Interest Rates going back up to normal levels again?

Thrugelmir

Koldweather1 wrote: »

Our interest rates will probably divorce the US to some extent simply because we have the external issue of Brexit for the next few years.

BOE's mandate, at least one of them is financial stability. The UK is not cocooned from the influences of the outside world. Brexit or no Brexit. The UK needs to borrow to fund Government debt and mortgages. Much of this money comes from abroad. Divorce isn't an option.

Dandytf

.25 Novemeber increase is proving popular speculation.

Thrugelmir

Dandytf wrote: »

.25 Novemeber increase is proving popular speculation.

Difficult to avoid the trumpet blowing.

Dandytf

economic wrote: »

i just fixed my mortgage at 1.54% for 2 years no fees. i think thats a great rate for piece of mind as comparable trackers are similar rates.

Excellent, my 2.49 fixed with erpc’s was my Aug choice.
Dissapointed my value dropped considerably since 2009-didn’t meet tracker ltv which I wanted.

singhini

I keep a spreadsheet of my mortgage payments/details and for the past 179 months (about 15 years) my average interest rate has been 3.95%

The thing about BoE interest rates and mortgage rates are they are linked but are not absolutely tied together (what I mean is if the BoE rate increases by .25% then the banks typically increase existing mortgages by .25% but new deals might go up by .5% or whatever they want it to be). The same can be said of savings rates, if BoE rate goes up by .25% then savings rates often don't change immediately.


I just checked and back in July 2007 my rate was 5.29% and BoE rate was 5.75% (then by march 2009 my rate was still 5.29% and BoE had gone down to 0.50%) ooh dear:(


This is a good thread

chappers

Dandytf wrote: »

.25 Novemeber increase is proving popular speculation.

Pretty sure then or December, last two meetings have been 5-3 in favour of no change, meeting before that was 7-1.
The BoE have to roll the dice at some point but I suspect a cautious approach and if no damage is done this time expect another go end of first quarter next year.
I think it's going to take at least that to properly have an effect.
In 2007 the 10 year rate was about 5% it is currently below 1%

Thrugelmir wrote: »

. Much of this money comes from abroad. .

About 25% the BoE is addressing that by buying up UK gilts from abroad, at the beginning of last year oversees holdings in gilts was around 30%. The week pound is helping this buy up as without hedging their currency, for example US investors will be getting about a 6th of the return of a domestic investor on a government bond.
But there are issues there too a bond sale early last year barely covered the auction so the liquidity in the bond market might be an issue in itself.
This is where Corbyn's great masterstroke to borrow our way out of trouble really falls down, there might not even be the appetite in the market to raise the money he wants.

Filo25

Very weak new car sales numbers for September.

S&P yesterday very sceptical on the BoE comments as well, we may see a 0.25% increase in November but hard to see much further tightening beyond that, with the softness in the overall economy and higher inflation so far not feeding through too aggressively into pay increases.

I would broadly agree with that, I struggle to see much of a driver in the real economy for any significant interest rate increase at present, growth is anaemic, inflation is up primarily due to devaluation but not showing much sign of developing into an inflationary spiral at present based on wage increases, falling real wages are also squeezing real incomes and consumer confidence.

michaels

Filo25 wrote: »

Very weak new car sales numbers for September.

S&P yesterday very sceptical on the BoE comments as well, we may see a 0.25% increase in November but hard to see much further tightening beyond that, with the softness in the overall economy and higher inflation so far not feeding through too aggressively into pay increases.

I would broadly agree with that, I struggle to see much of a driver in the real economy for any significant interest rate increase at present, growth is anaemic, inflation is up primarily due to devaluation but not showing much sign of developing into an inflationary spiral at present based on wage increases, falling real wages are also squeezing real incomes and consumer confidence.

I agree but clearly the BOE still have a model which says that low unemployment leads to wage increases (remember Carney's 'forward guidance' that rates would not rise till unemployment went below 7%). This broke down because of the labour supply from Europe plus the public sector pay freeze.

Now they feeding in Brexit stopping (reversing?) EU migration and GBP devaluation induced inflation (plus govt political weakness) making the public sector pay freeze untenable and they are back to expecting low unemployment to lead to wage rises and thus a need for monetary tightening.

However those same factors are also leading to a fall in aggregate demand which is resulting in a noticeable (accelerating?) slowdown in the real economy so it looks like there is a very real chance of both a recession and interest rate tightening, commonly known as stagflation

Electrum

If interest rates do go back up to the long term norm, then repossessions will break all time records now.

How did we get into this mess?

MobileSaver

Electrum wrote: »

If interest rates do go back up to the long term norm

What is the "long term norm?"

Electrum wrote: »

repossessions will break all time records now.

I doubt very much that that will happen.