David Cameron hints at interest rate rise to combat 'worrying' inflation

StevieJ

wymondham wrote: »

Yes please, back nearer to normal would be great. The pendulum needs to swing back the other way and help savers and after a long period of pointless saving rates

Unfortunately or not monetary policy is set to assist the economy not so savers can achieve better interest rates for their savings accounts.

lpp1980

sss555s wrote: »

Bit of a contradiction there.

How did the people struggling now, manage 2 years ago when rates were higher?

You are deluding yourself if you think interest rates rising won't cause a lot people to risk losing their homes. Interest rates rising will effect everyone with a mortgage. Unless your lucky enough to have fixed your rate recently.

Many people have switched from repayment mortgages to interest only mortgages over them two years. Not to mention government mortgage support schemes that have helped out people and banks clearly being more lenient with repossessions (for now). Things have changed considerably. There'll be a lot pain ahead if interest rates rise.

StevieJ

lpp1980 wrote: »

You are deluding yourself if you think interest rates rising won't cause a lot people to risk losing their homes. Interest rates rising will effect everyone with a mortgage. Unless your lucky enough to have fixed your rate recently.
.

It will affect some but I suspect margins will shrink as rates increase to around 3.5% (but not for a good while) so I expect most people will handle any increases to come over the medium/longer term.

ILW

lpp1980 wrote: »

Nonsense, even a small rise in interest rates would tip plenty of people close to the edge. Theres enough people struggling already, on just interest only mortgages. Banks would almost definitely pass the rise on.

You can't say you didn't see it coming. The rate was never going to be 0.5% forever.

Anyone in that situation who is relying on base rates of below 1% to maintain their lifestyle is quite frankly a bloody fool.

Gorgeous_George

The Tory toffs will not care about the riff-raff losing their homes and jobs. They have a history of allowing thousands of homes to be repossessed.

So long as the rich get richer and their liberal partners stay onboard.

GG

JP45

Jonbvn wrote: »

Not going to happen. Deflation is of far greater concern than inflation.

Precisely. It's impossible to rule out a rise in inflation over the next couple of years but right now the bigger risk lies with deflation, as the Bank clearly recognises.

As for the OECD's suggestion that the Bank should raise rates to 3.5% by the end of 2011, as Jonathan Loynes of Capital Economics put it:

"The OECD's recommendations, if perhaps not 'mad', are certainly severely misguided. Thankfully, the latest communications from the MPC itself suggest that, for now at least, it agrees with us – the May Inflation Report predicted that inflation would meet its target on the basis of unchanged interest rates all the way out to 2012."

Or for those averse to anything from Capital Economics, here's a brief extract from Martin Wolf's assessment, writing in the FT:

The OECD seems to take the view that the only big risk is a loss of fiscal and monetary “credibility”. It is not. The other and – in my view, more serious – risk is that the economy flounders for years. If that happened, eliminating the fiscal deficit would be very hard.

If, as the OECD and Britain’s coalition government believe, fiscal tightening must be accelerated, the corollary is ultra-loose monetary policy, until recovery is established. If, alternatively, monetary policy is ineffective, as it may be, fiscal tightening should be announced, but implementation should be postponed until recovery is secure. I have now lost faith in the view that giving the markets what we think they may want in future – even though they show little sign of insisting on it now – should be the ruling idea in policy. So now should the OECD.

http://www.ft.com/cms/s/0/932eafe6-69c1-11df-8432-00144feab49a.html

MRSTITTLEMOUSE

sss555s wrote: »

Bit of a contradiction there.

How did the people struggling now, manage 2 years ago when rates were higher?

Exactly rising rates should'nt make a difference at all.
Falling rates should only have been taken as a windfall and treated as such.
Everybody should always consider rising rates when taking on a mortgage.
Fluctuations in rates are pointed out to you when you apply so no one has got anyone to blame but themselves if they have'nt accounted for them happening.

carolt

Kohoutek wrote: »

Do you know that the government doesn't set interest rates anymore? :eek:

Call me cynical but I think the BoE was 'leaned' on by Labour whilst in govt, and I don't think it will be any different with the Tories in.

Independent shmindependent.

DaddyBear

Kohoutek wrote: »

Do you know that the government doesn't set interest rates anymore? :eek:

I'm not being rude, but I actually laughed out loud when I read that.

Heyman_2

carolt wrote: »

Call me cynical but I think the BoE was 'leaned' on by Labour whilst in govt, and I don't think it will be any different with the Tories in.

Independent shmindependent.

Oh really, was the ECB leaned on by Labour as well? Or the US Federal Reserve Bank?

Merv and the MPC set the rates, end of.