The Interest Rate Yo Yo is back in the Up Phase

deemy2004

Money Market rates have risen sharply over the last week or so

The 1 year LIBOR rate bottomed at 4.84 in Mid Jan, when most comentators were resigning themselves to rates having peaked, and sterling had drifted somewhat off its peaks. Now interest rates have trended up to 5.21. Which is a hefty .35% jump ! This suggests that interest rates are likely to rise much sooner than expected, regardless of the fact that an election is around a corner.

On the basis of the trend the rate rise may even come this month !

Also the anticipated rate rise, may not be the end of the story with another rise likely shortly after the election, though this is subject to economic stats, currency markets, housign market reaction etc....

Advice - If your looking to fix rates, then wait a while i.e. till the next rates rise.

Aletank

I'm due to remortgage now, I tried to get a Nationwide appointment before the 10th March yesterday but the best they could do was the 15th. I'm just hoping rates don't rise on the 10th as I'm looking to go for a 5 year fixed, so a 0.25% rise on the 10th would be costly for me over them 5 years.

deemy2004

Its a tough call, the election and budget will probably end up delaying a decision until after the May election

Walletwatch

Signals are still mixed enough to keep rate rises at bay for this month at least - I think the time when it is most possible is in April (don't think they'll do it in May, considering it will be so close to the election)

As for now, I have only one friend on the MPC - hope other guys join Tucker on the hawks' side ;-)

Aletank

Aletank wrote:

I'm due to remortgage now, I tried to get a Nationwide appointment before the 10th March yesterday but the best they could do was the 15th. I'm just hoping rates don't rise on the 10th as I'm looking to go for a 5 year fixed, so a 0.25% rise on the 10th would be costly for me over them 5 years.

:mad: Nationwide have increased their Fixed Rates by 0.25%, I have a appointment for Tuesday too and was hoping to get a 5 year fixed deal.
That will probably cost me £10 a month more now - £600 over the 5 year fixed term

deemy2004

Aletank wrote:

:mad: Nationwide have increased their Fixed Rates by 0.25%, I have a appointment for Tuesday too and was hoping to get a 5 year fixed deal.
That will probably cost me £10 a month more now - £600 over the 5 year fixed term

I don't think they had much choice as the money market rates have already risen to anticipate a rate rise.

Now since my post the rates have continued to rise.. Now the 1 year LIBOR is at 5.25%, the pressure continues to build for a rate rise, if the trend continues once it goes above 5.30%, I would expect a rate rise at the following MPC meeting, so it may occur at the April meeting.

Walletwatch

deemy2004 wrote:

I don't think they had much choice as the money market rates have already risen to anticipate a rate rise.

Now since my post the rates have continued to rise.. Now the 1 year LIBOR is at 5.25%, the pressure continues to build for a rate rise, if the trend continues once it goes above 5.30%, I would expect a rate rise at the following MPC meeting, so it may occur at the April meeting.

Yes, I guess it really depends on to what extent much the banks have covered themselves, by getting into swaps to offset the positions that get created out of the mortgages they offer in the retail market. Given that the money markets have already factored in a 25 bps in the rates, we should expect banks to go that way sooner or later.

By the same logic though, I'd expect the fixed rate deposit rates also to increase, so am being greedy and waiting before fixing.

deemy2004

Theres usually a lag of between 4 and 8 weeks between the money market and fixed rates.

I recall last year money market rates peaked in early August but there was a good 6-10 week delay in the cutting of many Fixed rate deals as the money market rates tumbled, most cuts were in late sept / early October, by which time money market rates had already fallen by about 0.25%.

So the best rates will probably start appearing in Mid April 05.

Walletwatch

Yes, I agree, which is why I am not even putting any money into my next year ISA as soon as it is available, plan to wait till end April, to see if something better than the 5.5% one-year fixed rate from Abbey comes up.

I think though, that banks will hold out and wait for the Money Markets pricing in a rate rise to be corroborated by an actual rate rise, so I think it might actually be later - maybe May second week.