Interest rates

Pobby

It appears that quite a lot of folk posting here are far more savvy than me when it comes to predictions. I, for many years, experienced interest rates on average of around 8%. How long to you think they will remain low? How high could they go and when. Be very interested in what people think.

Really2

Personaly looking at the state of the economys at the moment I can't see it going over 5% in the next 5 years after that it depends on to many things.

I think rates could stay very low for a very long time not based on anything just a feeling (and the fact all the debt as to be paid back).

macaque_2

Pobby wrote: »

It appears that quite a lot of folk posting here are far more savvy than me when it comes to predictions. I, for many years, experienced interest rates on average of around 8%. How long to you think they will remain low? How high could they go and when. Be very interested in what people think.

The government's strategy for managing the current crisis is stoking up strong inflationary pressures. Interest rates could be in double figures within 2 years.

Really2

macaque wrote: »

The government's strategy for managing the current crisis is stoking up strong inflationary pressures. Interest rates could be in double figures within 2 years.

How even with the £ at real low we are only just staving off deflation. What inflationary presure is there?
The only inflation we are getting is from a weak £ so in all reality if the £ stregnths deflation will happen and will not get any better untill the world recovers.

There is no signal of any inflation unless we are talking of the magical hyper-inflation which seems to get passed around.

In reality there is a debt black hole untill that is filled there will be no real inflation.
Secondly banks have been stung so they are still unlikely to go back to mad lending even if all the loss making asstes were purchased.

If somone could show anyone proof of hyper inflation other than articles written by peopel who have gone long on comodoties I would be interested.

ad9898_3

The simple answer is, if inflation rears its head, then IR's will follow, inflation isn't likely to occur until we see some growth, or Brown starts printing. I believe IR's can only be kept at this very low level for a short space of time, rates will be up within 18 months but not by much unless the facts I have stated come into play.

HammersFan

It's really tough to answer that one. Who would have thought we'd be at 1% now (and liekly to be less soon). I remember lots of people on here saying we were doomed because there was no room for BoE to cut rates because of inflation - which is how it seemed. But inflation as an issue went away almost overnight.

So to get back to your question, I think we'll be below 2% for as long as we are in a recession.

macaque_2

Really2 wrote: »

How even with the £ at real low we are only just staving off deflation.

The falling £ and government debt is the problem. We have a very weak economy and a growing risk of raging inflation. Added to this, the government is going to be forced to put up interest rates soon in order to borrow.

A number of pundits have recently been warning borrowers to lock into long term fixed interest deals. I would take their advice.

It is a fallacy to think that high inflation is only associated with high levels of economic activity. Just look at Zimbabwe.

Really2

macaque wrote: »

1)The falling £ and government debt is the problem. We have a very weak economy and a growing risk of raging inflation.
2)Added to this, the government is going to be forced to put up interest rates soon in order to borrow.

A number of pundits have recently been warning borrowers to lock into long term fixed interest deals. I would take their advice.

It is a fallacy to think that high inflation is only associated with high levels of economic activity.
3)Just look at Zimbabwe.

1) So is every other country, but little or no evidence of raging inflation!
2) Are they (QE)
3) Oh dear......(do you know why Zimbabwe is in the mess it is in and why it was called the bread basket of Africa?)

Thrugelmir

Higher taxes after the next general election are more of a concern than interest rates to me. As the lack of the £ in the pocket will curtail individual's spending power thereby curbing some inflationary pressures. Inflation though may be effected by oil and gas prices. Which are outside the ability of any UK Government's control.

Lending rates are well above BOE base already and will gradually rise. Even if base rates fall further. As loan defaults will rise and the remaining borrowers will bear this loss.

Wookster

macaque wrote: »

The falling £ and government debt is the problem.

Absolutely - if the pound falls then the CPI will rise as much of our consumption is imported. If the printing presses fire up this could compound matters further.

It seems as though there are frantic efforts to reinflate asset prices (read: the housing market) and I just don't see how this can happen without serious inflatory problems.

whathavewedone

I don't really think it is all that likely that we are going to get inflation in double figures in the next five years.

However, if we do I think that whichever government is in power will bring in legislation to protect existing borrowers - eg giving them better fixed rate terms (even if they are in negative equity) than new borrowers.

My reasoning for this is that because we have had such a long period of HPI that there are very many people with big mortgages which they simply wouldn't be able to service if interest rates went into double figures.

I know a lot of people will think well they were stupid enough to buy at the top of the market so stuff them. The trouble is that for the banks if hundreds of thousands are repossessed owing hundreds of thousands they are unlikely to ever see that money back.

In the last recession when interest rates were sky high people when people were repossessed they probably left owing around 10k - an amount which the banks could reasonably expect to recover making repossession the obvious option.

It makes a lot more sense to allow people to stay in their homes if they are still employed and can afford their mortgage at rates of up to 6% than to let them go under owing huge sums of money that they could never hope to pay back.

A friend of mine earns 70k, her oh earns 100k, they bought a 950k house in 07 with a 10% mortgage, interest only - works out at about 4k per month. If interest rates went into double figures they wouldn't be able to afford their mortgage even if they keep their jobs. Surely it would make more sense to let them stay as long as they can pay rates of 6-7%? I don't know what their house is worth now but it won't be 950k.