Interest rates

caveman38

What is the professional prediction for interest rates for the next 3 years.
Obviously no-one knows what will happen to world economics, but is it generally beleived that they will reamain low till the economy is back on it's feet or will it be used again in the fight against inflation should that rise.
I was thinking for the sake ofweighing up tracker mortgages against FR that they would reamain at 0.5 % for the reamainder of this year and rise by 1% next year and another the year after ie 2.5 in 2012.
Would I be way off the mark do you think.

beecher2

Who knows. By 'professional' do you mean mortgage advisers, as they're no more likely to know than anyone else I wouldn't think. You could look here for some information, and good links
http://www.thisismoney.co.uk/interest-rates

I personally think they'll start rising this year, as I am concerned that the BoE will ignore inflation and assume that it'll correct itself.

Zoezo

So assuming over the year the rate will go up by 1%, I guess the time to reneogiate a fixed rate mortgage would be now? If BOE goes up to say 1.5% by the end of this year, I assume we would not be seeing fixed rates such 3.79% for one year fixed offered again? Those deals would rise accordingly too?

Zoe

inspector_monkfish

after todays dissapointing GDP news, rates aren't going anywhere for some time...

---

11:20 26Jan10 - UK gilts, rate futures jump as weak GDP calms rate-hike bets
* March gilt future highest since mid-December
* 10-yr gilt yield 6 basis points down at 3.846 pct
* Short sterling up 11 ticks


LONDON, Jan 26 - British gilt futures rallied to a
one-month high on Tuesday after figures showing the economy
limped out of recession at the end of last year fuelled bets the
Bank of England would take its time tightening policy.

The Office for Nationals Statistics said GDP grew 0.1

percent between October and December, well short of forecasts
for a 0.4 percent gain and below even the lowest forecast in a
Reuters poll for 0.2 percent growth.

Strategists said that although the figures were likely to be
revised slightly higher in future releases, there was little to
suggest Britain was on the verge of a strong rebound, limiting
the scope for the BoE to raise rates from 0.5 percent.

"It does certainly push any rate hikes back out into the
future," said Jason Simpson, strategist at RBS.

"On the back of this information, it seems to rule out a
first-half rate hike and reaffirms the view the BoE will be slow
to raise rates, despite higher-than-expected inflation, with the
first rate hike expected in Q4."

Short sterling interest rate futures shot up as much as 12
ticks from September contracts out to trade around 10 ticks
higher by 1059 GMT, as dealers scaled back their expectations
for policy tightening.

Thrugelmir

Tracker rates vary widely depending on LTV.

Pincher

My wet dream is BOE will be 3.25% in September 2011, and 5 year fix will be at 5% (having dropped from 5.75% now): profit margin is at a minimum because competition has returned.

I will have been paying BOE+1.75% from now until then, last of which will be 5.00% = 3.25 + 1.75.

poppy10_2

inspector_monkfish wrote: »

after todays dissapointing GDP news, rates aren't going anywhere for some time...

How about: after last week's disappointing inflation figures, rates will be going up sooner than expected...

Thrugelmir

Pincher wrote: »

My wet dream is BOE will be 3.25% in September 2011, and 5 year fix will be at 5% (having dropped from 5.75% now): profit margin is at a minimum because competition has returned.

I will have been paying BOE+1.75% from now until then, last of which will be 5.00% = 3.25 + 1.75.

Where do you expect competition to come from?

Pincher

Thrugelmir wrote: »

Where do you expect competition to come from?

Santander is not the only bank, and Nationwide is not the only building society. If they were, the Competition Commission should break them up.

Bank of China is entering the UK mortgage market, with god knows how much money to lend.

Thrugelmir

Pincher wrote: »

Santander is not the only bank, and Nationwide is not the only building society. If they were, the Competition Commission should break them up.

Bank of China is entering the UK mortgage market, with god knows how much money to lend.

One major new lender doesn't make for competition. Particularly as they are cherry picking the better quality part of the market. Good margin, low risk lending. Old fashioned banking one might say.

The EU is forcing LloydsHBOS to reduce market share. As has around 29% of all outstanding mortgage debt across its operations currently. To achieve the EU's request around £14 billion will have to be moved to new lenders in the next few years. Hence why IF are no longer offering new products. Lloyds is shifting through its loan book. Like Skipton will encourage unwanted borrowers elsewhere.

There is a progressive change but slow change rippling through the market.

Worth remembering that 450,000 borrowers are left with NRAM (bad bank ) and that the rump of B&B in taxpayers hands will shortly join with NRAM. Thats a lot of existing debt to be refinanced in the years to come.

Banks will have no need to chase business. The business will come to them.

Pincher

Hopefully, by the end of 2011, most of these bad debts have been flushed through the system, and any market restructuring has done its job.