No rate hike until August 2012

Generali

According to this bloke anyway:

The markets are now pricing in a first rate hike in the UK for August 2012, which is quite incredible if you consider that back in January when I wrote this comment, the markets were pricing in three 0.25% rate hikes this year alone. The chart below shows just how violent things have been, where I’ve taken the market’s rate expectations for the month of August 2012

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and this one:

IF you owe a lot of money to your bank, it’s time to rejoice. There is now almost no chance of interest rates going up this year.

link

and this:

Interest rates are unlikely to rise before early next year, City analysts' reading of the latest minutes of the Monetary Policy Committee suggest – and there is an increasing possibility that another round of quantitative easing could be on the way if the economy remains weak.

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and quite a few others....

ILW

Inflation is going to start running away, we will be truly ******* then.

Graham_Devon

The QE is interesting.

Could we actually pull it off?

worldtraveller

Thanks Generali! The link to John Redwood reminded me again how very much I have always cringed over the years when I've seen that clip! :rotfl:

Generali

worldtraveller wrote: »

Thanks Generali! The link to John Redwood reminded me again how very much I have always cringed over the years when I've seen that clip! :rotfl:

It's a classic isn't it. That and Neil Kinnock's Sheffield rally are just painful to watch.

This is good from the US too as is this 16 seconds in.

HAMISH_MCTAVISH

Late 2012 or even early 2013 now look very possible.... And even then it may be another decade before rates hit 5%.

Truly a once in a lifetime opportunity for anyone with a mortgage.

DervProf

HAMISH_MCTAVISH wrote: »

Late 2012 or even early 2013 now look very possible.... And even then it may be another decade before rates hit 5%.

Truly a once in a lifetime opportunity for anyone with a mortgage.

To do what, pay it off ?

I found that paying my mortgage off when base rate was around 4 - 6 % was not too much of a problem (mortgage rate being 5 - 7.5%).

Once in a lifetime :rotfl:. Most people get 25 years to pay off a mortgage, and most people who do have a mortgage do pay it off, as far as I know.

Ronaldo_Mconaldo

ILW wrote: »

Inflation is going to start running away, we will be truly ******* then.

Rubbish. The only reason inflation is so high is because of VAT and high energy prices. cranking up interest rates won't have any effect on those and all it will do is stop people spending altogether.

purch

Inflation is going to start running away

Yes..........to hide :eek:

Masomnia

Could someone explain to me in fairly basic terms how these swap rate thingy things work?

Is it simlar to futures?

Generali

Masomnia wrote: »

Could someone explain to me in fairly basic terms how these swap rate thingy things work?

Is it simlar to futures?

Do you mean an interest rate swap? An interest rate swap is where you swap a fixed for a floating rate of interest or vice versa.

For example, say I'm a bank offering a fixed rate mortgage. I've got a problem because I pay depositors a floating rate of interest but my income from the loan is fixed. My fear is that interest rates will rise and I'll have to pay depositors more in interest than I get in interest coming in from the mortgage.

To fix this, I can enter into an interest rate swap. I agree with someone else that I will pay them a fixed rate of interest and in return they will pay me a floating rate (usually based on the rate of interest banks use to lend each other money called LIBOR).

The resulting cash flow is that I receive a fixed amount of interest from the mortgage and pay most of that to the bank I've done the swap with. They in turn pay me a variable amount of interest which I use to pay the depositor.