Further Interest Rate Rises - Wait for better fixed rate offer?

SPWaller

It's been predicted in some places in the next BoE interest rate announcement on Dec 15th the rate could go up to 4%.

Should we be expecting much higher Savings Interest Rates in that case? Would it potentially be worthwhile to hang on until then to lock in a better fixed rate deal. I'm currently looking at 1 year account, 4.6% with Vanquish,  so that could potentially be bumped up to 6.1% if that was to go up at the same rate as the base interest rate.

Or do we think the banks are factoring in the expected rises into the deals currently being offered and we will get marginal rises.

Thanks!

kungfuman

Although a bit of a crystal ball question, I'm interested to see what people think about this too as I'm thinking about locking in for a 5 years fixed isa.

Krakkkers

I think 5 year rates have peaked and may even fall in the near term.

Johnjdc

There is a delusion among some on this forum that fixed rates are closely linked to the current base rate at any given moment in time. They aren't.

While long-term rates will usually be higher than current rates (because of a thing called liquidity preference) that's not by any means always true, or particularly true now.

Fixed rates absolutely factor in the expected rises. They won't go up 0.75% just because the base rate does (indeed it went up by that last week - have fixed rates? Not a bit!)

Albermarle

SPWaller said:

It's been predicted in some places in the next BoE interest rate announcement on Dec 15th the rate could go up to 4%.
That is a bigger increase than generally expected, but who knows.
Should we be expecting much higher Savings Interest Rates in that case? Would it potentially be worthwhile to hang on until then to lock in a better fixed rate deal. I'm currently looking at 1 year account, 4.6% with Vanquish,  so that could potentially be bumped up to 6.1% or not if that was to go up at the same rate as the base interest rate.

Or do we think the banks are factoring in the expected rises into the deals currently being offered and we will get marginal rises. The longer the fix, the more expected future rates are factored in .

Thanks!

Probably easy access and one year fixes will go up a bit further. As mentioned 5 year fixes have probably already peaked. 

biscan25

For market indicators, you are better off looking at swap rates or gilt yields as predictors of which way fixes are going to go, assuming that there is usually a lag between movements and actual products coming to the market.

1 to 5 year swap rates are all down in excess of 0.5% over the last 7 days. It's reasonably safe to assume fixed rate savings product rates will start to come down now, provided these swap rates don't start creeping up again.

t1redmonkey

I think the longer term fixes probably won't go up much, if at all.  Unless something unexpected happens, e.g. if Kwasi Kwarteng has sabotaged Jeremy Hunt's budget and chucked in a load of unfunded growth focussed initiatives in there!  Also worth keeping an eye on inflation data as that might influence BOE's forecasts (next set on inflation data for the UK is the day before the budget, 16th November I believe).

CheekyMikey

I took the plunge on the 5 year fixes at the weekend and opened two…Gatehouse at 5.1% and Tesco at 4.8%, £50k in both which was my money from a bond fund I sold a few months ago. Taking interest out monthly to provide £400/month income to top up my db pension. Might have been premature who knows, but I always said I’d be happy with 5% so decided to at least lock those rates in. Have some powder left in Santander easy access at 2.75% to see what happens over the next month. 

diystarter7

5 year fixes may hardly move but 2 year fixed will move a bit more than the 5 years.
Things can change quickly if the Ukraine war ends as we see it today and Putin is taken out
and Covid is managed a lot better then rates may creep down a bit instead of going up.
Then there is always an element of what the government does in a budget

Swipe

SPWaller said:

It's been predicted in some places in the next BoE interest rate announcement on Dec 15th the rate could go up to 4%.

A 1% rise in December? That's not happening. My money is on a 0.5% rise at most.

cricidmuslibale

Swipe said:

SPWaller said:

It's been predicted in some places in the next BoE interest rate announcement on Dec 15th the rate could go up to 4%.

A 1% rise in December? That's not happening. My money is on a 0.5% rise at most.

Yes, I reckon you're probably right. For those that don't already know this, it wasn't a unanimous decision to raise the B of E base rate by 0.75% on November 3rd; seven B of E MPC members voted for 0.75%, one MPC member voted for a 0.5% rise and one MPC member only voted for a 0.25% rise! Thus it's highly unlikely that the majority vote on 15 December will be for anything above a 0.5% rise, allowing for the fact that the very recent 0.75% rise was the largest percentage rise since 1989, I believe, and is therefore likely to have been intended as a one-off, larger rise than usual for maximum impact!