Will Kwarteng’s U-turn mean lower interest rates?

Nailer99

Kwarteng’s “Mini-budget” caused a chaotic collapse in the markets which has caused banks to hike their interest rates.

Now that he’s u-turned, hopefully we expect mortgage rates to come down again, at least a bit. 

Can anyone please post here any evidence of rates falling again?

Or am I being naive?

GAMBITv5

Marginally, yes. Expect them to peak around 5.5% instead of 6% - don’t expect many lenders to climb down from their latest rates, more lengthen the time between further rises…

dunstonh

Now that he’s u-turned, hopefully we expect mortgage rates to come down again, at least a bit. 
Can anyone please post here any evidence of rates falling again?

The cancelling of the abolition of the additional rate band is not going to make a jot of difference directly.  It was one of the few changes that was considered by many analysts as self funding and not reliant on borrowing.    The additional rate band was more of a political football than a monetary one.

What the action has done though is show that the establishment are still in control and will not allow anything more radical to happen.   So, the markets will react to that in the short term.

Nailer99

GAMBITv5 said:

Marginally, yes. Expect them to peak around 5.5% instead of 6% - don’t expect many lenders to climb down from their latest rates, more lengthen the time between further rises…

So in the market overall, there will be slightly cheaper mortgages to be found.

GAMBITv5

Nailer99 said:

GAMBITv5 said:

Marginally, yes. Expect them to peak around 5.5% instead of 6% - don’t expect many lenders to climb down from their latest rates, more lengthen the time between further rises…

So in the market overall, there will be slightly cheaper mortgages to be found.

Potentially. But don’t count on it. BBR will still increase next month

norsefox

Nailer99 said:

Kwarteng’s “Mini-budget” caused a chaotic collapse in the markets which has caused banks to hike their interest rates.

Now that he’s u-turned, hopefully we expect mortgage rates to come down again, at least a bit. 

Can anyone please post here any evidence of rates falling again?

Or am I being naive?

The taxation is around £2bn a year, so it makes little difference.

It was a bad policy, and executed even more badly.

The problem this Government has re borrowing and how markets perceive it, is a credibility one.  Climbdown, U-turns, and ham-fisted explanations on TV won't be providing the markets or the electorate with any assurances that they a) have a plan; and b) that it is workable or effective.

The bankbenchers submarining this 'budget' may calm the markets because it looks like there are adults in the room.  The flipside to this, is that we could have a lame duck PM during a time of economic upheaval.  

It's catch 22 at this point.  I doubt there's much this Government can do to persuade anyone that they can fix this.

dander

It's not the budget that has made the interest rates increase, it's a response to the massive inflation we are currently experiencing. Interest rates were moving upwards before the budget because the BoE are trying to control inflation which is at about 11%. There may be a bit of panic added on after the budget, but it's just a knee-jerk acceleration of where we were already heading, rather than a random surge that will come down again.

snowqueen555

The 45% tax rate wasn't the real issue. There was £45 billion in tax cuts and the reinstate of the 45% tax bracket will only bring save us £2 billion. Truss and Kwarteng were right in that regard, politically very important issue, but will not make much difference to the markets.

Market wants to see Britain increase taxes so it can pay back it's debts, they essentially borrowed more money to fund the energy crisis (£60 billion) and reduced their income at the same time.

OhWow

dander said:

It's not the budget that has made the interest rates increase, it's a response to the massive inflation we are currently experiencing. Interest rates were moving upwards before the budget because the BoE are trying to control inflation which is at about 11%.

While the US were quickly raising interest rates, the Bank of England were slow to respond.

" Updated: 14/12/2021

IMF warns Bank of England not to be too slow to raise interest rates"

https://www.euronews.com/2021/12/14/imf-britain

https://www.cityam.com/andrew-bailey-fell-asleep-inflation-workers-face-flames/

https://www.thisismoney.co.uk/money/markets/article-10952297/Bank-England-Governor-Andrew-Bailey-rack-inflation.html

[Deleted User]

It won't make any significant difference. Most of the problem was not related to the 45p tax rate, it will only make a small dent in the amount of planned borrowing. It was more the optics of it.

Janey_Suth68

Not sure - it's still not looking great!