What are interest rates likely to do?

rothers798

This question is for people more experienced in these matters than myself.

What, in your opinion, are the BoE likely to do with interest rates in the next 6 months, 12 months, 2 yrs and 5yrs?

I know that nobody can know for certain but what are your gut feelings?

kingkano

up up and away....

JoeK_3

My crystal ball says that as the present Government are worried about inflationary pressures, the BOE will increase interest rates until this is under control.

There may be more increases in the pipeline short term.

Further down the line, the BOE will reduce rates, as they are worried about the effect of interest rates depressing the UK housing market and causing a depression.

For future long-term interest rate forecasts, watch the price of property in the south of the country.

Puff, now where did that crystal ball go to?

JoeK

shaymenRup

The two pressures causing a lot of the damage at the moment are house price inflation and the high price of oil.

Neither is able to be controlled by the government to any extent. Each in turn has knock on effects ie High energy prices etc.

We are seeing private pay rises in excess of inflation (again an inflationary pressure), albeit public sector workers are getting less than inflation pay rises to try compensate and consumers are putting more and more spending on credit.

The next set of inflation, unemployment and consumer debt figures should show if interest rate rises have had an effect. I would think a further rise may be likely in the next 3 months.

If the governments plans work, inflation will fall quickly, but don't expect rate decreases until inflation is well below the governments target of 2%.

Kimitatsu

I agree with all that has been said!

Interest rates will hit at least 6% this year I think, housing inflation is one of the pressures, and until you stop housing inflation running at 10% a year then you have to slow it down some other way.

Credit has been easy to obtain, albeit harder now, that decrease in credit will take time to filter through so I think you will be looking at 18months to 2 years before you see any drop in interest rates (if not later).

Then again we will have a general election between now and then...........

rothers798

Thanks guys, based on that, would you go for a fixed rate or a tracker? I could swallow a couple more rate rises, just!

meanmachine_2

Forecasts about IRs aren't worth the electronic paper they're tapped on.

However, for what it's worth...

If oil had remained around $60 then I'd have suggested a peak of 5.75%.

If they remain above $70 for a sustained period, then we'll hit 6% and will likely have to stay there or thereabouts for a few years.

If I was buying now I'd fix, but fixes have become very uncompetitve in the last few weeks.

plane_boy2000

My gut feeling is a couple more rises are on the way by the end of this year, then a level period for a bit for inflation to adjust back to below the Govt target, then a few spaced out steady quarter % cuts bringing us back to around 5% ish in two years time.

Working on my theory thats why I have just fixed for two years in the hope the rates will be lower then rather than fixing for 5 years. The fact that fixed rates are not very good at the moment is an indicator that the analysists at the financial institutions see further rises, and these guys are pretty clued up - its there job.

JoeK_3

rothers798 wrote: »

Thanks guys, based on that, would you go for a fixed rate or a tracker? I could swallow a couple more rate rises, just!

I would go for a 3-5 year capped rate.

JoeK

EdInvestor

Once falls in utility prices feed through, they ought to decrease inflationary pressure in the short term, but the market is looking at one further 0.25% rise.

shaymenRup

meanmachine wrote: »

Forecasts about IRs aren't worth the electronic paper they're tapped on.

However, for what it's worth...

If oil had remained around $60 then I'd have suggested a peak of 5.75%.

If they remain above $70 for a sustained period, then we'll hit 6% and will likely have to stay there or thereabouts for a few years.

If I was buying now I'd fix, but fixes have become very uncompetitve in the last few weeks.

How funny is this thread. Who'd be in the futures market eh?

Interest rates 6% wrong
Oil $70 a barrell try doubling that!!