The 3 year anniversary of the 0.5% BOE interest rate.

Graham_Devon

Was discussed on the BBC this morning.

1 caller was a lawyer from London who suggested we were just propping the housing market up while costs spiralled around us, pricing FTB's out even further and creating even bigger problems.

Another caller, a retiree, who suggested after 50 years of working, the small amount of savings they had were now already being nibbled away at thanks to rising costs. These savings were supposed to last them a decade, with one holiday they have been saving for for x amount of years. She stated they certainly won't last a decade any longer. She's approached her MP, but apparently all he cares about is keeping mortgage rates low.

There wasn't any more callers, but suspect there would have been later on wanting to keep rates low.

For me, the whole anniversary is somewhat darkened by the BOE rate starting to be something of an irrelevance.

There will be a whole raft of articles on this today, when the BOE is expected to do nothing.

Graham_Devon

Capital Economics suggest they could stay at 0.5% for another 3 years.

MSE News article...
http://www.moneysavingexpert.com/news/banking/2012/03/05-base-rate-may-last-another-three-years?utm_source=forum&utm_medium=sidebar&utm_campaign=box

ruggedtoast

Graham_Devon wrote: »

Capital Economics suggest they could stay at 0.5% for another 3 years.

MSE News article...
http://www.moneysavingexpert.com/news/banking/2012/03/05-base-rate-may-last-another-three-years?utm_source=forum&utm_medium=sidebar&utm_campaign=box

Oh I hope so Graham, I do hope so.

Back when I had savings and no mortgage I thought ZIRP was an outrage.

Now I have a huge mortgage on an overpriced house, and no savings whatsoever so ZIRPING makes me all:

:beer:
:T
:rotfl:
:beer:
:money::money::money::money::money::money::money::money::money::money::money::money::money::money::money::money:
:j

HAMISH_MCTAVISH

Graham_Devon wrote: »

Capital Economics suggest they could stay at 0.5% for another 3 years.

MSE News article...
http://www.moneysavingexpert.com/news/banking/2012/03/05-base-rate-may-last-another-three-years?utm_source=forum&utm_medium=sidebar&utm_campaign=box

From the article:

"Remember that when interest rates hit their previous record low of 2% in 1932, they stayed there for pretty much two decades."

Philip Shaw, an economist at Investec, adds: "It would take a seismic change in the economic and inflationary landscape to bring proposals for higher interest rates back to the table."

Neverland

I think its impossible that interest rates won't rise

1. If inflation drops then interest rates rise simply by being less negative in real terms

2. At what level of inflation will the BoE raise interest to stamp it out? 5% per annum? 7% per annum? 10% per annum?

3. When the current bout of QE finishes who else will buy the large quantities of debt our government needs to issue at a 2% rate of interest?

4. Persumably the £250bn of government debt that the Bank of England holds will be sold back to investors at some point?

5. Finally and quite simply, if Bank of England base rates are at their lowest level ever recorded fro 300 or so years, what is it they can possibly do but rise?

However, what I can't tell you is when...

[Deleted User]

Well, they've done wonders for keeping me afloat. Helped to save a deposit to buy our 'family' home

To all those with big savings after many years of squirreling money away; you should look at the equity you acquired as house prices rose and rose and rose; it is substantially more than the loss you are making on interest rates

As a 'young' person (well.. 31), i have a HUGE mortgage for an average house and ziltch chance of it increasing in value. The trade-off is the low rate on the mortgage. Swings and round-a-bouts

Neverland

ringo_24601 wrote: »

To all those with big savings after many years of squirreling money away; you should look at the equity you acquired as house prices rose and rose and rose; it is substantially more than the loss you are making on interest rates

As a 'young' person (well.. 31), i have a HUGE mortgage for an average house and ziltch chance of it increasing in value. The trade-off is the low rate on the mortgage. Swings and round-a-bouts

Actually for people with defined contribution (not final salary) pensions or cash savings the "win" on the house price is all taken away with the loss on the annuity they are offered on their pension funds on retirement

A few people (people with big debts and/or final salary pensions) have won big, through nothing more than luck ... which I think is a bit unfair

As for you, good luck...I'd be paying it off like crazy....there is every likelyhood that the interest rates will rise...

andyroberts1967

Neverland wrote: »

A few people (people with big debts and/or final salary pensions) have won big, through nothing more than luck ... which I think is a bit unfair

Luck is, by its very nature, unfair - otherwise we'd all have exactly the same luck, wouldn't we?
I'd settle for a further 3 years of interest rates at this level or close to it, I'm currently paying off a mortgage which, through overpayments, I have reduced from 23 years to 11, so every month with these rates is a shot in the arm for me.

[Deleted User]

oh, i wish i was in a position to be paying it off faster. Young family and wife on maternity leave... Praying for a few pay-rises before the rate slowly creeps up.

There's no cat in hells chance of it leaping up to 10% overnight (or even 5%0. The political repercussions would be crazy

Conrad

If people are getting a low return on cash based investments (and that includes those ELECTING a safe steady lower yielding annuity), it has nothing to do with anyone but them.

If you want better returns, make different investment choices, stop being so damned lazy.

My Mum moans about this and I suggest she instead use her cash to buy a property and get about an 8% yield, but she doesn't want the hassle. Thats like me demanding my car is clean without wanting the hassle of washing it!

Just because lifes choice range does'nt suit your temperament, is no reason 'someone' shuld fix this for ya.

Neverland

ringo_24601 wrote: »

oh, i wish i was in a position to be paying it off faster. Young family and wife on maternity leave... Praying for a few pay-rises before the rate slowly creeps up.

There's no cat in hells chance of it leaping up to 10% overnight (or even 5%0. The political repercussions would be crazy

BoE base interest rates have leapt by more than 5% twice in my memory in short period

1979-1980 - shortly after Magaret Thatcher got in to cure inflation

1991(or thereabouts?) - Thatcher again, when Norman Lamont was defending the £'s exchange rate against the Deutschemark as part of the ERM, which was a pre-cursor to the Euro

No-one saw it coming then either, many people lost their homes

Edit: Of course, THIS time its different...