any foreseeable reason interest rates could go up in next 5 years?

[Deleted User]

Hi,

I'm debating whether to switch to a 2 year or 5 year fix. I can't see interest rates going any lower so reckon fixing is better at the moment. The 2 year rate is £816 a month for me, and the 5 year rate is £844 a month (at the moment I'm paying £902 on a previous 2 year fix).

What possible reasons could there be for the BoE to raise rates? In know they do it to defend the currency, but any other ways it could happen?

Thrugelmir

Who predicted that they'd remain this low for so long. Shows that the underlying economy still has major problems that could so easily erupt into a full blown crisis.

dano17439

Read today that they wont consider rising rates until 2020

richnpt

I can't see them rising considerably even if they do go up; possibly 2% max? This country is over £1tn in debt, so low interest rates plus a bit of inflation is the best chance of inflating away the national debt. I can see sub-2% rates for a decade or so unless there is some sort of unexpected economic-boom (i.e. the dotcom stocks before 2000, or commodities and property pre-2007). Robotics might provide a bit of a boost to the global economy, but think that may take a few years to play out yet.

brit1234

Inflation

Inflation is the main reason that interest rates can go up in the next 5 years. Lowering the strength of the pound imports inflation from goods (Chinese electronics, American grain, foreign fruit etc) and energy (gas, oil).

As the oil price increases which it is doing inflation figures are going to rapidly rise. The cost of transporting goods will rise making their cost far bigger or items far smaller at same cost. Rampant inflation can cause the BOE to rise rates especially when Carneys leadership ends.

AnotherJoe

brit1234 wrote: »

Inflation

Inflation is the main reason that interest rates can go up in the next 5 years. Lowering the strength of the pound imports inflation from goods (Chinese electronics, American grain, foreign fruit etc) and energy (gas, oil).

As the oil price increases which it is doing inflation figures are going to rapidly rise. The cost of transporting goods will rise making their cost far bigger or items far smaller at same cost. Rampant inflation can cause the BOE to rise rates especially when Carneys leadership ends.

But that's offset by the fact that some inflation is a good thing and it's been too low for a while, and a low exchange rate is what's needed as we negate Brexit, helps us with exports, discourages foreign imports and offsets any trade tariffs raised against us.

And oil price isn't increasing, it's dropping again, and in any case compared to 2-3 years ago, the oil price is massively lower and there weren't any huge knock on effects in making goods hugely cheaper then due to transport costs so why would there by a swing the other way if they went back to what would anyway be a lower position than say 3 or 4 years ago ?

fewcloudy

[quote=[Deleted User];discussion/5504930]Hi,

I'm debating whether to switch to a 2 year or 5 year fix. I can't see interest rates going any lower so reckon fixing is better at the moment. The 2 year rate is £816 a month for me, and the 5 year rate is £844 a month (at the moment I'm paying £902 on a previous 2 year fix).

What possible reasons could there be for the BoE to raise rates? In know they do it to defend the currency, but any other ways it could happen?[/QUOTE]


Well, seems like this chimp thought they would have risen by now...

https://www.theguardian.com/business/2016/apr/15/george-osborne-says-brexit-will-drive-up-interest-rates

blueste

Taking all the above considerations into account, why don't you take a 2 year tracker? You will pay less interest and if the forecast changes you could switch. Also, some analysists are predicting a drop to 0% by the end of the year- on a tracker you could take advantage of this.

dunstonh

You cant predict interest rates as the things that would result in interest rates increasing may or may not happen.

There are some things that do suggest that interest rates will rise in the future but also some things that are keeping them down.

The fall in the value of sterling will see many goods in the UK increase in value and that will push up inflation. One of the controls for rising inflation is increasing interest rates.

However, the UK economy is suffering at the moment because of the brexit uncertainty. So, this is keeping interest rates low. If the damage from brexit is not as strong as predicted and recovery occurs, then interest rates will reverse. However, that will be slow. The economy can barely withstand a 0.25% increase. Let alone a 5% increase.

Well, seems like this chimp thought they would have risen by now...

https://www.theguardian.com/business/2016/apr/15/george-osborne-says-brexit-will-drive-up-interest-rates

To be fair, GO could be right. The next stage to control inflation would see higher interest rates as one of the tools used. it isnt needed now but the stage is set in the usual cycle for these things.

getmore4less

2 or 5 fix they don't protects from rising rates for long.

but what you can do is measure the follow on rate after the 2y to break even with the 5.

what are the rates?