What BOE interest rates will really cause financial disaster?

Batchy

SimbaK2K wrote: »

But then theres SVR rates that track the BOE base rate, e.g. all the Nationwide customers who are enjoying low rates right now, me included.

However, I feel this poll is irrelevant as saying what interest rate wil cause pain means nothing a timeline, i.e. 3% may hurt this year, but in 2012 it won't. Or are we just talking immediately? In which case none of it matters as the BOE rate is going nowhere fast.

I see what you mean, if the POLL could represent this, then I would, Im thinking (which I should have stated already), Short to medium term 2 - 5 years.

Batchy

its not better anyway! Thats a general statement

Its only beneficial if the rate you can get is better than the rate your being charged (taking into account tax effect)

For example, my gf is overpaying, Wrongly, into a mortgage, at only 1.24% NET when should could be paying into an ISA at 3.1% NET (as no tax charged) etc, etc, etc.

ultrawomble

Thrugelmir wrote: »

Any increase will be done in .25% increments , possibly even .125%. So will be barely noticable. Going to take some number of years to return a more normal level.

The BoE base rate was 5.25% in February 2008 and had dropped to 0.5% by March 2009. That's an average drop of ~0.37%/month, but Oct/Nov '08 saw a drop of 1.5%. Why should rises be slower and more gentle than cuts?

Vincenzo

ultrawomble wrote: »

The BoE base rate was 5.25% in February 2008 and had dropped to 0.5% by March 2009. That's an average drop of ~0.37%/month, but Oct/Nov '08 saw a drop of 1.5%. Why should rises be slower and more gentle than cuts?

Because the economy can stand the shock of rapid rate falls much better than rapid rate rises.

Strings

Batchy wrote: »

I appreciate what you saying but I do not know a mortgage product which tracks LIBOR, only only that track BOE Base rate, or Banks own base rate (like Barclays Bank Base Rate. BBBR)

Libor is a whole different discussion IMO

True, this is more inference to what the banks can borrow at, and therefore lend at. So strictly speaking it might not make that much of a difference to you and I. However, like I mentioned it is the rate at which the banks will lend at which is the key driver.

Interesting that in New Zealand, while it is a small market, the reserve bank of New Zealand has recently increased the base rate, yet fixed rates are coming down. I expect the same to happen here. My guess, and that is about all it is, is that the banks assess affordability and will charge the consumer the maximum they can so that people will lend. There is no point from a banks perspective to have high interest rates with nobody lending. No lending equals no profit and it is better to get turnover even at a reduced margin.

sss555s

History shows us that when rates start to move they keep going until they reach a point.

I expect this point is decided before the rise has started but it's much easier to take, "creeping" month by month.

The Torys usually have pretty high rates so i'll go for 6-8% by 2012.

The truth is for the vast majority of us who have kept our employment are far better off than we were 2+ years ago.

Why would 6% be any worse now (considering wage rises) to the normal worker with a mortgage than it was 3 years ago? And there was nothing to say 3 years ago was a hard time.

maveli

Thrugelmir wrote: »

With interest rates at all time lows. There's never been a better time to repay debt.

Not true for everyone. the interest for my debt is BoE+ 0.23 and saving is BoE + 2.5. So why should I repay ?

Strings

maveli wrote: »

Not true for everyone. the interest for my debt is BoE+ 0.23 and saving is BoE + 2.5. So why should I repay ?

yes but you are one of the very few with this arrangement.

Dan:_4

ultrawomble wrote: »

The BoE base rate was 5.25% in February 2008 and had dropped to 0.5% by March 2009. That's an average drop of ~0.37%/month, but Oct/Nov '08 saw a drop of 1.5%. Why should rises be slower and more gentle than cuts?

Because it will ruin the economny and undo all the work that has been achieved during low rates.

My prediction: 0.5% rest of 2010, 1% during 2011, 2% during 2012

Batchy

sss555s wrote: »

History shows us that when rates start to move they keep going until they reach a point.

I expect this point is decided before the rise has started but it's much easier to take, "creeping" month by month.

The Torys usually have pretty high rates so i'll go for 6-8% by 2012.

The truth is for the vast majority of us who have kept our employment are far better off than we were 2+ years ago.

Why would 6% be any worse now (considering wage rises) to the normal worker with a mortgage than it was 3 years ago? And there was nothing to say 3 years ago was a hard time.

Must admit, I think 6-8% is too high, agree that was the case before, but I think we have just gone through the biggest recession since the 1930s the shock could put us straight back there.

Im not an economist, im and accountant... I think practically, rather than realistically. But realistically, what have the government to gain. Are they scared of inflation? I dont think so IMO.