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"early Rise In Interest Rates To Bring Relief For Savers"..

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http://www.telegraph.co.uk/finance/economics/interestrates/8261177/Early-rise-in-interest-rates-to-bring-relief-for-savers.html

Early rise in interest rates to bring relief for savers

Interest rates are expected to start rising again by June, much earlier than anticipated, bringing some relief to Britain’s 38 million savers.

Most economists had not expected an increase until the end of the year, as the economy struggled to recover from the worst recession since the Second World War.

But data from the financial markets indicated yesterday that the rate would rise by early summer following a surprise jump in inflation.

Any move upwards would add hundreds of pounds to many mortgage bills but would offer relief to savers, who have suffered from pitiful returns since the financial crisis started.

A rise in the Bank of England base rate would end a two-year period of stability when interest rates stayed at a record low of 0.5 per cent in an effort to help the flagging economy.

Savings rates are now so bad that there are only three accounts, out of a total of 2,203 on the market, that pay a real rate of return. According to the Bank of England, the average instant access savings account pays an interest rate of just 0.23 per cent.

The warning about a rise in base rates followed figures from the Office for National Statistics (ONS), which indicated that factory-gate inflation – the prices manufacturers pay for raw materials – jumped by far more than expected last month because of of a spike in global commodity prices. The rate jumped from 9.2 per cent in November to 12.5 per cent in December as the cost of wheat, sugar, metal, oil and chemicals rose.

The gilt market, where the Government raises money by selling bonds, immediately reacted, with yields on bonds rising to a 12-month high of 1.39 per cent.

These yields are the closest the City comes to a forecast for what interest rates will be. Analysts said yesterday’s increase indicated that the futures market was pricing in an interest rate increase.

Stephen Lewis, the chief economist at Monument Securities, said: “The market movement suggests that investors are thinking that rates are going to rise before June.”

David Page, from Lloyds TSB Corporate Markets, added that factory inflation figures continued to “feed the ongoing background concerns that inflation is a growing problem”.

Philip Shaw, an economist at Investec, said: “ We were originally forecasting that interest rates wouldn’t rise until the back end of 2011 but there is a real risk the Bank of England’s monetary policy committee will have to raise rates sooner rather than later to protect its credibility.”

The Bank of England’s target is to keep the Consumer Prices Index rate of inflation at 2 per cent, and changes to interest rates are its main way of keeping inflation under control.

Next week the ONS will publish the latest CPI figures. In November it was at 3.3 per cent and the figure for December is expected to have climbed even higher because of the rising price of petrol and utility bills.

Economists believe it could rise to 4 per cent with a few months, as the full force of factory inflation starts to feed through to shop shelves.

A quarter point increase in interest rates from 0.5 per cent to 0.75 per cent would add £375 to the annual interest on a typical £150,000 mortgage.

There are fears that mortgage companies are already pulling their best deals in anticipation of a rate rise. The best five-year fixed rate mortgage has risen from 3.69 per cent at the end of last year to 3.99 per cent this week, according to John Charcol, the broker.

Savings rates, however, should receive a kick-start, although a 0.25 point increase in savings rates would only add £25 to an account with £10,000 in it.

David Kern, chief economist at the British Chambers of Commerce, said: “These figures reinforce our expectations that during the next few months annual consumer price inflation will rise towards 4 per cent and possibly higher.”

David Cameron hinted yesterday that he would try to ease the inflationary pressures on families, especially the cost of filling a car as oil prices rise.

Ruth Lea, economic adviser to the Arbuthnot Banking Group, said: “Of course most British families are already feeling the force of these global commodity price rises and the effects of inflation. You only have to fill up a car with petrol or visit a shop or open a utility bill.”

Many experts remain hopeful that the Bank will not succumb to pressure to raise interest rates, especially if job losses continue to climb to three million.

Melanie Bien, director of the mortgage broker Private Finance, urged borrowers not to panic. She said rate-setters “appear keen to delay an increase in base rate until at least the second half of the year”.

It makes a nice change to read an article supporting savers.

You can add comments at the end of this article

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I doubt if savers will for years if ever again see a real return on their savings, inflation is taking off and nothing the BOFE can do now will change this they have missed the boat and failed to comply with their remit a total failing of so called experts.

Mind you they have all been paid a fortune by us for not doing their job and they should pay every penny of taxpayers money back .

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I doubt if savers will for years if ever again see a real return on their savings, inflation is taking off and nothing the BOFE can do now will change this they have missed the boat and failed to comply with their remit a total failing of so called experts.

Mind you they have all been paid a fortune by us for not doing their job and they should pay every penny of taxpayers money back .

This is a smoke screen story designed to deceive people in to paying higher interest rates who can and to encourage some general caution about borrowing too much, whilst not causing the banks to go bankrupt.

The aims are:

1) Get those on ultra low variable rate mortgages onto fixed rate one, so those who can afford more will pay more, to help prop up the banks

2) Keep sending messages to the housing market that it must not inflate out of control, but actually do nothing about it.

3) Actually keep rates low, as a rise in interest rates of 1% will cause x million repos, in which case the banks go bust.

There isn't a plan to raise interest rates until we get truly massive inflation, the current plan is to keep talking about raising interest rates.

Edited by Mikhail Liebenstein

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Their plan seems to be working.

There is a thread about the cashflow consequences of buying an expensive house funded at a low rate now or a cheaper house funded at a higher rate later.

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Savers must be given hope or they may wake up to the fact they are being royally fleeced.

A token gesture rise of 0.25% followed by another 22 months of hold would not surprise me. Likewise a rise followed by another round of printing wouldn't surprise me either.

Beware of the BoE giving with one hand and talking back more with the other. A small rise in base rate can so easily be wiped out with another round of Sterling devaluation.

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Why? If they know they will need to raise rates, why not raise them NOW?

Cos they will claim raising IRs will only take effect in a year or so re: inflation and that they predict inflation will fall by then so no action needed. Shysters. It's been their get out of jail card during this entire farce...

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This is a smoke screen story designed to deceive people in to paying higher interest rates who can and to encourage some general caution about borrowing too much, whilst not causing the banks to go bankrupt.

The aims are:

1) Get those on ultra low variable rate mortgages onto fixed rate one, so those who can afford more will pay more, to help prop up the banks

2) Keep sending messages to the housing market that it must not inflate out of control, but actually do nothing about it.

3) Actually keep rates low, as a rise in interest rates of 1% will cause x million repos, in which case the banks go bust.

There isn't a plan to raise interest rates until we get truly massive inflation, the current plan is to keep talking about raising interest rates.

Absolutely spot on my friend.

It's MSM trying to get people to pay down debt and fix their mortgages rather than be at the mercy of SVR when rates do hike. The reality is that a 1% rise in rates would be near catastrophic for many people on SVRs and it's not going to happen in the near future as it will be recession time again. Savers are unfortunately still seen as the enemy, and I am one myself!

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I doubt if savers will for years if ever again see a real return on their savings, inflation is taking off and nothing the BOFE can do now will change this they have missed the boat and failed to comply with their remit a total failing of so called experts.

Mind you they have all been paid a fortune by us for not doing their job and they should pay every penny of taxpayers money back .

Savers have never seen a real return on their no risk savings, they saw a big return on no risk property debt.....now there is very little return on no risk saving and a negative return on high risk property debt. ;)

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Remember this time last year when rates were supposed to start rising fast in the summer of 2010? And people were told to lock in now at a fixed rate before its too late.

And savers told.. just hold on a few more months?

In 2012 it will be the same.. 'rates set to rise soon'.

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Why? If they know they will need to raise rates, why not raise them NOW?

You look ahead, unfortunately many in this country don't. If the rate is 1/2% then thats all they see.

Its all a bit academic now - Merv has lost control of rates. Apparently he worries about his legacy. I wouldn't if I were him - history will not judge him well.

Edited by AndyAndy

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You look ahead, unfortunately many in this country don't. If the rate is 1/2% then thats all they see.

Its all a bit academic now - Merv has lost control of rates. Apparently he worries about his legacy. I wouldn't if I were him - history will not judge him well.

Legacy - 2005 onwards pumpingthe bubble, then pumping the next one to make aure he didn't get blamed for the first one.

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I'm sure OPEC and the BRICS will be $hitting their pants at the though of Mighty Merv curbing their inflationary excesses....

Savers.... you want more cash for doing nowt.....

Debtors.... you exist to be fleeced in order to fund people who believe they have a god given right to a certain lifestyle.

Low interest rates.... boo f*cking hoo.

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Their plan seems to be working.

There is a thread about the cashflow consequences of buying an expensive house funded at a low rate now or a cheaper house funded at a higher rate later.

could you expand a little please mate?

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could you expand a little please mate?

I am assuming it was a reference to whether it was better to load up on debt now and face paying higher interest in the future after massive inflation has kick off (this kind of assumes wage inflation) or whether it was better to wait for now and buy a house that is cheaper in real terms.

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2011 will be the year when they will talk about raising IRs but have no intention of doing so. At best you might get a token 0.25% rise.

They have broken the link - got away with it - of linking the IR they charge on loans to the IRs they give on savings. It might never return.

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Early rise in interest rates to bring relief for savers

Interest rates are expected to start rising again by June,..

So June would be an early rise :lol::lol:

Thank goodness for the UK's wonderful newspapers - worth every penny (not).

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2011 will be the year when they will talk about raising IRs but have no intention of doing so. At best you might get a token 0.25% rise.

They have broken the link - got away with it - of linking the IR they charge on loans to the IRs they give on savings. It might never return.

I've been tracking the "Spread" between effective deposit rates and savings rates since about 1984: it was around here it really took off.

A number of realities need consideration here.

1. There is now an effective disconnect between BofE's Base Rate and LIBOR:

2. Base Rate ought properly to be used, along with Money Supply as the twin tools available in a fiat currency system to adjust Monetary (i.e. "Real") Inflation: and the essentially critical relationship between Money Supply and GDP: or productivity:

3. The only time Base Rate if of interest and concern on Main Street (i.e. the real World) is for Tracker Mortgages. They are now a thing of the past. Never ever in future will mortgage lenders use Base Rate Trackers, as they gain their liquidity from interbank sources: not savers:

4. If BoE upped Base Rate by (probably) 200 basis points - 2% - which the MPC ought to enact to defend sterling, then the economy is dead and the bank mortgage lenders dead:

5. Thus we are forced to conclude Base Rates are set on political grounds: rather than (As ought to be) monetary drivers:

6. The only persons suffering are the little guy: savings return, effective zero (Interest rates have been effectively negative for a long time; thus "savers" are not such: they are perpetual losers: of capital value by erosion):

7. The little guy suffers again if and where they borrow money: since APRs range from 11.9% right up to 30%: and SMEs. Big Business borrows at what are called "Fine" rates:

What will drive up both LIBOR and Base Rate will without doubt be Bond Rates: as the UK Government will be forced to pay increasing rates of returns on new issues as Sovereign Risk Bond markets resist more UK issues, as part of their increasingly bearish view of government debt.

Has to be remembered that Mad Merv's predecessor, Hard Eddy, lowered and lowered rates, synthetically, on economic and political grounds: not his or the BoE's job or ambit. That's Government's task: or ought to be.

See Here:

The whole tottering structure is dysfunctional and will soon collapse.

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Ruth Lea, economic adviser to the Arbuthnot Banking Group, said: “Of course most British families are already feeling the force of these global commodity price rises and the effects of inflation. You only have to fill up a car with petrol or visit a shop or open a utility bill.”

Even as you sleep at night it's Kerching Kerching all the way for TPTB and more and more money in their pockets.

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They might be going to give "early" relief to savers sometime never but at least banks with taxpayers and savers bailout money are being used immediately to support property developers and landlords etc by reducing their loans by 25%.

http://www.ft.com/cms/s/2/e54b8042-200a-11e0-a6fb-00144feab49a.html#axzz1B6LjehFZ

Edited by billybong

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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