Inflation hits 3%

gil13

Yes, that's correct these things take time to feed through, in saying that those on variable rates who suddenly realise that they are maybe over £100 p.m worse off can very quickly put the breaks on spending and will if the rates continue up. I personally was going on about doing 1/2 point rises last year, I could almost see this inflation figure coming. I would have preferred BOE to to have applied the medicine early. The housing market is much more difficult to predict, personally I feel there has been a real disconnect between Interest rates and House prices, there are so many factors at play. Banks have helped fuel some it, sentiment, estate agents, new secondary markets such as BTL and the like. I do not see a big price crash, but a correction is probably going to happen, it then comes down to how big the panic. I am also interested to see if the stock market has a big correction, some are still saying on earnings multiples it remains good value, but when the red pens come out no doubt later this year on that score together with if there is some equity withdrawal as people park on deposit at a good rate of interest. Then we could see some fireworks although over the longer term, equities have always outperformed cash, indeed perhaps funds will just move to other markets outside of the UK such as Europe (Germany doing much better) or developing markets. Interesting times ahead, lets hope everybody shows some constraint and less panic.

Generali

The thing that struck me about this isn't that the CPI hit 3%, it's that the RPI is now 4.4%. That implies to me that monetary policy is actually pretty loose right now unless this is just a statistical blip. If it isn't, we can expect to see more rises given that the average real interest rate (i.e. base rate less the RPI) seems to average about 2%.

roswell

sm9ai wrote:

Together with fixed rates being withdrawn things don't look good.

I think this post relates to something on the news last night that banks might be concidering withdrawing fixed rate mortgages. This was in one of the papers but cant remember which one, anyone got more info??

Generali

The Telegraph contains a list of products withdrawn along with some other stuff along the lines of 'Does the MMR cause falling house prices?'.

gil13

http://www.telegraph.co.uk/news/main.jhtml;jsessionid=DTNW4F3QVKHXTQFIQMFSFF4AVCBQ0IV0?xml=/news/2007/01/16/nbanks16.xml

talksalot81

sm9ai wrote:

yes, a number of people expect rates to be up to 6.5% soon :eek:

I dont think many knowledgeable analysts would be predicting that far forward... really that much higher is little more than a 'gut feeling'.

movieman

I dont think many knowledgeable analysts would be predicting that far forward...

I seem to remember most analysts were predicting more cuts after August 2005, and we've had three increases since with more to come. Most analysts only seem to be any good at telling people what they want to hear.

From what I remember the last time RPI was this high, rates were around 7.5%... don't be surprised if they have to go higher than that in the next few years.

BeerBelly

Does anything think 5 year fixed with get withdrawn?

Guess I will out tomorrow, just wondering your thoughts.

realwildone

I dont think many knowledgeable analysts would be predicting that far forward... really that much higher is little more than a 'gut feeling'.

Take no notice of the economists. They get it wrong more than right. Howard Archer is one of the most quoted and the one who gets it wrong more than most.

gil13

7.5% seems a bit toppy to me, but who knows, I just can't see it. I guess you have to also consider items such as fuel bills being higher now than ever(but predicated to come down this year). I mean I am not sure the exact figure but they have probably gone up +25% over last year. I guess all MSE'rs are in the right place....if you can save money and get the best deals we go some way to containing our own inflation.