Are we expecting BOE to remain at 4.75% on 8th February 2025?

sevenhills

ReadySteadyPop said:

Economists tend to use meaningful chunks of time, 25 years for example, because that is the term of an average mortgage (well used to be) or even longer, I think the 7% figure is a 300 year average maybe, that would be classed as "historical" surely?

I am not sure that interest rates 25+ years ago are relevant today. Money is now much more international with UK banks competing with foreign banks?

ReadySteadyPop

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

sevenhills said:

fergie_ said:

The mortgage market lags slightly behind the swap markets. Swaps had been coming down - hence some small cuts - and are now creeping back up.

But what should the interest rates be, to benefit the whole economy? Savers need a little interest and businesses need lowish rates.

7% base rate is the historical average I believe?

Pick whatever data you want to get whatever result you want.  You could get anywhere from 2% to 15% as the "historical average".

Can you show me how you get 15% as the average?

By defining "historical" to be 1979 - 1982.  That is a period in history, so it is a historical average.  Not a good one, but then any selected period is arbitrary. 

There is no such thing as "the historical average".

Economists tend to use meaningful chunks of time, 25 years for example, because that is the term of an average mortgage (well used to be) or even longer, I think the 7% figure is a 300 year average maybe, that would be classed as "historical" surely? You seem to be trying to say that interest rates don`t matter much when it is obvious they do matter a great deal to a great number of people, what happens if the four or five years of 15% happens right after your fix on a big mortgage taken at a much lower rate ends?

They don't directly matter that much to any individual, and any selected trend or average is even less useful.

Planning on timing the market, either in terms of interest rate or value, is a fool's errand.

So you don`t think people care about the cost to service their debt, or do you mean something else? What I mean is that the historical averages are a good guide to where rates tend to go without intervention (only massive intervention by central banks allowed the last few years of rates to happen)

BarelySentientAI

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

sevenhills said:

fergie_ said:

The mortgage market lags slightly behind the swap markets. Swaps had been coming down - hence some small cuts - and are now creeping back up.

But what should the interest rates be, to benefit the whole economy? Savers need a little interest and businesses need lowish rates.

7% base rate is the historical average I believe?

Pick whatever data you want to get whatever result you want.  You could get anywhere from 2% to 15% as the "historical average".

Can you show me how you get 15% as the average?

By defining "historical" to be 1979 - 1982.  That is a period in history, so it is a historical average.  Not a good one, but then any selected period is arbitrary. 

There is no such thing as "the historical average".

Economists tend to use meaningful chunks of time, 25 years for example, because that is the term of an average mortgage (well used to be) or even longer, I think the 7% figure is a 300 year average maybe, that would be classed as "historical" surely? You seem to be trying to say that interest rates don`t matter much when it is obvious they do matter a great deal to a great number of people, what happens if the four or five years of 15% happens right after your fix on a big mortgage taken at a much lower rate ends?

They don't directly matter that much to any individual, and any selected trend or average is even less useful.

Planning on timing the market, either in terms of interest rate or value, is a fool's errand.

So you don`t think people care about the cost to service their debt, or do you mean something else? What I mean is that the historical averages are a good guide to where rates tend to go without intervention (only massive intervention by central banks allowed the last few years of rates to happen)

Base rate is a macro-level concern that should be approached as one of many contributory levers to the whole economy.  As an individual, what the base rate was in 1952, 2002, or last Thursday means almost nothing.  Neither, realistically, does any trend in that rate.  If you take an effectively fixed-interest deal, which most do (not just in terms of mortgage, but all debt), the only thing that really matters is what the retail rate is at the point when the deal ends.  Whether it goes up, down or sideways in between is completely irrelevant.  People who think it is an important metric are those who chase the market and end up getting burned.

Which random historical average - which actually refer to different rates at different points in the past - do you think is the magic one that things will always happily sit at?  Don't you think that there are other things that might also feed into the 'best' rate which can change over time?

Or is your perspective that fundamentally the economy now is the same as it was in 1750 and it will be exactly the same in 2250, so actually the rate is pointless - in which case why do any trends in it matter then?

lojo1000

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

sevenhills said:

fergie_ said:

The mortgage market lags slightly behind the swap markets. Swaps had been coming down - hence some small cuts - and are now creeping back up.

But what should the interest rates be, to benefit the whole economy? Savers need a little interest and businesses need lowish rates.

7% base rate is the historical average I believe?

Pick whatever data you want to get whatever result you want.  You could get anywhere from 2% to 15% as the "historical average".

Can you show me how you get 15% as the average?

By defining "historical" to be 1979 - 1982.  That is a period in history, so it is a historical average.  Not a good one, but then any selected period is arbitrary. 

There is no such thing as "the historical average".

Economists tend to use meaningful chunks of time, 25 years for example, because that is the term of an average mortgage (well used to be) or even longer, I think the 7% figure is a 300 year average maybe, that would be classed as "historical" surely? You seem to be trying to say that interest rates don`t matter much when it is obvious they do matter a great deal to a great number of people, what happens if the four or five years of 15% happens right after your fix on a big mortgage taken at a much lower rate ends?

They don't directly matter that much to any individual, and any selected trend or average is even less useful.

Planning on timing the market, either in terms of interest rate or value, is a fool's errand.

So you don`t think people care about the cost to service their debt, or do you mean something else? What I mean is that the historical averages are a good guide to where rates tend to go without intervention (only massive intervention by central banks allowed the last few years of rates to happen)

Base rate is a macro-level concern that should be approached as one of many contributory levers to the whole economy.  As an individual, what the base rate was in 1952, 2002, or last Thursday means almost nothing.  Neither, realistically, does any trend in that rate.  If you take an effectively fixed-interest deal, which most do (not just in terms of mortgage, but all debt), the only thing that really matters is what the retail rate is at the point when the deal ends.  Whether it goes up, down or sideways in between is completely irrelevant.  People who think it is an important metric are those who chase the market and end up getting burned.

Which random historical average - which actually refer to different rates at different points in the past - do you think is the magic one that things will always happily sit at?  Don't you think that there are other things that might also feed into the 'best' rate which can change over time?

Or is your perspective that fundamentally the economy now is the same as it was in 1750 and it will be exactly the same in 2250, so actually the rate is pointless - in which case why do any trends in it matter then?

Unfortunately the base rate does matter but only because the BoE keep changing it to try and show they can have a positive impact on the economy. 

The fact they change it does impact on the economy and hence does influence decisions (which then does impact on the economy).

My point again is by changing it they just create uncertainty. They should just leave it where it is at 5% (5.25%).

BarelySentientAI

lojo1000 said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

sevenhills said:

fergie_ said:

The mortgage market lags slightly behind the swap markets. Swaps had been coming down - hence some small cuts - and are now creeping back up.

But what should the interest rates be, to benefit the whole economy? Savers need a little interest and businesses need lowish rates.

7% base rate is the historical average I believe?

Pick whatever data you want to get whatever result you want.  You could get anywhere from 2% to 15% as the "historical average".

Can you show me how you get 15% as the average?

By defining "historical" to be 1979 - 1982.  That is a period in history, so it is a historical average.  Not a good one, but then any selected period is arbitrary. 

There is no such thing as "the historical average".

Economists tend to use meaningful chunks of time, 25 years for example, because that is the term of an average mortgage (well used to be) or even longer, I think the 7% figure is a 300 year average maybe, that would be classed as "historical" surely? You seem to be trying to say that interest rates don`t matter much when it is obvious they do matter a great deal to a great number of people, what happens if the four or five years of 15% happens right after your fix on a big mortgage taken at a much lower rate ends?

They don't directly matter that much to any individual, and any selected trend or average is even less useful.

Planning on timing the market, either in terms of interest rate or value, is a fool's errand.

So you don`t think people care about the cost to service their debt, or do you mean something else? What I mean is that the historical averages are a good guide to where rates tend to go without intervention (only massive intervention by central banks allowed the last few years of rates to happen)

Base rate is a macro-level concern that should be approached as one of many contributory levers to the whole economy.  As an individual, what the base rate was in 1952, 2002, or last Thursday means almost nothing.  Neither, realistically, does any trend in that rate.  If you take an effectively fixed-interest deal, which most do (not just in terms of mortgage, but all debt), the only thing that really matters is what the retail rate is at the point when the deal ends.  Whether it goes up, down or sideways in between is completely irrelevant.  People who think it is an important metric are those who chase the market and end up getting burned.

Which random historical average - which actually refer to different rates at different points in the past - do you think is the magic one that things will always happily sit at?  Don't you think that there are other things that might also feed into the 'best' rate which can change over time?

Or is your perspective that fundamentally the economy now is the same as it was in 1750 and it will be exactly the same in 2250, so actually the rate is pointless - in which case why do any trends in it matter then?

Unfortunately the base rate does matter but only because the BoE keep changing it to try and show they can have a positive impact on the economy. 

The fact they change it does impact on the economy and hence does influence decisions (which then does impact on the economy).

My point again is by changing it they just create uncertainty. They should just leave it where it is at 5% (5.25%).

So you agree with me then, in principle.  It is one of many things that contribute to the overall economy, but by itself it doesn't actually directly matter as an individual number to an individual member of the public.

What matters is that the BoE/Govt seem to see it as the primary lever and just keep messing about with it.

naf123

Sonia Swap rates are creeping back up. Was >4% for 5 year swap as of 23rd May. I don't have access to live data but it sort of reinforce the point that rates are not going significantly lower any time soon.  

lojo1000

BarelySentientAI said:

lojo1000 said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

sevenhills said:

fergie_ said:

The mortgage market lags slightly behind the swap markets. Swaps had been coming down - hence some small cuts - and are now creeping back up.

But what should the interest rates be, to benefit the whole economy? Savers need a little interest and businesses need lowish rates.

7% base rate is the historical average I believe?

Pick whatever data you want to get whatever result you want.  You could get anywhere from 2% to 15% as the "historical average".

Can you show me how you get 15% as the average?

By defining "historical" to be 1979 - 1982.  That is a period in history, so it is a historical average.  Not a good one, but then any selected period is arbitrary. 

There is no such thing as "the historical average".

Economists tend to use meaningful chunks of time, 25 years for example, because that is the term of an average mortgage (well used to be) or even longer, I think the 7% figure is a 300 year average maybe, that would be classed as "historical" surely? You seem to be trying to say that interest rates don`t matter much when it is obvious they do matter a great deal to a great number of people, what happens if the four or five years of 15% happens right after your fix on a big mortgage taken at a much lower rate ends?

They don't directly matter that much to any individual, and any selected trend or average is even less useful.

Planning on timing the market, either in terms of interest rate or value, is a fool's errand.

So you don`t think people care about the cost to service their debt, or do you mean something else? What I mean is that the historical averages are a good guide to where rates tend to go without intervention (only massive intervention by central banks allowed the last few years of rates to happen)

Base rate is a macro-level concern that should be approached as one of many contributory levers to the whole economy.  As an individual, what the base rate was in 1952, 2002, or last Thursday means almost nothing.  Neither, realistically, does any trend in that rate.  If you take an effectively fixed-interest deal, which most do (not just in terms of mortgage, but all debt), the only thing that really matters is what the retail rate is at the point when the deal ends.  Whether it goes up, down or sideways in between is completely irrelevant.  People who think it is an important metric are those who chase the market and end up getting burned.

Which random historical average - which actually refer to different rates at different points in the past - do you think is the magic one that things will always happily sit at?  Don't you think that there are other things that might also feed into the 'best' rate which can change over time?

Or is your perspective that fundamentally the economy now is the same as it was in 1750 and it will be exactly the same in 2250, so actually the rate is pointless - in which case why do any trends in it matter then?

Unfortunately the base rate does matter but only because the BoE keep changing it to try and show they can have a positive impact on the economy. 

The fact they change it does impact on the economy and hence does influence decisions (which then does impact on the economy).

My point again is by changing it they just create uncertainty. They should just leave it where it is at 5% (5.25%).

So you agree with me then, in principle.  It is one of many things that contribute to the overall economy, but by itself it doesn't actually directly matter as an individual number to an individual member of the public.

What matters is that the BoE/Govt seem to see it as the primary lever and just keep messing about with it.

I don't think I understand your point.

"As an individual, what the base rate was in 1952, 2002, or last Thursday means almost nothing."

I can agree with that.

"If you take an effectively fixed-interest deal, which most do (not just in terms of mortgage, but all debt), the only thing that really matters is what the retail rate is at the point when the deal ends.  Whether it goes up, down or sideways in between is completely irrelevant. "

Not sure I agree here and the reason is exactly the point I am trying to make. The BoE moves the rate around and talks about moving the rate around. The expectation of where rates will be can be a deciding factor in decisions. Whether it should be is another matter. My point is, people buy houses and don't buy houses based on where rates are where they expect rates to be (as well as other factors).

If the BoE left rates at 5% we would have a much more stable market (less speculation) and people would not need to forecast where rates will be when they (re)mortgage.

lojo1000

Meanwhile, 5 year UK gilts at the highs for the year.

BarelySentientAI

lojo1000 said:

BarelySentientAI said:

lojo1000 said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

sevenhills said:

fergie_ said:

The mortgage market lags slightly behind the swap markets. Swaps had been coming down - hence some small cuts - and are now creeping back up.

But what should the interest rates be, to benefit the whole economy? Savers need a little interest and businesses need lowish rates.

7% base rate is the historical average I believe?

Pick whatever data you want to get whatever result you want.  You could get anywhere from 2% to 15% as the "historical average".

Can you show me how you get 15% as the average?

By defining "historical" to be 1979 - 1982.  That is a period in history, so it is a historical average.  Not a good one, but then any selected period is arbitrary. 

There is no such thing as "the historical average".

Economists tend to use meaningful chunks of time, 25 years for example, because that is the term of an average mortgage (well used to be) or even longer, I think the 7% figure is a 300 year average maybe, that would be classed as "historical" surely? You seem to be trying to say that interest rates don`t matter much when it is obvious they do matter a great deal to a great number of people, what happens if the four or five years of 15% happens right after your fix on a big mortgage taken at a much lower rate ends?

They don't directly matter that much to any individual, and any selected trend or average is even less useful.

Planning on timing the market, either in terms of interest rate or value, is a fool's errand.

So you don`t think people care about the cost to service their debt, or do you mean something else? What I mean is that the historical averages are a good guide to where rates tend to go without intervention (only massive intervention by central banks allowed the last few years of rates to happen)

Base rate is a macro-level concern that should be approached as one of many contributory levers to the whole economy.  As an individual, what the base rate was in 1952, 2002, or last Thursday means almost nothing.  Neither, realistically, does any trend in that rate.  If you take an effectively fixed-interest deal, which most do (not just in terms of mortgage, but all debt), the only thing that really matters is what the retail rate is at the point when the deal ends.  Whether it goes up, down or sideways in between is completely irrelevant.  People who think it is an important metric are those who chase the market and end up getting burned.

Which random historical average - which actually refer to different rates at different points in the past - do you think is the magic one that things will always happily sit at?  Don't you think that there are other things that might also feed into the 'best' rate which can change over time?

Or is your perspective that fundamentally the economy now is the same as it was in 1750 and it will be exactly the same in 2250, so actually the rate is pointless - in which case why do any trends in it matter then?

Unfortunately the base rate does matter but only because the BoE keep changing it to try and show they can have a positive impact on the economy. 

The fact they change it does impact on the economy and hence does influence decisions (which then does impact on the economy).

My point again is by changing it they just create uncertainty. They should just leave it where it is at 5% (5.25%).

So you agree with me then, in principle.  It is one of many things that contribute to the overall economy, but by itself it doesn't actually directly matter as an individual number to an individual member of the public.

What matters is that the BoE/Govt seem to see it as the primary lever and just keep messing about with it.

I don't think I understand your point.

"As an individual, what the base rate was in 1952, 2002, or last Thursday means almost nothing."

I can agree with that.

"If you take an effectively fixed-interest deal, which most do (not just in terms of mortgage, but all debt), the only thing that really matters is what the retail rate is at the point when the deal ends.  Whether it goes up, down or sideways in between is completely irrelevant. "

Not sure I agree here and the reason is exactly the point I am trying to make. The BoE moves the rate around and talks about moving the rate around. The expectation of where rates will be can be a deciding factor in decisions. Whether it should be is another matter. My point is, people buy houses and don't buy houses based on where rates are where they expect rates to be (as well as other factors).

If the BoE left rates at 5% we would have a much more stable market (less speculation) and people would not need to forecast where rates will be when they (re)mortgage.

I don't think they do.  Or if they do, it's a tiny factor in timing.  There are very few people (Crashy as the exception of course) who think "I could buy a house, but in 3 months the BoE base rate could be X, after 5 years it could be Y and after 20 years it could be Z, so I won't"

That's timing the market, and it's a mug's game.

If people actually did consider the rates, there would be less people complaining about ending a v. low deal and moving onto a more 'normal' rate, because it was obvious to everyone that 1% mortgage interest was not likely to last.

I also don't think that either fixing the base rate at a particular number or expecting mortgage rates to hang around that number is particularly credible.  There would still be variation, and if variation makes such a big impact on people choosing to buy houses as you suggest then it would still be a problem then.

I do agree that less messing would be beneficial overall, and especially less of this "leak a rumour that we might change something soon"

Altior

All the chat around the central base rate appears to revolve around mortgages. Of course mortgages are a big factor, but far from the only one. In fact I'd argue mortgages gravitate around the base rate, rather than the base rate being set to directly influence retail mortgages. Of course there is far more complexity going on, money supply, velocity and so on. But at the heart of policy it's intended to control how much money is being spent at any given time, ergo theoretically control inflation (and indirectly, employment). Rates were at rock bottom, effective negative and actual negative in some parts of the west for so long because the policy makers wanted/needed to engineer spending. Essentially, lockdowns were the enforced route out of that trap because it enabled multiple policy makers to give new cash directly to millions/billions of consumers, at the same time as prevalent severe restrictions on supply applied. Hence the resultant huge spike in prices, and the necessity to get out of the 'zero rate' hole.