BBC News: "Interest rates likely to go up in 2014"
Discussion
BBC News just did a piece on the Bank of England's more positive outlook and the recent reduction in unemployment.
They suggested that the BoE base rate is likely to increase sooner than expected - next year in fact.
What's your thoughts on this, and what impact would an increase in Mortgage/Savings interest rates have on you?
They suggested that the BoE base rate is likely to increase sooner than expected - next year in fact.
What's your thoughts on this, and what impact would an increase in Mortgage/Savings interest rates have on you?
Elderly said:
As they approximately were from the mid 70s to the mid 80s IIRC.
The problem was that inflation was around those levels too.
IIRC they hit 15% in the early 90s; I think it was Norman Lament trying to play King Canute. Tyically they were 7-8%, and the housing market seemed perfectly fine. How would today's housebuyers cope with a jump from 1% to 8% I wonder?!The problem was that inflation was around those levels too.
But you have a point about inflation.
Can the interest rate ever be above inflation? I think the two must be linked.
I remember an interest rate of around 18% on my first repayment mortgage in the mid 1970s. Difficult but doable then, just. I wonder how that would be coped with now, although inflation and wages would make a big contribution, of course.
I do not expect rates to increase before the 2015 general election but I do expect Messrs. Balls-up and Millipeed to make a lot of noise about what the Tories would do to interest rates and mortgage costs if they were re-elected. Of course, if Labour is elected the rate would increase anyway.
R.
I do not expect rates to increase before the 2015 general election but I do expect Messrs. Balls-up and Millipeed to make a lot of noise about what the Tories would do to interest rates and mortgage costs if they were re-elected. Of course, if Labour is elected the rate would increase anyway.
R.
Simpo Two said:
Tyically they were 7-8%, and the housing market seemed perfectly fine.
Some typical BASE rates:ETA - apologies for the cr@p quality screen grab.
The housing market was fine because house price inflation was even higher.
People were prepared to borrow expensively for their homes if there was a perceived profit at the end.
The corollary of that is that most people will not borrow (however cheaply)
if at the end there's a perceived loss.
Ollerton57 said:
Interest rates are controlled by BoE for this purpose though isn't it? Rate rise won't be limited to after the general election - the reason why control moved in the first place.
The influence of the treasury on the BoE is significant. Interest rates will only rise before the election as a last resort.
I can't see base rate in the UK being changed in the next year, especially when you consider that the ECB have reduced rates again.
The economy shouldn't revolve around the property market so proclaiming that Britain is fixed simply because a few more people have bought overpriced new builds with a 5% deposit is silly, even talking about putting base rates up will have a negative impact on the mortgage market as lenders can increase the rates on medium/long term fixes overnight.
The economy shouldn't revolve around the property market so proclaiming that Britain is fixed simply because a few more people have bought overpriced new builds with a 5% deposit is silly, even talking about putting base rates up will have a negative impact on the mortgage market as lenders can increase the rates on medium/long term fixes overnight.
Surely we'd also need to see a significant rise in inflation before we see the base rate increase?
Such a hard thing to balance. On the one hand you've got people like my parents who got 'stiffed' with pension returns and are living off the interest generated on their savings (which gives them a comfortable but non-extravagant lifestyle) and who aren't spending to drive inflation up. On the other hand my generation have had to save up large deposits to obtain a 90% mortgage and due to low interest rates are able to spend.
Once interest rates rise will the older generations automatically start spending? Perhaps not. On the other hand when the rates rise my generation will not be able to spend.
If inflation increases above the 2.5% target, maybe closer to 3%, and unemployment falls to below 7% perhaps we'll see one small rate rise to see how it affects matters.
Such a hard thing to balance. On the one hand you've got people like my parents who got 'stiffed' with pension returns and are living off the interest generated on their savings (which gives them a comfortable but non-extravagant lifestyle) and who aren't spending to drive inflation up. On the other hand my generation have had to save up large deposits to obtain a 90% mortgage and due to low interest rates are able to spend.
Once interest rates rise will the older generations automatically start spending? Perhaps not. On the other hand when the rates rise my generation will not be able to spend.
If inflation increases above the 2.5% target, maybe closer to 3%, and unemployment falls to below 7% perhaps we'll see one small rate rise to see how it affects matters.
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