Base rate to peak at 4.5% in May 2023 will rates will then fall in 2024

coypondboy

Hi Folks I know no one has a crystal ball and likely to have a labour govt in May 2024.  I am on a fixed rate of 0.89% until May 2024 anyone guess what fixed rates will be by then, labour govt might worry bond investors and keep rates higher then necessary but if 2023 is bad for house prices and a severe recession the bofe might have to do a covid/financial crash emergency cut?

Aberdeenangarse

BoE have pretty much run out ammunition for future problems, so financial assistance will be minimal. Interest rates of around 5% for fixed rate deals are normal, not the new normal, and I assume that’s where they’re likely to stay for the foreseeable future. 

Ibits4321

Why would a Labour government worry bond investors? Have you not heard it's the Tories who crashed the economy? 🤔

Nailer99

Here’s what a member of the BoE’s committee that decides interest rates thinks will happen to interest rates:

https://twitter.com/markets/status/1591091550767173632

Aberdeenangarse

Nailer99 said:

Here’s what a member of the BoE’s committee that decides interest rates thinks will happen to interest rates:

https://twitter.com/markets/status/1591091550767173632

She’s from Argentina. I guess they’ve never had any problems with inflation?!

‘Jonathan Haskel, another MPC external member, struck a very different note in a speech published on Friday, which he was due to deliver at the Bank of Israel on Sunday. Haskel said the latest signs of the economy slowing did not imply there was less need for the BoE to tighten policy’

https://www.ft.com/content/67a6d0d9-e302-4f9b-8d67-c59243a601f9

simon_or

The bank has given as many signals as it can that market expectations for rate rises are overblown and that the bank would need to be dragged kicking and screaming to higher rates.

If things stay as they are politically, and the govt's fiscal tightening bite matches its bark, I don't see the bank rate going above 4%. A 4.5% bank rate is already (more than) baked in to market expectations.

Mortgage fixed rates and lender margins are already trending downwards (albeit only slightly) and I expect that to continue as banks are forced to compete.

All this is assuming that the relative calm of the status quo continues. The big risk (among many others) that could upset the applecart is the govt being unable to push through tax hikes and spending cuts through parliament, which is a genuine risk given all the different factions.

mi-key

It is a very delicate balance, but I really think the days of mortgage companies being able to charge 2% or more above the BoE base rate as they have been doing is coming to and end.

If they all did this, the amount of new customers would dry up. Most of their customers are on long term fixes, so they can't make more money from them for years, so their only option is new lenders coming along. It could be they need to change their lending model to be able to attract new customers, and as soon as one does, all the others will follow

Aberdeenangarse

simon_or said:

All this is assuming that the relative calm of the status quo continues. The big risk (among many others) that could upset the applecart is the govt being unable to push through tax hikes and spending cuts through parliament, which is a genuine risk given all the different factions.

The big problem, despite what some are saying, is inflation won’t return to anywhere near 2% for the foreseeable future. It’s now a major problem with average pay increases nearing 6%. It will be interesting to see the ONS figures released on Tuesday. As you say we’ll also have to wait and see what’s announced in the Autumn statement on Thursday, and how it’s received by the markets.

Strummer22

If average pay increases are nearing 6% but inflation is running at 10% - and government policy is going to mean higher taxes so less money in our pockets - that will still result in falling demand, slowing (or retracting) economy and, in due course, lower inflation. I do not see how pay increases well below the current level of inflation would fuel further inflation. But then again, I'm not an economist. 

simon_or

Aberdeenangarse said:

simon_or said:

All this is assuming that the relative calm of the status quo continues. The big risk (among many others) that could upset the applecart is the govt being unable to push through tax hikes and spending cuts through parliament, which is a genuine risk given all the different factions.

The big problem, despite what some are saying, is inflation won’t return to anywhere near 2% for the foreseeable future. It’s now a major problem with average pay increases nearing 6%. It will be interesting to see the ONS figures released on Tuesday. As you say we’ll also have to wait and see what’s announced in the Autumn statement on Thursday, and how it’s received by the markets.

I personally think inflation is going to moderate and the bank will jump on any sign that it is.

From an inflation perspective imho the big unknown is the movement of the pound as any sustained weakening (or even a lot of volatility) is going to prop up inflation and keep it higher than expected.