People BEWARE 6% IR next year looking a real possibility

realwildone

LONDON (Reuters) - Increased consumer spending pushed economic growth to its quickest rate in two years in the second quarter of 2006, official data showed on Friday.

The Office for National Statistics said GDP rose 0.8 percent on the quarter and 2.6 percent on the year, unrevised from the initial estimate and in line with forecasts.

The figures are likely to keep intact expectations the Bank of England will raise interest rates again before the end of the year, particularly as price pressures picked up strongly.

The implied deflator rose by 1.5 percent on the quarter, its biggest jump in 15 years.

This indicator implies that IR could hit 6% next year.

dougk_2

I think its extreamly unlikely. With oil pricers falling again inflation will be down a bit more. If banks and lenderws thought this was the case then fixed price mortgage rates would have gone up a bit as well.

Actuaslly look back two years on this forum and this message is a bit dejavu.

aderbyshirelad

Actuaslly look back two years on this forum and this message is a bit dejavu

And the reply to this observation from doomongers like realwildone?

Well, it will come true eventually..... [Or so they all hope]

aderbyshirelad

Actuaslly look back two years on this forum and this message is a bit dejavu

And the reply to this observation from doomongers like realwildone?

Well, it will come true eventually..... [Or so they all hope]

asandwhen

The increased consumer spending was probably from the world cup too so I doubt that will continue and also since the interest rate increase I would suggest that spending will slow further - there has been reports that oil and gas prices are about to fall so inflation will come back down to expected levels and interest rates will probably stay at 4.75/5.00.

meanmachine_2

dougk wrote:

I think its extreamly unlikely. With oil pricers falling again inflation will be down a bit more. If banks and lenderws thought this was the case then fixed price mortgage rates would have gone up a bit as well.

Actuaslly look back two years on this forum and this message is a bit dejavu.

Swap rates have actually gone up quite markedly in the last few weeks.

Agreed that not much has happened in this country in the last two years, but in the States things are looking very nasty now on the housing front. Not suprising, given that rates have risen five fold over that period.

scrooge82

in my opinion fixed rates have gone up a bit.

i took out a 5 year fixed at 4.74% in march this year

same bank 5 year fixed is now 5.19%

F_T_Buyer

I think people need to think seriously if they can afford 6% interest rates. I personally don't think they will get that high, but it is a serious possibility.

If you can't afford rates at 6% (i.e. mortgage rates at 7% ish) you are borrowing too much. Plain and simple.

richgirl

The key here is inflation, if inflation (CPI) goes above 3%, then interest rates will rise as high as they have to go to bring inflation down... it could be even higher than 6% !
And that would likely trigger a recession followed by deflation, where the value of assets and goods would just keep falling.

cuffie

Why does this same topic keep coming up in every other thread???!!! Its the same people going round and round in circles!

Gorgeous_George

cuffie wrote:

Why does this same topic keep coming up in every other thread???!!! Its the same people going round and round in circles!

It does get rather dull as it all guesswork.

I'd love prices to crash. Houses cost too much and, at the moment, I will not be buying another BTL.

Bring on the crash - I have cash waiting to snap up a bargain at auction. BTL and max the mortgage to free up cash for another BTL.

The bank base rate will not reach 6% next year. Too expensive politically.



GG