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spoonfed

Interest Rates...

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flippin heck! a couple of weeks ago i enquired at my mortgage provider about switching to a fixed rate from the tracker i have now and the product fee was something like 300 quid.....i think 'okay, i'll get that sorted out in the next week or two', got a bit busy with work etc and didn't get round to doing it for maybe a month and now the fees are a grand (that includes 2,3 abd 5 year fixed).

does this mean anything?? are they expecting a big rise in interest rates soon, or are they just looking to rip off the maximum number of people wanting to fix at low rates?

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It just means they don't want you to change.

Or that they are expecting many people to panic and seek to switch so they are profit taking.

The bond market may dictate that base rates have to increase.

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May be of interest ....

By William L. Watts, MarketWatch

LONDON (MarketWatch) - Rising interest rates threaten to undermine any potential economic recovery unless the world's most powerful finance ministers convince bond traders that they'll put the brakes on massive stimulus measures before inflation becomes a threat, economists said.

Finance ministers from the Group of Eight nations meet Friday and Saturday in the southern Italian city of Lecce as they attempt to lay groundwork for the meeting of G8 heads of state at their summit next month.

"We expect the G8 finance ministers ... to come out of their confab with some sobering language and proposals that will chill out overanxious fixed income markets," said Carl Weinberg, chief economist at Valhalla, N.Y.-based High Frequency Economics, in a research note.

"Most importantly, the G8 will have to discuss credible plans for reining in both fiscal and monetary stimulus when and if the economies start to grow again," he said.

The G8 includes the United States, Japan, Germany, France, Italy, Great Britain, Canada and Russia. The meeting won't include central bankers. Currency issues aren't expected to be on the agenda.

Government bond yields have jumped sharply, fueled by fears that aggressive monetary stimulus and government borrowing in a bid to avert a deflationary spiral has laid the foundation for an eventual surge in inflation.

That pushed the 10-year Treasury note yield above the 4% level for the first time since October on Thursday morning, while also pushing up yields on German and British government bonds. Yields move inversely to price.

Yields on shorter-term Treasurys have also risen on ideas the U.S. Federal Reserve could move by the end of the year to raise the Fed funds rate from near zero.

"The market has really drawn a line in the sand," said Kenneth Broux, an economist at Lloyds TSB in London.

The market may be getting ahead of itself, given that the global economy appears to still be in the midst of a deep recession, even if some data have started to moderate, economists said. If left unchecked, rising interest rates could cause any potential economic rebound to come undone.

Unemployment remains on the rise in major economies. Recent European data, including German exports and industrial production have proven disappointing even as forward-looking surveys point to rising expectations, Broux noted.

"If you believe, as we do, that this economic downturn is hardly over, then higher long-term interest rates will only make the ongoing recession deeper and longer," Weinberg said.

As a result, the G8 officials have to talk about credible plans for reining in stimulus measures once economies begin to grow again, he said. Also, the G8 may uncharacteristically attempt to tamp down recovery expectations, Weinberg said.

U.S. Treasury Secretary Timothy Geithner told reporters in Washington earlier this week that the collective credibility of world leaders would be at risk if they don't adhere to a responsible fiscal path.

Meanwhile, German finance ministry officials on Thursday said they want the discussions to focus on the global economy and how to unwind stimulus measures once a recovery has taken hold.

"As soon as the economy gets its footing, the fiscal stimulus policies will have to be rolled back," Jorge Asmussen, the ministry's state secretary, told reporters in Berlin Thursday, according to news reports.

While the pace and timing of a recovery remain uncertain, some early signs of stability have started to emerge, Asmussen said.

Full 2 page article available at marketwatch.com

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