Base Rate This Time Next Year?

Strummer22

michaels said:

TerryTeacake said:

Sarah1Mitty2 said:

Strummer22 said:

Maka344 said:

Strummer22 said:

Well we can have a stab at it and revisit in Aug 2024.... I'm going to go for 4.75%

Lower, election forces will be at play... 

Gov does not set the rates... merely "suggests" to the supposedly independent BoE what they want them to do ;-)

And then they do what the bond markets tell them to do - I`m going to go for 7%.

The Bank of England is facing major losses on its bond purchases — and it's set to get much worse. This would mean much higher interest rates.

https://www.google.com/amp/s/www.cnbc.com/amp/2023/08/30/bank-of-england-bond-losses-to-cost-government-20b-more-than-expected.html

Surely cutting interest rates would make the bond values increase and reduce the liability?!

Yeah I don't see how @TerryTeacake's conclusion follows from the info in that article.

Anyway, fancy a guess Terry?

TerryTeacake

michaels said:

TerryTeacake said:

Sarah1Mitty2 said:

Strummer22 said:

Maka344 said:

Strummer22 said:

Well we can have a stab at it and revisit in Aug 2024.... I'm going to go for 4.75%

Lower, election forces will be at play... 

Gov does not set the rates... merely "suggests" to the supposedly independent BoE what they want them to do ;-)

And then they do what the bond markets tell them to do - I`m going to go for 7%.

The Bank of England is facing major losses on its bond purchases — and it's set to get much worse. This would mean much higher interest rates.

https://www.google.com/amp/s/www.cnbc.com/amp/2023/08/30/bank-of-england-bond-losses-to-cost-government-20b-more-than-expected.html

Surely cutting interest rates would make the bond values increase and reduce the liability?!

During the pandemic the BoE printed lots of money to bid up bonds and suppress yields, in order to keep the system on life support when the economy went into lockdown during covid. No sane rational investor in the free market is going to buy bonds at 0% yield, only central banks will. Now the central banks have to fight inflation so they can no longer afford to print money to buy bonds, these bonds are now reverting to their natural free market price of far lower than what the BoE bought them at.

If we didn't have a rampant inflation problem they probably would cut interest rates instead of raising them over the last 18 months. Also, we must be aware although inflation has been coming down recently it doesn't mean prices are falling, it just means prices are still rising but albeit at a slower rate. RPi was used when I was young and this included mortgages & rents, today they use the CPi index which doesn't include these so the RPi at the moment is 10.9% and this will go much higher very soon when we see over 130,000 mortgage holders per month roll onto these new higher rates.

TheAble

michaels said:

TerryTeacake said:

Sarah1Mitty2 said:

Strummer22 said:

Maka344 said:

Strummer22 said:

Well we can have a stab at it and revisit in Aug 2024.... I'm going to go for 4.75%

Lower, election forces will be at play... 

Gov does not set the rates... merely "suggests" to the supposedly independent BoE what they want them to do ;-)

And then they do what the bond markets tell them to do - I`m going to go for 7%.

The Bank of England is facing major losses on its bond purchases — and it's set to get much worse. This would mean much higher interest rates.

https://www.google.com/amp/s/www.cnbc.com/amp/2023/08/30/bank-of-england-bond-losses-to-cost-government-20b-more-than-expected.html

Surely cutting interest rates would make the bond values increase and reduce the liability?!

Agreed. The more the BoE puts up the rate the worse the losses will be; while the government does guarantee the loss (great move by the Treasury there (!)) this isn't any kind of incentive for the Bank to raise rates.

For my money, we've got perhaps 0.5% worth of hikes left, tops, before rates are held for a while and then cautiously reduced. Barring some kind of liquidity crisis/stock market crash a la 2008 (not ruled out by any means) I'd expect us in 12 months' time to be roughly where we are now.

Strummer22

TerryTeacake said:

today they use the CPi index which doesn't include these so the RPi at the moment is 10.9% and this will go much higher very soon when we see over 130,000 mortgage holders per month roll onto these new higher rates.

Probably not sensible to use RPI when deciding whether to raise interest rates then, otherwise you get trapped in the cycle:

1. Inflation is high, let's raise interest rates!
2. Rents go up. Mortgage costs go up.
3. Inflation is even higher! let's raise interest rates more!
4. Rents go up. Mortgage costs go up.
5. Inflation is even yada yada yada, you get the gist.

So the fact that RPI might not fall because it includes housing costs should, and will, have pretty much no bearing on where the interest rate goes from here. Also, RPI is currently 9%, not 10.9%, having fallen from a peak of 14.2% in October 2022.

ader42

Quite simply, even if/when inflation gets under control and back to the target of 2% there will be concerns that cutting rates too quickly will undo the progress made. So rates will be higher than now for a few years time yet imho. My guess? I would ballpark 6% 

I’m paying my mortgage off early when my fix ends next April.

Aberdeenangarse

lmitchell said:

Dandytf said:

I expect Nationwide fix rates to be 2.5% at least next year,
Hopefully then I can be tempted to fix from 2 years or more.
Only concern is how many uk rate rises there is during this and next year.
I can swap from early 2023, longer term I suspect boe base rates will rise towards 4.5% again, 2025 anyone.

thanks

4.5% by 2025?! No chance.

If anything, given the stuttering economy forecasted between now and then, base rates might hit 2-2.5% but then freeze or even drop back a tick or two IMO. Hence why 2-year fixes are currently pricier than 5-year fixes with many lenders.

I think we can safely assume interest rates will still be higher than that in 2025?