IR to rise again next month

realwildone

Expect IR to rise again in October.

Ed Balls gave clues to a 'unexpected' rise in August in a speech he made.

Gordon Brown gave a speech this weekend warning of further IR rises.

Whilst the BOE is supposed to be independent. Brown and Balls seem to warn the markets just before a rise.

5.5% by April next year. A 1% rise adds 25% to your mortgage payments. If you have BTL don't even think about passing the rise on.

It's time to pay the piper.

Bil2

Will interest rates need to rise to 5.5% to lower the inflation rate from the current 2.8% to the target 2%... I don't think so!

I think that if interest rates are raised twice more to 5.25% this should be enough to reduce inflation as consumers will be scared into curbing their spending as a result.

foreversummer

"A 1% rise adds 25% to your mortgage payments."

Clarify please (!) . . . . .

mystic_trev

Bil2 wrote:

Will interest rates need to rise to 5.5% to lower the inflation rate from the current 2.8% to the target 2%... I don't think so!

I think that if interest rates are raised twice more to 5.25% this should be enough to reduce inflation as consumers will be scared into curbing their spending as a result.

I'm not so sure BOE should have acted much earlier and certainly not reduced rates last year! "Inflation is like toothpaste. Once it is out of the tube, it is hard to get it back in again."

ABN Ambro have said to expect another interest rate hike soon and maybe a couple more next year - we've been having this discussion on the Savings & Investments forum.

http://forums.moneysavingexpert.com/showthread.html?t=265696

whambamboo

foreversummer wrote:

"A 1% rise adds 25% to your mortgage payments."

Clarify please (!) . . . . .

If you pay 4% interest, then a £200,000 mortgage is interest-only £8,000 a year. On 5% interest it is £10,000 interest-only per year. On a repayment mortgage the difference is smaller in relative terms.

A 1% rise is 25% more if you go from 4% to 5%.

Obviously 4.5 to 5.5 is slightly less than a 25% increase

ashcarrot

"Will interest rates need to rise to 5.5% to lower the inflation rate from the current 2.8% to the target 2%... I don't think so!"

Inflation is actually 2.5% (rising from 2.4% recently). I think October is the right time to rise the interest rates however it may be november for political reasons. Ie everyone has been saying they've expected a rise in November hence it doesn't come as a shock. We'll see (im currently saving for a house so I will be welcoming the move)

lisyloo

November is more likely.
The BOE produce their detailed inflation report in Feb, May, Aug and Nov.
It's these months when traditionally interest rate changes are more likely because they have more concrete info at their disposal.

Hereward

Personally, I don't think there will be a rate rise until November. The speech by Gordon Brown was about the cost of borrowing on a global scale, as part of his leadership of the IMF. The speech could be part of the “Maradona Theory” to get people to adjust their habits before any impending rate rise, and then not following through with the rise in interest rates. In addition to the Maradona Theory, it would seem a little strange to increase interest rates the month before the next BoE inflation report, especially as interest rates were kept on hold this month.

mystic_trev

You can get odds of 5 to 1 on an October rate rise - Betfair.

mystic_trev

Hereward wrote:

it would seem a little strange to increase interest rates the month before the next BoE inflation report, especially as interest rates were kept on hold this month.

Will that Incude Tuition fees? There's talk that they'll help push up CPI to the 3% mark!

mattbass

mystic_trev wrote:

"Inflation is like toothpaste. Once it is out of the tube, it is hard to get it back in again."

thats good :rotfl: