Higher Interest rates for 2007

mystic_trev

The Markets have already priced in a 0.25% increase for February. As Infation is still remaining very stubborn, some are now predicting they could rise as high as 6.25% by the middle of next year.Interesting article in todays Telegraph.

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/01/02/nhomes02.xml

"Prof David Smith of the University of Derby, the chairman of the "shadow" monetary policy committee, has predicted that — far from falling later this year as many City experts think — borrowing rates could rise from their present level of five per cent to reach 6.25 per cent midway through 2008.

The prediction will come as a blow for households, many of whom are already struggling to meet their monthly mortgage payments and other bills.

Prof Smith said he feared the Bank would take this decisive action to take control of the burgeoning level of personal debt, which has now passed £1,300 billion"

Generali

Interesting. I keep reading about how inflation is getting 'stickier', i.e. harder to bring down by raising interest rates due to the increasing proportion of the economy being services rather than goods (e.g. here or here).

This implies that interest rates will have to rise higher for longer than many predict. It may all be rubbish too of course.

Gorgeous_George

It's all a scam to get people to take fixed rate mortgages befoe interest rates crash through the floor.



GG

theGrinch

"they" say a lot dont they? guess they need to fill the paper

leftieM

It would be great if they reviewed all of the HP/IR predictions for last year and showed how many were right and wrong. Talk is cheap when it comes to this issue.

Generali

From memory (and mine is notoriously poor) both rate rises were predicted almost perfectly by financial markets.

free4440273

Generali wrote:

From memory (and mine is notoriously poor) both rate rises were predicted almost perfectly by financial markets.

without wanting to disagree, and my memory is even worse than yours!, they actually 'anticipated' any increase just to cover themselves in virtually ever monthly rate announcement. the thinking often went: 'yes, this time round there might very well be a .25 rate increase' - ad infinitum. it's like i have said before, they don't really what they are doing, like the BofE has no idea what it is doing, trying to please all men all of the time. like i have said many times before rates should go up to between 6.5 to 7 per cent by the end of 2007 - this would be economically justified, but they probably won't go up because the BofE just seems gutless at the moment (although mervyn king is actually a very astute person - you can see from his speeches that he thinks house prices have lost sense with economic reality).
http://forums.moneysavingexpert.com/...ml?t=336172#10

lypsey

leftiem
This time last year I think you will find quite a few banks were indicating LOWER rates

http://www.thisismoney.co.uk/news/article.html?in_article_id=405988&in_page_id=2

http://news.independent.co.uk/business/news/article336421.ece

Generali

When I say that financial markets predicted the rate rises, I mean they were priced in to bond prices etc. pretty much accurately. Many individual banks got it wrong, that is undeniable but 'the market' as a whole got it right I think.

free4440273

Generali wrote:

When I say that financial markets predicted the rate rises, I mean they were priced in to bond prices etc. pretty much accurately. Many individual banks got it wrong, that is undeniable but 'the market' as a whole got it right I think.

you are absolutely right. i probably misread/misinterpreted what you said.

UK007BullDog

Personally I saw it coming and have been saying for the last couple of months on this site that I expect to see 2 more rate rises. One in February and one in the summer.

Due to people still spending like crazy and buying everything in the sales.

We went to Bluewater on the 27th Dec. Tried, gave up because we were stuck in the car park for 45 minutes unable to get a space. People were fighting!

So we went to Canary Wharf Mall instead where it was not so overrun, but still bad. All for two pairs of Gap Jeans for DD. Never again!