When Will Rates Start to Rise?

Dopple

Hi Guys,

I was intending to take a sabbatical from work (been working with computers for 20 years and getting too much eye strain) this year and live off my savings.
I could have afforded to do that when I was getting about 7% gross last year, but not now.

I wondered when do people think interest rates will start to rise again?
I would need 5.5%-6% from a one or two year fixed rate.
When will we see those days again?

FoxtonsRIP

Not too long I should imagine. The only problem is that inflation will be even higher than interest rates.

sabretoothtigger

End of this year maybe but you should plan for the worst basically.

Rates might rise, very high even but inflation has an equal chance of doing the same which means savers will be a hamster on a wheel not really gaining any actual money and maybe even losing it in real terms

This is hard to weigh up from a consumer point of view, Im guessing inefficiency will increase in savings and lots of places which is roughly why inflation is a bad thing

Technology could be a great place to be. I forget where I read it but some guy said how in the 70's he was in computers and had a mortgage and it worked well for him as his job was in demand he got his pay rises and it far out weighed the rise in mortgage so inflation was nice to him.

You might be better off just reducing your hours to hedge your bets and get one of those fancy high tech screens they make so much more cheaply nowadays.

I have a large screen with a low res, it allows me to sit 6 feet away from the computer if I like, should be more relaxing


I will get you a link for MSE Martin with proper info on this paradigm:
http://forums.moneysavingexpert.com/showthread.html?t=1496519&highlight=

Dopple

Thanks for the advice.
My outgoings are very small, so I won't get hit that much by inflation.
As long as interest rates go up I will be happy.

sabretoothtigger

My outgoings are very small, so I won't get hit that much by inflation.

Inflation could reduce your actual capital worth even with zero outgoings. This is why people have been buying gold

A house price will rise with inflation afaik as might many assets including shares but even in an interest account cash might lose value, all depends how chaotic things get and maybe they wont

Investment speculators buy and sell currencies as their value varies. You are an investor in the british pound if you hold it for better or worse

Simple advice here might be to look at index linked bonds with NS&I - the rates on these are guaranteed to go up though you have to believe government will correctly measure inflation

Stavros_3

sabretoothtigger wrote: »

though you have to believe government will correctly measure inflation

I wouldn't believe a bloody word Alistair Darling or this government stated. The sooner they are kicked out of government the better. They have bankrupted Great Britain PLC

Masomnia

Stavros wrote: »

I wouldn't believe a bloody word Alistair Darling or this government stated. The sooner they are kicked out of government the better. They have bankrupted Great Britain PLC

The ONS gathers the statistics. And Britain isn't bankrupt.

nilrem_2

Dopple wrote: »

Thanks for the advice.
My outgoings are very small, so I won't get hit that much by inflation.
As long as interest rates go up I will be happy.

Dopple, at least rates seem to have hit the bottom now and there are signs of some fixed rates going up in the last few weeks, fixed rates do not seem to depend so much on the BOE rate as they used to do so even if the BOE are tardy increasing base rates I believe that we shall soon see some much better Fixed rates available, lets face it the only way is up from now on.

nilrem_2

Stavros wrote: »

I wouldn't believe a bloody word Alistair Darling or this government stated. The sooner they are kicked out of government the better. They have bankrupted Great Britain PLC

Your answer is not exactly very helpful to the original posters question is it!

samizdat

You could do worse than read the latest minutes of the Bank of England's Monetary Policy Committee, published today:

http://www.bankofengland.co.uk/publications/inflationreport/irlatest.htm

They also publish the current market expectations* relating to interest rates:

http://www.bankofengland.co.uk/publications/inflationreport/conditioning_path.htm

* N.B. These are not literally the expectations of everybody in aggregate because these expectations have to be estimated from the prices of various money market instruments.

Interestingly, the market seems to believe rates will remain low for some time, e.g. in Q2 2011 (2 years from now), the estimate is 2.78%.

The Bank as well seems to be saying that, even if rates stay the same for two years, it expects inflation to be no higher than the 2% target in two years' time. Since it is the Bank's job to keep inflation at target, on the face of it, rates should stay low. However, the Bank will keep looking ahead as new data becomes available and its forecast of inflation will evolve. The Bank also says that nobody really knows what will happen - there is great uncertainty in its forecasts.

tradetime

I don't believe rates will rise much before next summer, the recovery will be slow, any raise in rates would threaten that, inflation is threatening as witnessed by the recent strong moves in commodities, however that has been predicated on the false belief that a global economic recovery is already under way, when that illusion fizzles out commodities should fall back as money moves to safety again.
As someone said above, there are some "reasonable" rates if you can tie money up in fixed rate accounts.