Interest rates to stay below 1% for 5 years?

HAMISH_MCTAVISH

bungle4x4 wrote: »

personally, i can't wait for post recession inflation. 10 percent will do me very nicely thanks.

Well, as Blanchflower just suggested the BoE may well deliberately leave the interest rate low for a few years to let the nation inflate it's way out of debt...... And in such a situation we would have the dual upwards house price pressures of low rates and a flight to assets, I can't wait either!!!!:D

Mozette

kriss_boy wrote: »

Mine is .75% above the BoE with LLoyds TSB.

Do they have to stick to that or is it possible some lenders may refuse to continue to base it on the BoE int. rate if it remains so low for the suggested 5 years.

My girlfriend and I could virtually pay our entire mortgage off in 5 if it stays as low as it is!

I'm on Nationwide's Base Mortgage Rate which per their website:
"However, the BMR is guaranteed to be no more than 2% above the Bank of England base rate,"
So I'm sticking with it for now. This is no longer available, the equivalent is the Standard Variable Rate which has no such limit. I've been with Nationwide for ages though.

You need to check your T&C - and take a copy!!!

Heyman_2

0.79 above BR, lifetime here.

Every so often I look at other deals but until the MPC start raising the rates in earnest it just isn't worth it.

5 years below 1% suits me fine! :beer:

Generali

HAMISH_MCTAVISH wrote: »

Well, as Blanchflower just suggested the BoE may well deliberately leave the interest rate low for a few years to let the nation inflate it's way out of debt...... And in such a situation we would have the dual upwards house price pressures of low rates and a flight to assets, I can't wait either!!!!:D

I love this bizarre idea that you can inflate the debt away.

Higher inflation rates correlate with lower GDP growth rates. In effect, if you try to inflate the debt away you reduce the value of the debt but also reduce the ability to service it. In an economy where the banks are in tatters, the serviceability of debt is a big issue.

Emy1501

HAMISH_MCTAVISH wrote: »

Well, as Blanchflower just suggested the BoE may well deliberately leave the interest rate low for a few years to let the nation inflate it's way out of debt...... And in such a situation we would have the dual upwards house price pressures of low rates and a flight to assets, I can't wait either!!!!:D

I thought Blanchflower said that with employment the way it is its unlikely we would see the wage inflation needed to inflate the nation out of debt? I also thought he expects houseprices to fall by 30% in total?

Inflation would be great for homeowners who see their place as somewhere to live in but for the investor it would not be great as it unlikely house price inflation would match wage inflation and other investments.

StevieJ

whathavewedone wrote: »

Hmmm. I'm wary of any interest rate predictions since I took out a fixed rate mortgage in October 2008 when the narrative was all about inflation.

Not the narrative expressed on this board, if I remember there was a healthy inflation/deflation discussion taking place.

Wookster

Generali wrote: »

Interesting that it's come out that Mr Brown prevented the Treasury from taking stronger action to bring down the Government deficit. By borrowing, a Government or individual brings consumption backwards from tomorrow to today.

The more the Government borrows now, the lower the level of GDP the UK can expect in the future which would be consistent with lower interest rates in the medium term. Longer term it is consistent with lower GDP and interest rates back to the same level, IMO at least.

Unless there is a gilt strike in which case interest rates will rise significantly. Should Labour come back to power that is not beyond the realms of possibility.

Harry_Powell

There are two ways to control inflation, interest rates and taxes. As we're already set to be hit by a wide range of tax hikes (NI rise already decided) there is no need to raise interest rates. They're giving with one hand and taking away with the other, anyone who thinks this is a good thing is a fool.

kennyboy66_2

Generali wrote: »

I love this bizarre idea that you can inflate the debt away.

Higher inflation rates correlate with lower GDP growth rates. In effect, if you try to inflate the debt away you reduce the value of the debt but also reduce the ability to service it. In an economy where the banks are in tatters, the serviceability of debt is a big issue.

I suspect (being charitable to D. Blanchflower) is that he meant that we should target inflation at a slightly higher rate (say 5% rather than 2%), as clearly the relationship between GDP and inflation is not a linear one (ie 10% inflation is more than twice as bad as 5% inflation).

A pretty risk strategy I would say - the only real benefit would be if you could increase wages and benefits by less than inflation so that effectively there were real public sector and benefit cuts.

If this is the only benefit, then why not just freeze those benefits and pay now and have lower inflation ?

Are me saying its just politically too difficult without negative alchemy of inflation to muddy the waters.

smartn

kennyboy66 wrote: »

I suspect (being charitable to D. Blanchflower) is that he meant that we should target inflation at a slightly higher rate (say 5% rather than 2%), as clearly the relationship between GDP and inflation is not a linear one (ie 10% inflation is more than twice as bad as 5% inflation).

A pretty risk strategy I would say - the only real benefit would be if you could increase wages and benefits by less than inflation so that effectively there were real public sector and benefit cuts.

If this is the only benefit, then why not just freeze those benefits and pay now and have lower inflation ?

Are me saying its just politically too difficult without negative alchemy of inflation to muddy the waters.

Interesting what the public sectors reaction to inflation at 5% and wage rises limited to 1% would be. I can't see we can really do anything other than keep inflation close to the 2% target.