks be able to borrow money at close to 0% (the base rate is the rate of interest at which the banks can borrow money against security from the Bank of England).
2. The Government wants to sell Gilts (UK Government bonds) in huge numbers. That means (most likely) that the UK Government will have to offer a higher rate of interest to Gilt buyers.
3. The most normal security that banks use when they borrow from the Bank of England is Gilts.

When (and it will be when) the Government has to pay more to borrow from the market because all Governments are trying to borrow so much there will be very big problems.

The Government will be selling Gilts at a lower price than it is prepared to buy them back at. Clearly anyone with any sense would pile into a trade like that until the seller/buyer is bankrupted.

Thrugelmir

Generali wrote: »

I know that lots of people think I'm an idiot for believing that what's going on vis-a-vis interest rates can't work, no matter how much the Government and voters want it to.

1. The Government wants to have the banks be able to borrow money at close to 0% (the base rate is the rate of interest at which the banks can borrow money against security from the Bank of England).
2. The Government wants to sell Gilts (UK Government bonds) in huge numbers. That means (most likely) that the UK Government will have to offer a higher rate of interest to Gilt buyers.
3. The most normal security that banks use when they borrow from the Bank of England is Gilts.

When (and it will be when) the Government has to pay more to borrow from the market because all Governments are trying to borrow so much there will be very big problems.

The Government will be selling Gilts at a lower price than it is prepared to buy them back at. Clearly anyone with any sense would pile into a trade like that until the seller/buyer is bankrupted.

Gilts are debt notes. The BOE sells a piece of paper that honours to pay the bearer back a given amount on (normally) a fixed date in the future at either a fixed or variable rate of annual interest. Once issued the value of gilts is determined by the market depending on current interest rates. The BOE does not trade speculatively in Gilts.

purch

The BOE sells a piece of paper that honours to pay the bearer back a given amount on (normally) a fixed date in the future at either a fixed or variable rate of annual interest

No it doesn't.