BOE Bean: Will Keep Rates Low For As Short A Time As Possible

Dan:_4

Thrugelmir wrote: »

Anybody who is debt free.

The base rate means very little to those in debt. It does not effect personal loans; credit cards; fixed rate mortgages - those on a tracker or SVR will be a small majority of the UK mortgage holders and there is no reason to suggest they wont be able to afford the repayments when rates increase.

Thrugelmir

Dan: wrote: »

The base rate means very little to those in debt. It does not effect personal loans; credit cards; fixed rate mortgages - those on a tracker or SVR will be a small majority of the UK mortgage holders and there is no reason to suggest they wont be able to afford the repayments when rates increase.

You asked.

Who here would be happy to see rates rise?

I doubt its a question of affording repayments. Higher base rates will mean that people will remain in debt for longer. Thereby extending the downturn.

The people to benefit will be savers. As lenders compete to raise funds to lend.

ruggedtoast

Dan: wrote: »

Who here would be happy to see rates rise?

/waves

....

Dan:_4

Thrugelmir wrote: »

You asked.



I doubt its a question of affording repayments. Higher base rates will mean that people will remain in debt for longer. Thereby extending the downturn.

The people to benefit will be savers. As lenders compete to raise funds to lend.

Your right, it's not a question of affording repayments and savers will certernly benefit (at last!).

It does not mean people will stay in debt for longer, as I said most debt (personal loans/credit cards etc) are fixed - and so it does not matter what the base rate is doing.

The reason I asked the question is because there are some 'bears' on this very forum that seem to assume higher interest rates will cause a second house price crash - their final hope I guess.

It seems 20% down from peak is not enough for some.

MrDT

Dan: wrote: »

Who here would be happy to see rates rise?

I would like to see a steady return to normality. A steady increase up to say 6ish%, maybe half a basis point a month over the course of a year.

I don't see it happening though.

michaels

I don't think Libor (ie market consensus) is factoring in any rise for the next 12 months - What is the spread over OIS?

Heyman_2

inspector_monkfish wrote: »

He added that the Bank would reduce monetary stimulus and raise rates back to a more normal level as the economy recovered.

They'll be low for quite a while yet then won't they?

I can't see any of this 'shooting up' business happening either - they'll be doing steady increases to go hand in hand with recovery progress if this statement is anything to go by.

Thrugelmir

michaels wrote: »

I don't think Libor (ie market consensus) is factoring in any rise for the next 12 months - What is the spread over OIS?

LIBOR is the avearge rate that the banks lend to each other depending on their liquidity positions. Banks are required to balance their books every day so in fact borrow at that rate.

Also worth remembering that LIBOR is a median rate. The top and bottom rates being excluded from the calculation.

Five year libor swap rates are nearer 4%. Which is a better indication of where rates are heading.

michaels

Hence looking at OIS at around 3, 6 and 12 months should be the markets best guess of the average for base rates over that period excluding the 'risk' premium incorporated in to libor at these tenors.

See this on Reuters for example:

http://uk.reuters.com/article/idUKLL48448020090721

chucky

Thrugelmir wrote: »

LIBOR is the avearge rate that the banks lend to each other depending on their liquidity positions. Banks are required to balance their books every day so in fact borrow at that rate.

Also worth remembering that LIBOR is a median rate. The top and bottom rates being excluded from the calculation.

Five year libor swap rates are nearer 4%. Which is a better indication of where rates are heading.

they're currently 3.59% after a few weeks of moving downwards small amounts. they jumped an amount last week.

they were creeping up since February and got to about 3.8ish%.
http://www.swap-rates.com/UKSwap.html