Poll: Where do you expect Interest Rates to be in 2 years time?

wolvoman

5.0-5.5%

Generali wrote: »

I disagree, I think house prices will be very important to the decision. The BoE must be terrified that if they raise rates too far we'll end up with a nasty credit crunch that will threaten the real economy.

If the banks need cash they can't call in mortgages but they can call in all that short term financing (usually overdrafts) used by smaller companies.

House prices rising or falling though won't create the credit crunch.

What I mean is that if house prices start to fall steadily (i.e. by less than about 10% pa) the BoE will ignore that. Inflation is what it is about.

I already stated that business investment will not be risked by the BoE and hence why I think interest rates will get lower over the next 18 months to 2 years. However it is not the job of the BoE to protect short term asset values.

Generali

6.5-7.0%

wolvoman wrote: »

House prices rising or falling though won't create the credit crunch.

The way I see it is that if house prices start to fall, fewer people will be able to borrow against the rising amount of equity they have in their houses and will be unable to repay their debts. According to a piece in The Telegraph, MEW accounts for over 6% of disposable income overall. That's a lot of credit card bills not being repaid!

Also, people that have overstretched themselves on their mortgage won't be able to sell up if they have negative equity in their house and so will be reposessed whereas at the moment they sell up.

Rising reposessions and bankrupcies are the classic conditions for a credit crunch to begin. I realise that they usually come after a recession has started but I don't think that is a necessary condition for a credit crunch to start.

wecanhelpu

6.5-7.0%

less money=falling prices=less money=falling prices etc......

Guy_Montag

6.5-7.0%

G - On the subject of a credit crunch, will dubious CDO's being re-rated not bring about a credit crunch no matter what the bank tried to do?

Hope you can still make it tomorrow!

Generali

6.5-7.0%

Guy_Montag wrote: »

G - On the subject of a credit crunch, will dubious CDO's being re-rated not bring about a credit crunch no matter what the bank tried to do?

That's an interesting question. As Wozza Buffet put it (quoting Mark Twain I think), "There are some things that can only be learned by experience. Try carrying a cat home by the tail."

Derivatives can be strange beasts. CDOs and MBSs could end up destroying several Big Banks that have lent to hedge funds that have invested in them in a 1929-style destruction of wealth. Then again, it could end up that the banks did their sums correctly on the collateral they've taken and the regulators did the right thing by only letting rich people invest in them. That way you end up with a 1980s Lloyds scenario with a bunch of rich people getting their fingers burned.

I hope it's the latter. There's a lot of toxic waste out there that's been packaged to look like a nice box of chocolates, I think. Time will tell.

Another Buffet-ism: "It's only when the tide goes out you can see who's been swimming naked!".

Guy_Montag wrote: »

Hope you can still make it tomorrow!

So do I. Mrs Generali isn't very well but as I suggested the venue it seems a very poor show not to make it!

FIG JAM

Good signature!

dannyboycey

7.25% or higher

Pobby wrote: »

Methinks that 7% is possible, however that would be the new 15%.

Unfortunately, many people don't understand that concept. In fact our current rate is equivalent to well over 10% pre 89 crash.

Melissa177

5.5% (Current Interest Rates)

Hi Guy, Generali - depending on how late Wimbledon goes on today, I'll see you there too!

Generali

6.5-7.0%

Excellent Melissa. Remember your brolly and wellies!

Moorepart

5.75-6.25%

This is a miracle economy, run by miracle PM, supported by miracle MPC so be prepared for a 'miracle' decision next week. I hope not!

Generali

6.5-7.0%

Anyone that's convinced that interest rates are going to remain unchanged can bet on Betfair to return £104 to a £20 bet (£84 in winnings plus your £20 stake back).

If you're interested, PM me because if I refer you to Betfair, you get your £20 back into your account whether you win or lose your bet and I get £20 too!