BOE Interest rate impact on stoozing

Al_Mac

The Bank of England will be putting interest rates up, little doubt in that.

Which should I do.

Max out stoozing now, as 0% is lilely to go, it's only around because the BOE rate is so low.

or

Wait until the rate goes up by 1/2%, then go for it.

or

Wait until it goes up by 1%.

Or another approach?

Discuss.

I'm off for a game of darts and some :beer: .

Catch ya later.

:money:

Martinslovechild

Most analysts believe that we are either at the peak of the current cycle or very close to it. On this basis, it will probably go up by a further quarter of one percent (0.25%) to 5%, but is unlikely to climb any higher.

A climb of 1% to 2% as you suggest would hit some homeowners hard, particularly those people who have either:-

a) recently purchased a property. The treasury predicts that property prices are scheduled to fall by 1% over the next 12 months.

b) borrowed to the limit against equity in a property that they already own.

Both groups could therefore be heading towards negative equity. The Bank Of England will be careful not to promote this.

Remember that credit card companies lose money out of BT offers regardless of whether the BoE Base Rate is 4.75% or 14.75%. It costs them either way.

My advice would be to not go rushing in like a bull in a china shop. Take things steadily and worry about the withdrawal of BT deals if or when they happen.

deemy2004

Al_Mac wrote:

Sorry, been to pub played darts, had a few beers, but they do lose out a hell of a lot more at 14.75%, than they do at 4.75%. They borrow moneys, often from sister companies, to finance 0%, they do not get if for nothing.

How high the rate will go? Depends on the website/expert you read.
:beer: or toooooo many.

Whats important is the real interest rate net of inflation.

There have been times in the past when inflation has been higher than interest rates in which case your debt gets devalued by more than the interest your paying on it.

Personally I think that the uptrend will last some more years, rather than months, though it will contain a correction or two which will see rates fall and then rise again.

So my pick is rates rise to end 2005 5.25%, fall to end 2006 4.75%, rise end 2007 6%, from then ???

It all comes down to what happens to china and to a lesser degree india.... for they have been a strong deflationary influence on the world economy due to their low cost goods and services... I can very well see these economies overheating and inflation taking off, and thus creating stagflation thus they will ineffect export their inflation abroad instead of deflation leading to a double whammy as commodity prices approach near all time highs.

Rafter

Even if rates do rise by 1% won't the credit companies simply introduce a 1% balance transfer offer and it will still cost them the same?

Since savings rates should go up by 1% too you will still be making the same stoozing profit?

Current intro offers are more likely to go because too many of the new customers are stoozers and less and less are the mugs who stay after the promotion is over and end up paying high interest rates.

I guess we will see more and more BT fees and other terms to make stoozing less and less attractive.

It will then become an issue of whether you are prepared to go through the same amount of effort to make say £50 on a card in a year rather than the £250 you might make on a £5000 balance stoozed over 12 months at present.

R.

Walletwatch

The way I see it, in the next few months:

1. SBTs will no longer be offered - even today, they are nothing but cash advances (except in cases where they are used by people genuinely in debt to cross-subsidise loans or overdrafts)
2. Agree that 0% deals will be charged more and more, and other ingenious ways will be introduced to ensure that balances transferred at 0% are those that are genuine (i.e. targetted at those who are currently paying high interest on their existing cards which the balances are transferred from) This could easily be achieved by making the documentation more stringent (asking for credit card statements of the past three months, say, for the card from which the balance is being transferred)