Fixed Rate ISA Conundrum

bigfreddiel

ses6jwg wrote: »

Personally I would not put anything in a fixed rate product at the moment but that is because my personal belief is that interest rates will rise in the next 12 months

not a chance - rate held today at 1/2% - and forecasts show its not rising net year either

go fo a 5x5 is my opinion - its a no-brainer

fj

bigfreddiel

RobStaffs wrote: »

:rotfl::rotfl::rotfl:

brilliant:beer:

ffacoffipawb

ffacoffipawb wrote: »

Current ISA: LLoyds TSB 2.90% fixed until November 2012

Considering transfer to Birmingham Midshires 5% 5 year fixed rate.

160 day interest penalty on Lloyds ISA, balance is just under £67k (including an old TESSA).

Would you switch or not?

Update: Lloyds closed on 30 June and transferred funds, presumably by cheque, to BM.

Cheque received by BM on 11 July.

BM have confirmed receipt at the rate of 4.89% pa, payable monthly (5% AER), with interest accruing from 30 June.

Very efficient service from both ends.

StevieJ

ffacoffipawb wrote: »

Update: Lloyds closed on 30 June and transferred funds, presumably by cheque, to BM.

Cheque received by BM on 11 July.

BM have confirmed receipt at the rate of 4.89% pa, payable monthly (5% AER), with interest accruing from 30 June.

Very efficient service from both ends.

I thought they were the same bank

spikyone

bigfreddiel wrote: »

not a chance - rate held today at 1/2% - and forecasts show its not rising net year either

Can you provide a link to those forecasts?

I go back to my point from another thread, very few people outside the BoE think rates should be 0.5%. You're still betting on them burying their collective head in the sand, and for another 18 months.

StevieJ

spikyone wrote: »

Can you provide a link to those forecasts?

I go back to my point from another thread, very few people outside the BoE think rates should be 0.5%. You're still betting on them burying their collective head in the sand, and for another 18 months.

Well, interest rate futures are predicting 12 months+

Market predictions

So when will the MPC make the first move? Interest rate futures have seen a big shift in recent months. They now (18 July) point to September or October 2012 for the first rise. But these market predictions are very volatile. Just three months ago they suggested a rate rise was imminent. (The swaps charts below give a hint of this swing in sentiment).

Read more: http://www.thisismoney.co.uk/money/news/article-1607881/Interest-rates-News-predictions.html#ixzz1SYbZ1UW5

StevieJ

In fact the CEBR were predicting 0.5% interest rates until the end of 2012 back in 2010, pretty good forecast I would say.

Following the emergency budget today, the centre for economics and business research predicts that interest rates will remain stable at 0.5% until the end of 2012.

http://www.mortgagestrategy.co.uk/economy/cebr-says-base-rate-stable-at-05-until-2012/1013866.article

spikyone

Veering dangerously off-topic here, but let's go for it anyway...

StevieJ wrote: »

Well, interest rate futures are predicting 12 months+

This is an interesting prediction to use, since the article itself says that the futures market has been volatile. In fact that market has been over-reacting to small changes in inflation of late, and when you consider the composition of the recent drop in inflation (electrical goods and clothing significantly down, fuel and food inflation continuing upwards unabated) it's hard to see such a reaction as rational. Real inflation, on items that are neither 'luxury' nor seasonally discounted, is still increasing and is far greater than the official 4.2%/5.0%. As the OECD point out in the article linked from thisismoney, this will increase pressure on wage inflation and ultimately necessitate base rate increases.

Given their raison d'etre I'm not sure how vested the CEBR's interests are, but they seem to be prescribing the same inaction as the BoE's Monetary Policy Committee based on the same flawed logic - namely that the current inflation rate is temporary. That article was written 18 months ago so clearly they have a different definition of "temporary" to you and I (see the graph from the ONS).

The key point from your linked thisismoney article is that most economists still predict a rate rise this year. If you asked how many expect rates to rise this year or next year, it would self-evidently be a bigger number still - this is why I disagree with bigfreddiel's assertion on economists predicting no rises next year.
I suspect that those economists who have changed their minds (from 70% expecting an increase this year to 55%) are basing their opinions not on what's necessary for the economy, but on the fact that the MPC are either ignoring several important facts or simply don't have the balls to act.

StevieJ

spikyone wrote: »

Veering dangerously off-topic here, but let's go for it anyway...



This is an interesting prediction to use, since the article itself says that the futures market has been volatile.

They may be volatile but they have the advantage of being an objective view of where we stand at this moment, economists and commentators tend to carry political baggage that effects their views and forecasts. Anyway it would appear that the most important forecasters are the ones that make the decisions i.e. the BOE monetary committee and here are their current views as published today.

http://www.bankofengland.co.uk/publications/minutes/mpc/pdf/2011/mpc1107.pdf