How long at 0.5%

soulsaver

divadee wrote: »

I have removed some of the posts on this thread and reffered them to the abuse team. They were off topic on this discussion and argumentative.

You missed a few....:o

fc123

julieq wrote: »

Why should people with savings have the right to risk free income? I don't think that benefits anyone except the pathologically risk averse and lazy. It's perfectly right that people should take risks to make money, and that's perfectly possible in this financial climate. Investment banks are doing it, BTL investors are doing it.

DD, your first reaction when anyone disagrees with you is hectoring and bullying. You don't like it when people mock you, so why not engage in arguments instead of browbeating people? And perlease, keep your views on what board guides should do or say to yourself - if you don't like the board or how it's operates you can always go somewhere else.

I had to laugh at the comment last night that all I know about is roulette. That was a small part of quite a lot of detailed argument and commentary, but you've hooked into it for reasons that escape me as a sort of ad hominem to try to discredit the arguments. You're also misrepresenting my position. It doesn't take the judgement of a Cassandra to figure out that interest rates will rise from a historically low point, what I (and others) disagree with is that there is some natural long term settling point around 8%.

It's a complex situation, there are a mixture of inflationary and deflationary pressures, and there is also an unusual fragility around the economy. For starters, even with 0.5% increases every month it would take 15 months to get to 8%, and that would be a fairly severe shock. Personally I think deflationary pressures will tend to win for the next couple of years, that's a perfectly arguable position.

But if anything is financially ignorant, it's the idea that you have special powers and can see things others can't. Fixed rates essentially price in what is known or can be anticipated about long term interest rates, with a profit margin, they provide stability and predictibility essentially, not a winning formula, they offer a bet at poor odds, possible to win but not intrinsically a value proposition. The idea that you were the only person advising people to take fixed rates at a point where the rates were dropping is risible, it's an obvious protective move to eradicate the risk of a big hike over time on stretched finances. What takes a little more nous is recommending something that isn't blindingly obvious. That's the way you make money, ultimately, by being ahead of the game rather than trailing in its wake. And that in turn is I suspect why you don't make money, you just talk a lot as if you do. If you actually had cogent arguments you'd use them.

What would I do if I had a mortgage at the moment? I'm not sure. As was said by someone else, it's difficult to know precisely what will happen because this uncharted territory. I know that industry is having a very hard time, but appears to be trying to ride out the storm, we have yet to see really large scale redundancies. That's a new situation, and it won't last, if that tips there is a serious danger of a stock market collapse in my view. There are inflationary pressures from oil (for example) and the devaluation; there are deflationary pressures from other directions. It's anyone's guess what will happen next, but overheating in the UK seems the least likely of all options just at the moment. My view would be that the best strategy is to take advantage of the low rates and build up savings to ensure a remortgage is possible with a realistic LTV and keep an eye on things.

One of the best posts I have read on this board for a long time...reminds me of the olden days on here.
Some nights I miss them.

sabretoothtigger

I think 0.5% till year end and then we'll see a rise in line with the rate at which they dropped, quite sudden.

For this reason I'd want a fixed rate on any loan by end of this year personally.

I think RPI should rise as the low mortgage rate is discounted by comparison to the previous year, not sure if it works like that exactly but eventually the special moves made recently will not form the majority of the inflationary picture like it seems to now


If britain had 10% rates and inflation in the past I cant see why modern times prevent it happening again, the low rate right now makes it more likely to spike upwards in future imo

http://www.bbc.co.uk/topics/inflation








http://www.guardian.co.uk/business/interactive/2008/nov/24/pre-budget-report

StevieJ

sabretoothtigger wrote: »

I think 0.5% till year end and then we'll see a rise in line with the rate at which they dropped, quite sudden.

For this reason I'd want a fixed rate on any loan by end of this year personally.

I think RPI should rise as the low mortgage rate is discounted by comparison to the previous year, not sure if it works like that exactly but eventually the special moves made recently will not form the majority of the inflationary picture like it seems to now

I think they will definately hold until after September, they will not want to boost RPI before the pensioners get their pay rise :eek: the 5% last year must have been most unwelcome for the govt.

penguine

Mortgage holders urged to fix rates

The Bank of England monetary policy committee (MPC) left the base rate unchanged at 0.5% yesterday, and this is expected to be its strategy for several months to come. But Ray Boulger of mortgage broker John Charcol warned that when rates do start rising again the increase is likely to be very steep.

"[Yesterday's] decision by the MPC to leave the bank rate unchanged for the second month running is likely to be the precursor for several more months of the same. However, whilst it is difficult to be confident how long bank rate will stay at 0.5%, it is likely than when the MPC starts increasing it it will move up quite quickly, which could be very uncomfortable for anyone still locked into a variable rate mortgage at that time.

All the "experts" quoted seem to be mortgage brokers though so of course they want people to be remortgaging at the moment. Not to say they're wrong about interest rate rises though.

treliac

penguine wrote: »

Mortgage holders urged to fix rates

All the "experts" quoted seem to be mortgage brokers though so of course they want people to be remortgaging at the moment. Not to say they're wrong about interest rate rises though.

Therefore it's best to make the most of the rates as they are at the moment and aim to fix nearer the point at which they may rise - in order to gain the best advantage.

daveb975

treliac wrote: »

Therefore it's best to make the most of the rates as they are at the moment and aim to fix nearer the point at which they may rise - in order to gain the best advantage.

I agree, but a lot of the cheaper fixed rates have gone already.

I have always had a fixed mortgage, but recently changed to a tracker to take advantage of the low rates. This is saving me quite a lot of money, and it is hard to make the jump back into a fixed rate!

I kind of wish that I had gone for the fee-free A&L 5 year fix at 3.99%, but I decided against it as doubling my current payments was too painful.

My current plan is to stay on the tracker until the end of the year and then hopefully pick up a fixed rate at below 5%. Probably won't save me any money in the long term, though.

sabretoothtigger

treliac wrote: »

Therefore it's best to make the most of the rates as they are at the moment and aim to fix nearer the point at which they may rise - in order to gain the best advantage.

If its obvious to you the rates will turn, its obvious to them and they'll not be giving nice 10 year fixed rates in that case.

People arent going to do this really because everyone likes to have their money right now but they need to take 1 or 2 years of higher rates to then gain the benefit of what might be a substantial discount.

There is some risk or it'd not be on offer, when it becomes a certainty you wont have the chance imo. Its obvious the odds are in peoples favour though, its a one sided bet imo

julieq

julieq wrote:

The thing with roulette is to either bet on the red or black squares. Then the little ball goes round and stops, and if you are lucky, or a sound investor like what I am, you will win some money. In some fancy clubs they say "fait ner plein" which is a bit James Bondy, but where I go they normally say "stop betting" which amounts to the same thing. I once won a large sum of money.

This is a horrendously edited misquote, and probably actionable.

In fact what you have to do is start betting on the red squares. Then if you lose you double the bet, and you carry on betting and doubling up until you win. It is IMPOSSIBLE to have more than a few red squares in a row, a friend of mine, Brenda, who used to work as a Croupier in the Rank Casino up Queen's Road, told me that, but there are all sorts of probability graphs and bell curves and so on that someone can surely post in support, you can really never go wrong if you have a graph. Anyway, once you've won on red you change to black and repeat, then back to red and so on, and eventually you walk out of the casino leaving le Chiffre a BROKEN MAN destined to spend the last of his miserable days looking behind him for a bald bloke with a large white cat who does not tolerate failure.

But sshhhh, if everyone knew how easy it is to become seriously rich the board would be a far more cheery place and we could all have nice Georgian Rectories. And where would the fun be in that?

On the subject of interest rates, there's a couple of things to say. Unless you know something someone else does, the optimum place to be is tracking BOE interest rates. Otherwise you're essentially taking random bets, if you fix you're betting against a fall, if you don't fix you're betting against a rise. Sometimes you win these bets, sometimes you lose them (anyone fixing last year in the expectation of oil driven inflation putting rates up lost spectacularly), overall it should more or less average out even. Because a fix is effectively a futures derivative with a profit margin built in, it's not quite as good value as tracking the rate as it changes. Obviously though fixed rates give you stability and predictibility for budgeting, and there is some value in that.

Secondly in a recession it's difficult to know what will happen. Japan and the US have had very long periods of very low rates in the past. We're looking hopefully at an upturn late this year, but that's as much wishful thinking as anything. A lot of redundancies - Corus this week could be the first signs of these - and we could be in for a very long period of trouble indeed.

Dithering_Dad

daveb975 wrote: »

I kind of wish that I had gone for the fee-free A&L 5 year fix at 3.99%, but I decided against it as doubling my current payments was too painful.

I'm the same - I wish I'd gone for this deal before it was withdrawn but I would have ended up with a hefty redemption charge that would have wiped out the gains made from having the fix.

My plan is to keep blitzing my mortgage and to fill my offset account so that if all the decent deals have gone by next April (when my current deal runs out), my mortgage will be significantly lower and so should not be overly impacted by higher rates.