No base rate rises for at least a year.. maybe 2 or 3 years

HAMISH_MCTAVISH

As a follow on from the Inspector Monkfish thread.....

LONDON--The Bank of England's Monetary Policy Committee signaled Wednesday that it won't tighten policy for at least the next year, while underscoring the need for more aggressive fiscal retrenchment.

and...

BOE CHART SHOWS CPI UNDER 2 PCT TARGET IN TWO YRS IF INTEREST RATES HELD CONSTANT

and... there may yet be more QE....

KING ON POSSIBILITY OF MORE QE
"I think you should certainly conclude the Committee has not ruled out any further asset purchases. We haven't decided to do it, but it's certainly an instrument in our armoury and it wold be wrong to rule it out."

And when, several years down the line, inflation would suggest base rates do need to rise, they may not need to raise them even then, instead preferring to unwind QE first.

KING ON TIGHTENING POLICY:
"If we were to tighten policy, which at some point undoubtedly we will have to do, we can either raise the bank rate which will have an immediate effect on the very short term structure of interest rates or we can sell assets which will start to impact further down the yield curve."
"The committee at the time will make a judgement as to the balance between those two."

With regards to housing, this has some pretty big implications.

1. Anyone buying on a decent tracker/capped SVR in 2007 will make out like a bandit. The money saved in interest will exceed any conceivable price depreciation. (already has, in most cases)

2. Given that interest is such a big component of the true cost of house purchase, this may well be one of the best times to buy in history.... IF you can get a decent mortgage.

3. Forget fixed rates, trackers are the way forward for the next few years.

4. Savers would seem to be screwed for the next few years at least. Which may well provide further demand for investment property.

It seems those occasional media projections for base rates to stay below 1% for 5 years may not have been too far off the mark!!!!!

Really2

HAMISH_MCTAVISH wrote: »

1. Anyone buying on a decent tracker/capped SVR in 2007 or 2008 will make out like a bandit. The money saved in interest will exceed any conceivable price depreciation. (already has, in most cases)

Just did a slight edit for you.

If this happens (and its a if)
I have just worked out, another 3 years at current tracker rate (.99) would see that I will have paid back (current overpay is equivalent to paying a 6% mortgage) the equivalent of 11-12 years of repayments in around 4.5years compared against a 6% fixed rate.

So overall just over 4 years of overpaying will have saved me 7 years.:eek:

chucky

HAMISH_MCTAVISH wrote: »

3. Forget fixed rates, trackers are the way forward for the next few years.

i don't see base rates going up in the short term at all and maybe even medium term not above 3%.

but...... the current trackers at the moment aren't too cheap with differentials being at least 2.5% above base rate. i even saw one the other day at 3.95% over base rate. that's a bit of a big risk IMO.

HAMISH_MCTAVISH

chucky wrote: »

i don't see base rates going up in the short term at all and maybe even medium term not above 3%.

but...... the current trackers at the moment aren't too cheap with differentials being at least 2.5% above base rate. i even saw one the other day at 3.95% over base rate. that's a bit of a big risk IMO.

Thought the best trackers were currently base plus 1.9% or thereabouts at 75% LTV.....?

nembot

Only Mervyn King can accurately provide information in regards to potential interest rate rises. The balancing act is increasing IR (which is a requirement) and not impacting the economy further.

Tough decisions, I wouldn't want the responsibility.

Charterhouse

Base rates to remain on hold. Don't really see a lot to mean that's going to mean housing shoots up to be honest, but of course, as usual, Hamish is just trolling rather than adding value.

chucky

HAMISH_MCTAVISH wrote: »

Thought the best trackers were currently base plus 1.9% or thereabouts at 75% LTV.....?

you may be right Hamish - i haven't looked at the rates.

the 2.5% above base rate trackers are the ones that have caught my eye. you may be be right.

chucky

Charterhouse wrote: »

Base rates to remain on hold. Don't really see a lot to mean that's going to mean housing shoots up to be honest, but of course, as usual, Hamish is just trolling rather than adding value.

he obviously means mortgage costs which is the biggest cost in servicing a home is not going to go up as preicted by many.

therefore it means that people will be able to afford their mortgage costs which means no increase in forced sellers.

not sure why that's trolling though.

HAMISH_MCTAVISH

chucky wrote: »

he obviously means mortgage costs which is the biggest cost in servicing a home is not going to go up as preicted by many.

therefore it means that people will be able to afford their mortgage costs which means no increase in forced sellers.

The bears have been desperately clinging on to their last two memes....

1. Rates will shoot up the moment The Tories take office, causing a new crash.

2. The Tories will sack a million public sector workers, tipping the country back into recession and causing a new crash.

Mervyn King comprehensively demolished bear meme number one this morning.

The budget in the next few weeks will comprehensively demolish bear meme number two.

not sure why that's trolling though.

You obviously didn't get the memo.......

"Trolling" is bearspeak for "being right"......:D

Cat695

thats peoples savings up sh*t creek then.....shame its just to keep house prices up

HAMISH_MCTAVISH

Charterhouse wrote: »

Base rates to remain on hold. Don't really see a lot to mean that's going to mean housing shoots up to be honest, but of course, as usual, Hamish is just trolling rather than adding value.

Ooooh, someone's a bit peeved that their prognostications have turned out to be so very badly wrong.......:rotfl: