Why Interest Rates Need To Rise And Why They Will

[Mikhail Liebenstein]

http://www.dailymail.co.uk/news/article-11...fuel-again.html

Given that oil is one of those things that tends to push all other prices upward and given today's Nationwide figure, it looks like interest rates may need to be jacked up massively before the end of the year.

What are people's thoughts on this?

[loginandtonic]

my thoughts are simply that the ultralow rates etc are just a ploy to get Labour in at the next Elections, wont work anyway, full crash ahoy when the rates rise even 1/2% i reckon, its all hanging by a thread

[Bosh]

my thoughts are simply that the ultralow rates etc are just a ploy to get Labour in at the next Elections, wont work anyway, full crash ahoy when the rates rise even 1/2% i reckon, its all hanging by a thread

I agree with this.

Gut say`s they will be heading North within 2 months.

No graph but I can attach a pic of my belly button if required

[Sybil13]

http://www.dailymail.co.uk/news/article-11...fuel-again.html

Given that oil is one of those things that tends to push all other prices upward and given today's Nationwide figure, it looks like interest rates may need to be jacked up massively before the end of the year.

What are people's thoughts on this?

What would I know but in the article about :

[

b]Mutuals braced for drop in property prices - survey[/b]Magazine: FinancialAdviser

Published Thursday , May 28, 2009

Building society bosses are expecting on average a 10 per cent drop in house prices this year ......

.....About 39 per cent of bosses polled predicted house prices would fall between 5 per cent and 10 per cent this year and a further 29 per cent forecast a drop of between 10 per cent and 15 per cent.

It did say:

Six out of 10 bosses believe mortgage rates will have to rise as a result of the cost of the levy and more than half believe savings rates could fall because of the extra burden.

Anthony Badaloo, principal of London-based IFA Church Hill Finance, said: "What this says is that savers and borrowers will pay for the errors and mistakes [of some financial institutions], which is a very unfair state of affairs."

Edited May 29, 2009 by Sybil13

[Limpet]

I agree with this.

Gut say`s they will be heading North within 2 months.

No graph but I can attach a pic of my belly button if required

That would be helpful, cheers

[SarahBell]

If they weren't making unemployment mortgage bailout quicker... if they weren't making banks take longer to repo , if they didn't own half the banks ... it'd all have crashed massively into a pile of jam on the floor by now.

But the props they have are not going to hold up for the longer term. and when the roof does come in it'll being a lot more down with it.

[porca misèria]

http://www.dailymail.co.uk/news/article-11...fuel-again.html

Given that oil is one of those things that tends to push all other prices upward and given today's Nationwide figure, it looks like interest rates may need to be jacked up massively before the end of the year.

What are people's thoughts on this?

Interest rates have needed to be much higher for most of the time since at least 2002.

A thought ...

The logic of the HPI years was that everything but housing was essentially too cheap to measure, and housing mopped up all money including credit in the economy. What's to stop the forces of HPI mopping up all that newly-printed money from the BoE?

[righttoleech]

Low interest rates are key to Brown's destruction of the economy. More than a decade in the making but we are nearly there.

Like a masochist I am watching homes under the hammer. Daily we see auctions from September 2007. Did they only make these programmes at the height of the boom? This is one debilitating disease.

[R K]

Sterling romping away and £150bn of QE - Why would they hike rates up??

[DrGUID]

I was looking at commodity stock charts last night and was struck by how bullish *all* of them look. That maybe explains why prices aren't going down in Tescos!

A re-run of the 1970s looks possible, when stuff was expensive, but houses were cheap.

[leicestersq]

http://www.dailymail.co.uk/news/article-11...fuel-again.html

Given that oil is one of those things that tends to push all other prices upward and given today's Nationwide figure, it looks like interest rates may need to be jacked up massively before the end of the year.

What are people's thoughts on this?

I had expected the market to react in such a way that interest rates on gilts would rise as a result of Quantitative Easing. There appears to have been slight falls in UK treasuries, but nothing substantial. Until those treasuries fall, interest rates on mortgages are not going anywhere.

And that is going to stop house prices falling at fast rate. And like it or not, there appears to be some evidence that house prices have stabilised. Which is a pain as I want them to fall hard.

In the US, interesting things are going on. It seems that the bond market is selling off US Treasuries, causing market interest rates to rise. That is going to affect the mortgage market. This is linked to the recent falls in the dollar, perhaps the Chinese and the Japanese are no longer going to be buyers of US paper. If so, they will have to rely on domestic demand to fuel their economies, as they are giving up the right to manipulate their currencies lower if they no longer purchase US government debt.

The pound seems to be swinging the other way. Whilst there was mortgage fraud here in the UK, it wasnt as rampant as in the US. We also dont have massive areas of land to build houses on, nor do we allow mortgagees the right to walk away from their homes and their debts. This is all helping to keep house prices here worringly high. It is, you have to admit, keeping our banking system solvent, and more valuable as a result. The meltdown here in the UK appears to have stopped, and as a result the pound has regained a lot of strength, which could ironically threaten the recovery.

So the Bank of England is just going to keep on printing money. They need to, in order to get the economy to recover the value of the pound needs to stay low. The best way to make something fall in value is to increase the supply of it, so they are going to keep on printing.

At some point, if that printing continues, the pound will fall, the market will worry about inflation, and gilt prices will fall. If the Bank of England gets it right, they should be able to stop printing, and interest rates will rise gently to a level that will cause some ructions in the housing market, but perhaps not too many ructions. Sure, some will lose their homes, but if the banks have been lending sensibly, most will still have enough equity in their homes to stop them walking away.

Of course if the Bank of England over cooks things, interest rates will soar. If that happens, then expect a big swap. Those with homes and no cash will end up swapping places with those who now have no homes but some cash.

[Mikhail Liebenstein]

I was looking at commodity stock charts last night and was struck by how bullish *all* of them look. That maybe explains why prices aren't going down in Tescos!

A re-run of the 1970s looks possible, when stuff was expensive, but houses were cheap.

That actually makes for a healthier ecoonomy.

Its the real economy re-asserting itself.

Why should a house be more expensive than a decent car?

There is a lot more IP in a car than a house.

[nohpc]

http://www.dailymail.co.uk/news/article-11...fuel-again.html

Given that oil is one of those things that tends to push all other prices upward and given today's Nationwide figure, it looks like interest rates may need to be jacked up massively before the end of the year.

What are people's thoughts on this?

My thoughts are that you are wrong.

BOE rate will stay very low. Borrowing rates will remain high and go higher putting further strain on the economy. Raising the BOE rate significantly would cause too much pain.

This suits me very well as I'm on a tracker mortgage on a property I want to keep and rent out whilst at the same time need prices to drop so I can buy a second property with a small mortgage.

[yellerkat]

My thoughts are that you are wrong.

BOE rate will stay very low. Borrowing rates will remain high and go higher putting further strain on the economy. Raising the BOE rate significantly would cause too much pain.

This suits me very well as I'm on a tracker mortgage on a property I want to keep and rent out whilst at the same time need prices to drop so I can buy a second property with a small mortgage.

Read the Gilts thread and weep.

[nohpc]

Read the Gilts thread and weep.

read it already. Not weeping funnily enough.

My thinking is thus:

1) I know what (BOE) rates I can tolerate (8%)

2) 8% would completely nuke the economy which is struggling at 0.5% rates

3) Therefor if rates go high enough to upset my finances then 99% of the population will probably be bankrupt.

4) Recent gilt auctions have had RECORD demand so it's all hypothetical really.

My prediction - BOE rates sub 2.5% till after 2012.

[yellerkat]

read it already. Not weeping funnily enough.

My apologies. I didn't realise you were so gut-churningly selfish.

[Bosh]

That would be helpful, cheers

Have no stock pics of my Belly Button

but I do have conclusive proof summer is here with this cheeky one

[nohpc]

My apologies. I didn't realise you were so gut-churningly selfish.

How is it selfish to want rates to say low thus preventing millions from going bankrupt?

Please explain your statement I'm genuinely interested what it was I said that was selfish.

[Danny Deflation]

my thoughts are simply that the ultralow rates etc are just a ploy to get Labour in at the next Elections, wont work anyway, full crash ahoy when the rates rise even 1/2% i reckon, its all hanging by a thread

I agree with that.

Many in this country are teetering on the edge of repossession and full-blown financial ruin. We don't need interest rates to rise into double figures for mass repos and full-blown financial turmoil. Just a one or two per cent increase, or a 1/2 per cent increase as loginandtonic suggests, will be enough to tip thousands over the edge.

This will help no one.

People will stop spending. Unemployment will rise. Taxes will increase. Social unrest will prevail. Absolute carnage.

On a personal level, I don't worry too much about interest rates. I have worked out how much my mortgage would be if rates rose to 18 per cent (as a worst case scenario) and I would be OK. Less money to spend or save, but ultimately OK. But on a wider level I am worried about IR increases.

[Danny Deflation]

Edited: submitted too many times by accident. Please delete this post.

Edited May 29, 2009 by Danny Deflation

[Danny Deflation]

Edited: Same post posted twice. Sorry.

Edited May 29, 2009 by Danny Deflation

[Leonard Hatred]

How is it selfish to want rates to say low thus preventing millions from going bankrupt?

Please explain your statement I'm genuinely interested what it was I said that was selfish.

Please explain how somebody who's overborrowed so much that they can't tolerate a slight increase in interest rates from records lows doesn't deserve to do bankrupt.

[yellerkat]

How is it selfish to want rates to say low thus preventing millions from going bankrupt?

Please explain your statement I'm genuinely interested what it was I said that was selfish.

For anything other than the very, very short term the economy needs balanced interest rates (RPIX + 2 to 3%).

Please explain how somebody who's overborrowed so much that they can't tolerate a slight increase in interest rates from records lows doesn't deserve to do bankrupt.

Exactly. Using negative IRs to rob the prudent in order to prop up the feckless is a recipe for disaster.

[Ash4781]

Don't they have a 2yr window?

So they need to start raising rates probably after the general election in 2010?

[Lord D'arcy Pew]

It's a miracle economy don't you know.

Now watch as the wine turns back to water.