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

RelievedSheff

I don't think they will raise rates tomorrow. I think they will be held at the current rate.

wheldcj

MattMattMattUK said:

Strummer22 said:

So, inflation fell again (had been forecast to rise), and core inflation fell quite a lot… so do we need another interest rate rise at all? Will be interesting to see what happens tomorrow.

We probably did not need the last one, 5.00% would have been fine, but I expect 5.5% tomorrow, with signals that it is the last, provided that the current trend continues.

There is still a lot more impact of the rises that have taken place to have their full impact, more than half of mortgage borrowers are still on a rate fixed before the interest rate rises began, others will have taken out a two year fix at 2-3% and will be insulated for a while longer yet etc. Every month that goes on sucks more money out of the economy as more people have to remortgage on significantly increase rates, combined with the savings accrued during Covid slowly being run down and tighter lending in the unsecured space will all have pressures that mean we have yet to get close to the full impact of the measures that will reduce inflation. There is still the reasonable possibility that late 2024-2025 could bring both a recession and deflation, which is not a situation anyone other than venture capitalists wants to be in. 

I agree with your assessment.  Our inflation rate is based on CPI which will now start to show a downwards trend which I am not really convinced has been resolved by interest rate rises but more a global flattening on the shock of the Ukraine conflict.

Problem is that RPI is still much higher & stickier it seems and with this including mortgage payments you can't see this metric dropping down any time soon and in fact picking up pace as more of society moves either to new higher interest rate fixed deals or sees their rent increase.

It is hard enough to fix an inflationary problem when everyone to some degree is feeling the same type of pain i.e. rising fuel, food, petrol.  It will be even harder next year & beyond.   It is entirely plausible that pensioners will start seeing deflation as their main spends like heating and food drop as well as their spending power increased by triple lock increases and better interest rate returns on savings.   Meanwhile working families will have any savings in the above areas completely dwarfed by the cost of rent/mortgage and the impact on spending elsewhere could prompt a domino effect of deep recession and unemployment.  

If this does happen then solving it for the government will be horrendous.   BOE wont want to drop rates back down to 1-2% again and even if they do with so many on fixed deals it will take years for the benefit to return to mortgage holders.

Strummer22

wheldcj said:

MattMattMattUK said:

Strummer22 said:

So, inflation fell again (had been forecast to rise), and core inflation fell quite a lot… so do we need another interest rate rise at all? Will be interesting to see what happens tomorrow.

We probably did not need the last one, 5.00% would have been fine, but I expect 5.5% tomorrow, with signals that it is the last, provided that the current trend continues.

There is still a lot more impact of the rises that have taken place to have their full impact, more than half of mortgage borrowers are still on a rate fixed before the interest rate rises began, others will have taken out a two year fix at 2-3% and will be insulated for a while longer yet etc. Every month that goes on sucks more money out of the economy as more people have to remortgage on significantly increase rates, combined with the savings accrued during Covid slowly being run down and tighter lending in the unsecured space will all have pressures that mean we have yet to get close to the full impact of the measures that will reduce inflation. There is still the reasonable possibility that late 2024-2025 could bring both a recession and deflation, which is not a situation anyone other than venture capitalists wants to be in. 

I agree with your assessment.  Our inflation rate is based on CPI which will now start to show a downwards trend which I am not really convinced has been resolved by interest rate rises but more a global flattening on the shock of the Ukraine conflict.

Well, CPI has been showing a downwards trend for nearly a year, having peaked in October 2022. Interest rate rises are probably having an effect on domestic inflation pressures, hence why core inflation also looks to have peaked, albeit more recently (in May 2023).

wheldcj said:

MattMattMattUK said:

Strummer22 said:

So, inflation fell again (had been forecast to rise), and core inflation fell quite a lot… so do we need another interest rate rise at all? Will be interesting to see what happens tomorrow.

We probably did not need the last one, 5.00% would have been fine, but I expect 5.5% tomorrow, with signals that it is the last, provided that the current trend continues.

There is still a lot more impact of the rises that have taken place to have their full impact, more than half of mortgage borrowers are still on a rate fixed before the interest rate rises began, others will have taken out a two year fix at 2-3% and will be insulated for a while longer yet etc. Every month that goes on sucks more money out of the economy as more people have to remortgage on significantly increase rates, combined with the savings accrued during Covid slowly being run down and tighter lending in the unsecured space will all have pressures that mean we have yet to get close to the full impact of the measures that will reduce inflation. There is still the reasonable possibility that late 2024-2025 could bring both a recession and deflation, which is not a situation anyone other than venture capitalists wants to be in. 

BOE wont want to drop rates back down to 1-2% again and even if they do with so many on fixed deals it will take years for the benefit to return to mortgage holders.

Therein lies a good chunk of the problem. Interest rates are a very blunt tool for removing demand from the economy, and any effect takes so long to show that by the time you see the iceberg dead ahead you can't steer away from it...
 

london21

I think rates will go up by 0.25% tomorrow and Vigin money have reduced their 5 years fixed from 5.27% to 5.17% 65% LTV 

Strummer22

Whilst the chat here recently has generally been that we don't think the BoE should raise interest rates, my gut feeling is than in a few minutes the interest rate will be 5.5%. 

Edit: my gut was wrong, by one vote! 

middleagedriver

Paused, knew it was coming this time

london21

It has stayed the same maybe will come down in the next few months.

My current deal ends in February 2024 feeling a bit hopeful now that will get a better deal than 2 years fix at 5.7%

Maybe opting for variable won't be a bad idea. 

Newbie_John

5-4 votes to keep 5.25%

MattMattMattUK

london21 said:

It has stayed the same maybe will come down in the next few months.

My current deal ends in February 2024 feeling a bit hopeful now that will get a better deal than 2 years fix at 5.7%

Maybe opting for variable won't be a bad idea. 

It will likely hold at the next meeting as well, there is an outside chance of another 0.25% increase this year, but there is zero change of a cut in the next few months. 

london21

MattMattMattUK said:

london21 said:

It has stayed the same maybe will come down in the next few months.

My current deal ends in February 2024 feeling a bit hopeful now that will get a better deal than 2 years fix at 5.7%

Maybe opting for variable won't be a bad idea. 

It will likely hold at the next meeting as well, there is an outside chance of another 0.25% increase this year, but there is zero change of a cut in the next few months. 

Will wait and see 

There are BOE 3 more meetings until 1st Feb 2024
 2 November, 14 December and 1 February