Bank of England base rate, predict what it will be in 2 years?

pault123

arenaman wrote: »

Fixed rates will rise but I doubt they'd rise in proportion with the BOE rate going up. There's a 4.5 to 5% gap between BOE rate and a 5yr fix at the moment. When the BOE rate goes up to 3% are we really going to see most 5yr deals at the 8% mark?

I took my 5 year fixed out in 2005 @ 4.99% at the time the base rate was 4.25%!

Are mortgage companies really that greedy now by not offering real rates that reflect the base rate?

Based on the feedback on this thread so far i'm considering a ING 2 year tracker which reverts to SVR

or a Woolwich lifetime tracker.

The ING is a slightly better tracker for 2 years, the woolwich higher but then after 2 years i'm sure the continued tracker would beat current SVR?

Eric_Pisch

pault123 wrote: »

I took my 5 year fixed out in 2005 @ 4.99% at the time the base rate was 4.25%!

Are mortgage companies really that greedy now by not offering real rates that reflect the base rate?

Based on the feedback on this thread so far i'm considering a ING 2 year tracker which reverts to SVR

or a Woolwich lifetime tracker.

The ING is a slightly better tracker for 2 years, the woolwich higher but then after 2 years i'm sure the continued tracker would beat current SVR?

Rates are higher because, the Banks have lost fortunes which they have to earn back, the banks don't have access to the oceans of cheap finance they had before so they cant offer it to us, alot more people are defaulting so that cost gets passed on to us.

I am hoping the rate will stay low for a year or so by which time my deal will be up then if i can get a decent 5 year fixed rate i will take it.

inspector_monkfish

Eric_Pisch wrote: »

Rates are higher because, the Banks have lost fortunes which they have to earn back, the banks don't have access to the oceans of cheap finance they had before so they cant offer it to us, alot more people are defaulting so that cost gets passed on to us.

I am hoping the rate will stay low for a year or so by which time my deal will be up then if i can get a decent 5 year fixed rate i will take it.

Banks are all awash with cash, that they could easily lend.
They are just too scared about what might or might not be around the corner, incase they don't get that cash back again!

Really2

Eric_Pisch wrote: »

I expect interest rates to go up alot in the medium term

sterling has been devalued by approx 30% and with the BoE still printing free money it will probably devalue more.

do you really think sterling will go lower. I would argue it will stay in the historic norms of $1.6- $1.8 for some time.
$2- £1 was never the norm.

but inflation is YOY so we would have to see YOY inflation of 2%+ to keep increasing base rates.

I would argue the £ will get stronger as we exit recession which should cause inflation to drop in the medium term under 2%. (this is what the BOE predicts also)

8% may be the average for the last 30-40 year but in those times we have seen historical highs never seen before.
so it is just as possible you could see the next 30-40 years well below the average.

I think the actual historical average is about 5.5% not 8%

Eric_Pisch

Really2 wrote: »

do you really think sterling will go lower. I would argue it will stay in the historic norms of $1.6- $1.8 for some time.
$2- £1 was never the norm.

but inflation is YOY so we would have to see YOY inflation of 2%+ to keep increasing base rates.

I would argue the £ will get stronger as we exit recession which should cause inflation to drop in the medium term under 2%. (this is what the BOE predicts also)

Yes,

If the BoE keeps printing more free money Sterling will be devalued even more eventually.

How any future government deals with the horricially out of control budget deficit as well could have an impact on sterling. Huge tax hikes and slashing public spending could impact on economic stability and make investors more nervous about putting money in sterling.

Really2

Eric_Pisch wrote: »

Yes,

If the BoE keeps printing more free money Sterling will be devalued more eventually.

How any future government deals with the horricially out of control budget deficit as well could have an impact on sterling. Huge tax hikes and slashing public spending could impact on economic stability and make investors more nervous about putting money in sterling.

What if they remove money then? (why do you think they will continue printing also?)

I would argue income tax hikes is deflationary. Lowering public spending to an affordable level should give investors confidence the right steps are being taken.
Surely keeping spending going and increasing the country's debt would scare investors, not cutting it.

Eric_Pisch

Really2 wrote: »

What if they remove money then? (why do you think they will continue printing also?)

I would argue income tax hikes is deflationary. Lowering public spending to an affordable level should give investors confidence the right steps are being taken.
Surely keeping spending going and increasing the country's debt would scare investors, not cutting it.

I think they will print more money because the deficit is simply out of control at the moment. The government is paralysed to do anything about it because any action to deal with it will be extremely damaging for the upcoming election. Initially the BoE reported they originally allocated amount of money they wanted to print was enough, they have since then printed more.

I agree partially with you about lowering public spending however the problem is the scale of the debt. Its what currently 60% of GDP with the 39 billion the nationalised bank break up is going to cost us (and thats ignoring the 600-700bill pension black hole and the 100s of billions in PFI works which at the moment because of reporting rules do not count towards our dept level).

Potentially with this amount of debt (£30k per person in the UK) you could be looking at 1-1.5 million public workers out of work and direct/indirect taxation increases of 5-7% per year. This would lead to a similar situation to the troubled times in the 80s.

inspector_monkfish

Eric_Pisch wrote: »

I think they will print more money because the deficit is simply out of control at the moment. The government is paralysed to do anything about it because any action to deal with it will be extremely damaging for the upcoming election. Initially the BoE reported they originally allocated amount of money they wanted to print was enough, they have since then printed more.

I agree partially with you about lowering public spending however the problem is the scale of the debt. Its what currently 60% of GDP with the 39 billion the nationalised bank break up is going to cost us (and thats ignoring the 600-700bill pension black hole and the 100s of billions in PFI works which at the moment because of reporting rules do not count towards our dept level).

Potentially with this amount of debt (£30k per person in the UK) you could be looking at 1-1.5 million public workers out of work and direct/indirect taxation increases of 5-7% per year. This would lead to a similar situation to the troubled times in the 80s.

BOE minutes tomorrow could give us some clues...

lemonjelly

inspector_monkfish wrote: »

Banks are all awash with cash, that they could easily lend.
They are just too scared about what might or might not be around the corner, incase they don't get that cash back again!

Inspector, if I may pick your brains one more time?

Why do the banks still, 1 year on, have this fear? We're being told that the bad stuff has gone now, QE should plug what gaps appear. So why is there still fear?

& what could be round the corner?

ninky_2

base rates won't go up until inflation has risen sufficiently to reduce people's effective debt. i suspect severe inflation at some point but probably not for 18 mths at least. so i think you can expect low rates for 18 mths at least with more significant rises for possibly the last 6 mths of your tracker. but then again - who knows!