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How High Will Interest Rates Go ?

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How high would interest rates go ?

When would they start rising ?

I don't think they will start rising till after the next general election.

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Until the debt mountain has been tackled central bank rates won't go higher than 4% for me, due to the risk of creating a huge wave of defaults.

However what happens to the rate the people pay is another matter.

The other problem is that risk may force rates to go higher but this will just trigger defaults.

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Until the debt mountain has been tackled central bank rates won't go higher than 4% for me, due to the risk of creating a huge wave of defaults.

However what happens to the rate the people pay is another matter.

The other problem is that risk may force rates to go higher but this will just trigger defaults.

Indeed. The disconnect between BoE rates and lending rates to consumers is widening daily - credit-card companies have also upped their rates and have started re-introducing charges for card-use. In truth the effect of QE on interest rates offered to consumers appears to be minimal.

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Nobdy knows. Even those in charge. End of discussion.

The official base rate will be less than 1% for the next 3 years at least I reckon so those on lifetime BoE base rate trackers will therefore largely be OK (they are a fairly small proportion of the market though).

Mortgage interest rates will begin to climb rapidly the moment that QE is put into reverse (or the bond markets force gilt yields up regardless of QE).

My guess is that SVR/2 year fixes for prime borrowers will be 8/9% inside 18 months. That is however obviously just a guess.

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The official base rate will be less than 1% for the next 3 years at least I reckon so those on lifetime BoE base rate trackers will therefore largely be OK (they are a fairly small proportion of the market though).

Mortgage interest rates will begin to climb rapidly the moment that QE is put into reverse (or the bond markets force gilt yields up regardless of QE).

My guess is that SVR/2 year fixes for prime borrowers will be 8/9% inside 18 months. That is however obviously just a guess.

You may be right. Who knows though. I do agree the base rate will be kept low for at least another year. How relevant that is to actual rates is another matter though - as you say.

Fixes at 8-9% would lead to huge falls in the property market. :ph34r:

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Rates can never go up in a big way again now.

Millions of people on tracker rates are now used to paying around 1% on their mortgage and spending the saved interest.

Millions of others on SVRs are now used to paying 3% and spending the saved interest.

Some will be using the money to pay down debt, but most will spend it. And the economy will become reliant on that spending.

So the economy is now dependant on low interest rates. If rates get raised when the economy comes out of recession, it will just go back into recession again. So rates cant be raised by much. Only a small increase would be needed to fight inflation any way.

My base rate tracker IO mortgage has come down from 1050 to 150 a month. Happy days!

Edited by Mammon

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Rates can never go up in a big way again now.

Millions of people on tracker rates are now used to paying around 1% on their mortgage and spending the saved interest.

Millions of others on SVRs are now used to paying 3% and spending the saved interest.

Some will be using the money to pay down debt, but most will spend it. And the economy will become reliant on that spending.

So the economy is now dependant on low interest rates. If rates get raised when the economy comes out of recession, it will just go back into recession again. So rates cant be raised by much. Only a small increase would be needed to fight inflation any way.

My base rate tracker IO mortgage has come down from 1050 to 150 a month. Happy days!

Interesting point about the spending.

And I guess you are a veeeery happy camper! Do you spend or pay down debt?

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My thoughts concerning the base rate is that it'll remain pretty much status quo until after the general election then small increments until it settles at around 3% sometime in 2012.

What happens to mortgage rates however is another story........anyone's guess.

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Rates can never go up in a big way again now.

People keep saying this, but I'm not sure it's that simple.

Interest rates aren't something which are purely decided. They can be used as a lever, for example to get you out of a recession or to put breaks on out of control consumer spending (the way they should have been used to stop the housing bubble). But ultimately they're a function of other things, and everything in an economy is linked together.

You can't have borrowing without lenders, and without savers for one thing. And pumping in money or leaving IRs artificially low can create inflation (will create inflation at some point). If that happens, IRs have to go up, they simply will go up, naturally. No one is going to lend at 5% if inflation is running at 10%.

This idea that they (the BoE, the government) will keep IRs low forever now, because we're all over-indebted and need them low is therefore as much a fallacy as they won't ever let house prices fall. There is only ever a certain amount of control over an economy. If it goes out of equilibrium, its own forces will push and pull is and interventions such as artificially keeping rates low when the economy is demanding otherwise will only make things worse.

Hence, no one knows how high they might go, but taking on a 25 year mortgage in the assumption they'll always be very low is likely to prove spectacularly misguided.

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We're getting into an odd situation.

Those in debt on an old tracker are doing very well, everyone else is not.

I can't see any rates rises for a while. Inflation won't happen till there's a recovery. QE will be

left there for a long time.

Very few will take on new debt. Those with property won't sell.

A lost decade? At least.

A lost generation? Very possible. For young people now, there's no jobs, plenty of debt. No hope of ever

buying a house.

Rents will continue to collapse, but for BTLers on trackers, they'll be no problems.

How did we get to here? I can't help but to only blame Brown.

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We're getting into an odd situation.

Those in debt on an old tracker are doing very well, everyone else is not.

I can't see any rates rises for a while. Inflation won't happen till there's a recovery. QE will be

left there for a long time.

Very few will take on new debt. Those with property won't sell.

A lost decade? At least.

A lost generation? Very possible. For young people now, there's no jobs, plenty of debt. No hope of ever

buying a house.

Rents will continue to collapse, but for BTLers on trackers, they'll be no problems.

How did we get to here? I can't help but to only blame Brown.

Its as much a Tory made problem as Brown, this has been developing through inept short sighted policy over 40 years

Tories - Allowing Selling of Council stock at below market value

Tories - Destroying tenant rights and making rental a landlords wetdream with the AST introduction

Labour - Taxing Dividends making property investment a no brainer

Labour - Artificially keeping rates low through RPI/CPI jiggery pokery

Im sure there are probaly a myriad of other Govt feckwittery/initiatives that has helped develop the complete and utter malinvestment in property in the UK

Edited by Tamara De Lempicka

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That's me that. :lol:

You lot keep spouting the doom and gloom but people like me are paying chucks off our mortgages.

QE and low interest just made life easier. The only thing I see about it thats not working is homeowners are all paying mortgages down instead of buying TV's and cars.

How is the low interest effecting your rent payments? :lol:

By the time a loaf of bread costs £3 and petrol is £5 a litre, nobody will be able to afford anything much.

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Given that a lot of commentators attribute Greenspan keeping rates low for to long as part of our problem, rates will surely rise , as to when and how high....it's unlikely that anybody knows, either here or where it matters

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You may be right. Who knows though. I do agree the base rate will be kept low for at least another year. How relevant that is to actual rates is another matter though - as you say.

Fixes at 8-9% would lead to huge falls in the property market. :ph34r:

I agree that rate rises will lead to big nominal falls in house prices. I think some people on here see inflation meaning the end of nomimal falls. I see it speeding them up.

This idea that they (the BoE, the government) will keep IRs low forever now, because we're all over-indebted and need them low is therefore as much a fallacy as they won't ever let house prices fall. There is only ever a certain amount of control over an economy. If it goes out of equilibrium, its own forces will push and pull is and interventions such as artificially keeping rates low when the economy is demanding otherwise will only make things worse.

I agree with this. We're between a rock and a hard place with interest rates. We might be forced to put them up.

I don't see why putting up interest rates just a little will stiffle inflation either. We import all this stuff, it's got to be paid for. Our currency will be devaluing, no one will want to buy our debt.

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That's me that. :lol:

You lot keep spouting the doom and gloom but people like me are paying chucks off our mortgages.

QE and low interest just made life easier. The only thing I see about it thats not working is homeowners are all paying mortgages down instead of buying TV's and cars.

How is the low interest effecting your rent payments? :lol:

Yes, absolutely correct. People like you have been bailed out with MY F***ing money. The Govt is so scared of letting defaults emerge, it's willing to steal from savers.

Goodbye Labour.

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