BoE base rate - mini debate

rjgb

Anyone got any reasoned hunches as to how the Bank of England base rate will change over the next few months/years?

Obviously any further falls are going to make very little difference to existing mortgage rates. However, rises could (will?) drive mortgage rates up.

It would be interesting to hear people's views on when such rises may begin, and what the rate of rising could be.

Pobby

Well I can only state what i have just read here that if IRs go to 7%, and that`s still pretty low, it will be a bloodbath in the housing market. Sooner or later inflation will take off and rates will have to rise.

Alan_M_2

The only inevitability is that they will eventually go up.....when and by how much will be determined by market forces at that time and any long term prediction is not a great deal more than guesswork.

purch

Don't expect to see anything larger than a 2 before the decimal point for a few more years yet !!!

rjgb

Pobby wrote: »

Well I can only state what i have just read here that if IRs go to 7%, and that`s still pretty low, it will be a bloodbath in the housing market. Sooner or later inflation will take off and rates will have to rise.

So it could arguably be best to get a mortgage with as long a fixed rate as possible now at, say, 5.5%, to protect yourself from rises, rather than get a product which reverts to a variable rate within 2/3 years.

However, as the other poster says, it is of course all guesswork.

rjgb

purch wrote: »

Don't expect to see anything larger than a 2 before the decimal point for a few more years yet !!!

On what basis do you say that, purch?

purch

On what basis do you say that, purch?

Because we are in a very deep recession, the bottom of which we havn't seen yet, and without a return to 'easy' credit any recovery will take years if not decades.

'Easy' credit refers to the availability not the price of.

1984ReturnsForReal_2

It the powers that be want to see millions lose their homes & jobs and investors hiding their money away in banks the rate will be put up.

Its not going to happen for a long while. Maybe a tweek here & there but above 3% is a long way off.

JayScottGreenspan

This is what the BoE assumed for the last inflation report:
http://www.bankofengland.co.uk/publications/inflationreport/conditioning_path.htm

tomterm8

rjgb wrote: »

On what basis do you say that, purch?

I think the BoE quarterly inflation report, which predicts that if base rates stay as they are now inflation will be within target for the next 12 months suggests the BoE does not intend to move base rates for some time.

However, that assumes that the UK does not suffer from a sudden stop in external financing, or its credit is not downgraded. Either of those scenarios, which are unlikely, could cause interest rates to hike up very quickly.

GracieP

I think the BoE will delay raising the rate until they really have to, but eventually they will have to. And when they have to, my guess is that it will climb in quite quickly.

At this point however, if I had a mortgage I wouldn't be fixing. It could be quite a while before rates rise and when they do there will be some sort of warning for those smart enough to keep their eyes open. Anyone with a mortgage right now would be better off on a tracker that they aren't tied to. They should overpay as much as possible and watch the economy. When things start to shift there will still be decent fixed rates to lock into.