interest rates down more???

xarjia

hi. i just saw this article today regarding interest rates.


http://business.timesonline.co.uk/tol/business/money/property_and_mortgages/article3013685.ece

the article says the rate will go down to 4% by 2009. is that correct?

is it wise to get out a variable rate mortgage now as i am due to change mortgages now?

JohnInDebt

Interest rates will be the least of our worries at that level as inflation would overtake Zimbabwe's!!!

dannyboycey

xarjia wrote: »

the article says the rate will go down to 4% by 2009. is that correct?

I don't know which is more worrying - that so called 'experts' write this tosh, or that people actually take it seriously.

Generali

My guess is 0.5% of cuts by end next year and if anything that's conservative.

1 month LIBOR (the rate at which banks are prepared to lend to each other for a period of 1 month and the 'base rate' for commercial lending) hit a nine year high on Wednesday. That is a far more important figure than the BoE base rate as it reflects the actual costs to banks of funding loans and mortgages to you and I.

In effect, the market has increased rates by 0.75% over the last few months - money has been getting more expensive regardless of the actions of the BoE.

The problem for the Bank of England is that if this continues, they've effectively lost control of interest rates - the market is setting rates independently of the actions of the MPC. If it continues, then things could become very nasty as borrowers are squeezed (in that I include perfectly sound businesses as well as the !!!!less and reckless).

There is a theory that rising debt is ultimately deflationary - it causes inflation as the money is borrowed (see what has happened to house prices over the past 10 years across the world to see the inflationary effect of all this lending/borrowing) but then causes deflation as the money is paid back and as a result the 'wealth' that was created by inflation is destroyed again.

I have no idea whether that's true or not (it sounds plausible but WTFDIK) but I bet that we'll see a lot more rate cuts before 2008 is out.

PS Was at a dinner last night with a lot of hedge fund and banking types (some people get all the fun eh?) and there was a lot of black humour about how bleak 2008 is going to be in finance. When you remember that the City is a big part of London's GDP and London pays about £20,000,000,000 more in taxes than is spent by Govt there, you would imagine that there's going to be a lot of pain felt in the parts of the country that receive that cash!

PPS If you really think that rates are going to 4%, buy Gilts!!!

dannyboycey

Nobody knows what interest rates will be in 2009. Period.

aardvaak

All this cut is going to achieve is to give the idiot consumers the feeling to go out and spend, spend,spend at Christmas on Credit Cards etc., then in January to whinge,whinge,whinge when the bills come in and say my interest rate is too high and of coarse the media will pick up on this.

nollag2006

Today's FT is forecasting 5% by mid-2008.

This should ensure that recent softening of house prices doesn't continue.

Phew !

dannyboycey

aardvaak wrote: »

All this cut is going to achieve is to give the idiot consumers the feeling to go out and spend, spend,spend at Christmas on Credit Cards etc., then in January to whinge,whinge,whinge when the bills come in and say my interest rate is too high and of coarse the media will pick up on this.

Agreed. I think the cut was just a gesture, as a Christmas sweetner for people to spend what they haven't got over the festive period.

The new year hangover will be immense.

nollag2006

xarjia wrote: »

is it wise to get out a variable rate mortgage now as i am due to change mortgages now?

Yup - a BOE base rate tracker might be wise, as the market is pricing in a BOE rate of 5% by 2009, according to Thompson Datastream.

There are already some decent fixed rate products coming out also, as swap rates are falling rapidly.

The Co-Op has just launched a new 2 yr fix at 5.39% for £999. Other products are likely to come out over the next few days, so it might be best to wait until early next week to make a decision.

SquatNow

The BoE will be forced to put interest rates up again post-christmas as inflation picks up. I can just imagine Mervs letter now.

Dear Gordon,

Inflation exceeded the 3% limit this month because you rodered me to put interest rates down.

Thanks a lot you muppet,

Merv.

Running_Horse

dannyboycey wrote: »

Nobody knows what interest rates will be in 2009. Period.

For once we are in agreement.

And the idiot who mentioned Zimbabwe needs to engage brain before typing.