Interest rates - worst case scenario over next 10 years?

amcluesent

The West is losing out to BRIC economies big-time, so we're in a race to the bottom to devalue our currencies by keeping interest rates rock bottom and/or printing money. Plus it's obviously policy to keep real inflation high to erode debt.

Even if recovering economy eventually warrants a rate rise, the Condem's won't do so with another election looming.

However, the banks have been given an explicit nod with Basel III to rebuild their balance sheets, so they could push up rates again over BoE base.

You could see 8% within 18 months of the next election, even if the base rate sticks at or below 2%

mbga9pgf

The government will do everything in its powers to avoid it. Including sucking up excess liquidity using fiscal policy, either through destruction of public sector expenditure or by hiking taxes.

Airlines are starting to recover. Thats a good bellweather that things are slowly getting better. I dont think rates will have the ability to rise too much, for once I will agree with hamfist.

StevieJ

HAMISH_MCTAVISH wrote: »

UK base rates will, in all probability, rise for only one reason. To fight inflation caused by an excess of liquidity chasing a shortage of goods and services.

Too much money chasing too few products creates inflation, and the BOE fights this inflation by raising interest rates to destroy demand.

Not only that, higher interest rates should mean a stronger currency meaning lower prices for imported commodities like oil.

IveSeenTheLight

michaels wrote: »

Depending on your ltv, how about Yorkshire Builiding society 10 year fix at 4.99% - costs more but then you are covered for 10 years.

That seems pretty good.

Heres a 5 year fix from 3.94%
https://mortgages.hsbc.co.uk/product/186-5-year-fixed-special

StevieJ

mbga9pgf wrote: »

The government will do everything in its powers to avoid it. Including sucking up excess liquidity using fiscal policy, either through destruction of public sector expenditure or by hiking taxes.

Airlines are starting to recover. Thats a good bellweather that things are slowly getting better. I dont think rates will have the ability to rise too much, for once I will agree with hamfist.

Bought a house have you

mbga9pgf

Well, I wouldnt go and buy a house unless I was sure I could afford the repayments Time will tell.

Besides, the whole ARM crisis is going to nail bank profits for years. If you will remember, the month before I bought I mentioned that I had changed my mind and that I thought bank rates would be low for the forseeable.

I purchased my home as a result of that change of heart.

I predict, bank funding will get easier towards the second half of next year, then get tighter again before the end of 2013.

Globally, banks have 1 Trillion in mortgages that are due to reset. Going to be interesting to see how their bottom line is affected as a result of the latest updated "ARM timebomb"(tm) chart that credit suisse did a few months ago.

With the lag between reset and repo, together with BASEL II, I reckon it will be a good few years before monetary policy can be considered without wiping out vulnerable banks.


Unless they go with the "bad bank" model or do another glass-stegal redux.



Boom! HEadshot!

nearlynew

Trying to predict the future actions of liars and thieves is almost impossible.

One thing that hasn't been mentioned by any posters (unsurprisingly) is that you don't have to take out the biggest mortgage you are offered.

Borrowing as little as possible is the best way to build a bit of slack into your finances.