Million Pound Question - Next direction of Interest Rates?

davepugh1981

After seeing GDP today come in at a dissapointing 0.5%, this must be puting downward pressure on interest rates. This compares to the inflationary pressures that are implying upward pressure.

Which one will win?

Am looking at 10 year fix rate mortgages and wonder if I would be making a mistake and whether swap rates may drop before my product matures in December. But i Know i would be well !!!!!! off if in 5 years time I was paying another £200 a month!!

Any views on the above would be much appreciated.

Dave

meanmachine_2

My gut feeling is that the Bank will be leaned on to cut rates just before Xmas.

It won't be for the long term good of the economy, and we'll see inflation rise, but I suspect the Bank might start hiking rates again after Xmas in an attempt to play catch up.

So a cut in November, then a rise in Feb.

But who knows?

davepugh1981

but you can;t see 2% BBR in the next 2-5 years? It seems to me as if the economy is pretty balanced at 4.50%

HGLTsuperstar

What rate on the 10yr fix are you being offered? If you're worried, what's on offer for 5 years? In 10 years time the PM & Chancellor will have "moved on", regardless of who wins the next election, and we may have joined the euro, or the euro may indeed have been dropped, so we may/may not be looking at European rates, but to be hanging out for 2% is too optimistic. Yes probably a shallow gesture rate cut to encourage Xmas spending, but expect to be at or over 5% by next summer

meanmachine_2

To be honest, if I was to buy right now, I'd be looking at a five year fix.

10 years is too long a gamble for me. It could pay off massively, or you could lose out massively.

But I bet all those who bought with 2 year fixes @ 3.5% back in 2003 are wishing they'd fixed for longer.

A five year fix at around 4% would actually encourage me to think about buying.

There - now Merv knows what he has to do to get meanmachine to unlock his wallet!

meanmachine_2

davepugh1981 wrote:

but you can;t see 2% BBR in the next 2-5 years? It seems to me as if the economy is pretty balanced at 4.50%

2%? No, absolutely not.

Not with high oil prices and a US rate on the rise. And that's an honest answer.

I'd be surprised if, in a few years' time we're not at around the 6%.

But that's an uneducated guess.

Ian_W

BIG MORTGAGE - a million quid!! Sure you can afford it? :rotfl:

Seriously if I, or anyone else on on here, could tell you what interest rates would do over the next 10 months, let alone 10 years we'd be better employed making our fortunes elsewhere.

Rates are just 1% above "lowest for a generation" - if you're going fix for 10 years then they're going to have to rewrite that generation game script and the historical average on interest rates [about 6-7%?] for you not to be on an overall winner if you're fixed below 5%. But records are meant to be broken, so who knows?

Even if the BoE do lower rates before the end of the year as MM suggests it's no gimme that the swap rates will go lower, they tend to go with the longer term view. That said they are very low now so may indicate a feeling that low is in for the longer term! :question:

So overall, I'm a Don't Know - hope that helps! :wall:

FOSman

I believe that in the near future, they will be cut. The reason being is that the Treasury are a little short of funds as the IMF and EU have pointed out to Mr Brown.

The retail sector has to survive x-mas if the economy is going to progress well into the next year.

From then on, if oil prices rises are absorbed by consumers, leading to inflation, then rates will have to rise to combat this. However, I do not believe this will be a long term problem as markets should re-adjust to the new oil prices.

So to answer your question, down till next year, then maybe up in 2007 to 2009, then may fall to a normal level from there, say around 4-5%.

nrsql

Personal opinion is that rates will come down a bit in the next few months and then go up (possibly with a change of chancellor as a face saving measure or is that being cynical).
I think the rate should go up but won't for a while.

But then what do I know.

FOSman

Look at the value of the pound against the dollar. Falling over the past few weeks. This is a sure sign that markets expect a rates cut.