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southmartin

3 Rate Rises This Year

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Yesterday I had lunch with a prominent MP (who for obvious reasons will remain nameless) and we were discussing the markets.

Now this is a cons MP who knows what's going on, and whilst I was talking about the lack of distressed sellers keeping the stand-off between buyer & sellers, they said that "there were three rate rises already priced in for this year". Believe me, this MP knows the people who know.

I decided not to push any further on this (as our meeting wasn't really about this) and so I don't know if they're 3x rises of 0.25% or 3x 1% so the information is only of partial use (and TBH they may well have to adjust the percentage of each rise depending on the situation at the time). But it's good to know that we'll be looking at a base of AT LEAST 1.25% by December - and maybe a lot more. Of course this will translate into SVRs of 7%+ which will no doubt help the HPC along.

I suspect that they'll want to avoid looking like panicking, and do a rise-per-quarter, so I'd expect a .25 rise next month (or the one after at the latest).

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He's just quoting forward implied interest rates. The Market has priced in three rises of 0.25% this year. The first of which most likely in May. Although what the BOE actually do is a different matter. Merv did appear to endorse the Market expectations in his latest speech though.

Edited by Pent Up

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I'm cofused.

I thought the BoE was independant and made rate decisions once a month based on available data at that time. Why would this MP know anything we don't. Are we basing 3 rate rises on what Merve has hinted? :huh:

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When people on here talk of a 0.25% increase in base rate they always imply that the mortgage rate will rise by much more. Why should it increase by anything other than 0.25%

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When people on here talk of a 0.25% increase in base rate they always imply that the mortgage rate will rise by much more. Why should it increase by anything other than 0.25%

2 reasons: 1, bankers are greedy bar stewards, but 2, they see one rate rise and assume a trajectory upwards and so raise their rates by a multiple to ensure they're not losing out by too many people fixing on low rates

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2 reasons: 1, bankers are greedy bar stewards, but 2, they see one rate rise and assume a trajectory upwards and so raise their rates by a multiple to ensure they're not losing out by too many people fixing on low rates

Both very valid ponts ;)

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I'm cofused.

I thought the BoE was independant and made rate decisions once a month based on available data at that time. Why would this MP know anything we don't. Are we basing 3 rate rises on what Merve has hinted? :huh:

There won't be three rises and not even the pm would know. The bank of England doesn't know until a couple of weeks before.

Lots of people think there will

three rate rises and there are also lots that think

the bank of England may hold off completely.

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He's just quoting forward implied interest rates. The Market has priced in three rises of 0.25% this year. The first of which most likely in May. Although what the BOE actually do is a different matter. Merv did appear to endorse the Market expectations in his latest speech though.

I disagree he said the markets had got ahead of them selves 15 minute 30 sec in

http://streamstudio.world-television.com/CCUIv3/frameset.aspx?ticket=117-118-9303&browser=ns-0-0-0-10-0&target=en-default-&status=ondemand&stream=flash-video-300

He said " I'm glad you asked that question" so why was he glad he had been asked that question?

was it because it gave him a chance to clear some thing up?

could be many quarters.

Edited by gf3

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I think that there are various issues at play here. As earlier comments have pointed out the expectations in the financial markets are for a rise in official interest-rates to 1.25% over the next year. It is also true that longer-term interest-rates have been rising and putting pressure on mortgage rates and others. However a reliable economist I follow advises caution for those expecting immediate rate rises.

I still do not expect the majority to change much. Someone told me they expected a rise today when the Inflation Report is released! Whilst it is possible that Mervyn King and others on the MPC have had a “Road to Damascus” type conversion I suspect in reality assuming market interest-rates predictions is the only was he could get his figures and charts to work today when he presents his forecasts. Otherwise he would have to forecast inflation above target and in Mervyn King’s world that would never do! This is different from it being above target in practice which seems to bother him very little if at all…He really does seem to assume that the general population can be fooled all of the time to mis-quote Abraham Lincoln.

http://t.co/rApbOPQ

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I think that there are various issues at play here. As earlier comments have pointed out the expectations in the financial markets are for a rise in official interest-rates to 1.25% over the next year. It is also true that longer-term interest-rates have been rising and putting pressure on mortgage rates and others. However a reliable economist I follow advises caution for those expecting immediate rate rises.

I still do not expect the majority to change much. Someone told me they expected a rise today when the Inflation Report is released! Whilst it is possible that Mervyn King and others on the MPC have had a “Road to Damascus” type conversion I suspect in reality assuming market interest-rates predictions is the only was he could get his figures and charts to work today when he presents his forecasts. Otherwise he would have to forecast inflation above target and in Mervyn King’s world that would never do! This is different from it being above target in practice which seems to bother him very little if at all…He really does seem to assume that the general population can be fooled all of the time to mis-quote Abraham Lincoln.

http://t.co/rApbOPQ

I always say that it's impossible to tell what the IR will be in 6 months or more time despite all the people who think they can predict it years in advance.

Nevertheless, a rise of at least 1.5% by the end of the year will not be far wrong. It's hard to call though - I suspect inflation will be "unexpectedly" high for some time yet and I suspect growth will be poor. So two competing pressures on IRs, but I think the time is coming that inflation can't be ignored.

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So have you joined the tory party now? http://www.housepricecrash.co.uk/forum/index.php?showtopic=137258

Theres only one thing that will derail the rate rises and that is unexpected falls in GDP tipping the UK back into recession. However if recession happens and the rate rises go up then the recessions were expected. Time will tell.

Good point - have just bumped that thread with the details....

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I more inclined to believe EA's than Politicians.

Southmartin did you pick up the bill for lunch?

Actually I did, but only because the MP paid for lunch last time we met (and no, they didn't ask for a receipt!)

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They need to be at 5% plus.

Agree pain will not be felt until we are at 5% levels, it was not long ago we were at close to these levels and everything ticked along quite nicely.

Personally I cannot see the rate going above 1.5% by year end and with a large percentage on fixed deals, discount etc there will be very little effect overall.

Even if you have been told 3 rises this year, the BOE can still take action a month or 2 later and drop the rate back down once they have analysed the affect of the rise.

Realistically they cannot rise to fast with tax rises coming our way, job losses and benefits being pulled, it needs to be a staged approached with a 0.25% rise per quarter on average over the next few years being the approach I feel they will adopted until they get us back to 5% by 2014-15 and the next elections.

The market will not crash because of it, it will adjust with asking prices reflecting the higher borrowing costs but with inflation adjustments prices will be similar to those of 2005.

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He's just quoting forward implied interest rates. The Market has priced in three rises of 0.25% this year. The first of which most likely in May. Although what the BOE actually do is a different matter. Merv did appear to endorse the Market expectations in his latest speech though.

+ 1

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Agree pain will not be felt until we are at 5% levels, it was not long ago we were at close to these levels and everything ticked along quite nicely.Personally I cannot see the rate going above 1.5% by year end and with a large percentage on fixed deals, discount etc there will be very little effect overall.

Even if you have been told 3 rises this year, the BOE can still take action a month or 2 later and drop the rate back down once they have analysed the affect of the rise.

Realistically they cannot rise to fast with tax rises coming our way, job losses and benefits being pulled, it needs to be a staged approached with a 0.25% rise per quarter on average over the next few years being the approach I feel they will adopted until they get us back to 5% by 2014-15 and the next elections.

The market will not crash because of it, it will adjust with asking prices reflecting the higher borrowing costs but with inflation adjustments prices will be similar to those of 2005.

Everything only 'ticked along nicely' because lenders were still throwing money at buyers - as soon as this stopped, house prices plummeted and it was only by slashing base rates to 0.5% that prevented further falls. Lending conditions have hardly improved.

In pre-crunch times, average SVRs were only around 1.5% above base rate (and people were keen to get off them) - now they have risen to around 4% above.

Still not sure - then try this:

Rate rise threat for 3m home owners

Almost three million homeowners would struggle to pay their mortgage if interest rates rose by just 2 percentage points, according to new industry figures seen by The Sunday Telegraph. This equates to more than one in three (37pc) of all mortgage holders.

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Yesterday I had lunch with a prominent MP (who for obvious reasons will remain nameless) and we were discussing the markets.

Now this is a cons MP who knows what's going on, and whilst I was talking about the lack of distressed sellers keeping the stand-off between buyer & sellers, they said that "there were three rate rises already priced in for this year". Believe me, this MP knows the people who know.

I decided not to push any further on this (as our meeting wasn't really about this) and so I don't know if they're 3x rises of 0.25% or 3x 1% so the information is only of partial use (and TBH they may well have to adjust the percentage of each rise depending on the situation at the time). But it's good to know that we'll be looking at a base of AT LEAST 1.25% by December - and maybe a lot more. Of course this will translate into SVRs of 7%+ which will no doubt help the HPC along.

I suspect that they'll want to avoid looking like panicking, and do a rise-per-quarter, so I'd expect a .25 rise next month (or the one after at the latest).

XXsniffXX what's that smell? Oh... it's bullshiit!

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Agree pain will not be felt until we are at 5% levels, it was not long ago we were at close to these levels and everything ticked along quite nicely.

Personally I cannot see the rate going above 1.5% by year end and with a large percentage on fixed deals, discount etc there will be very little effect overall.

Media disagrees - I keep reading varying figures, but that up to 75% are on variable...

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Inflation cannot be ignored, its here and thriving and must be addressed as soon as possible even if it causes discomfort in the short term. Merv and co need to act next month especially if we see anywhere near the jump we saw in Feb.

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Inflation cannot be ignored, its here and thriving and must be addressed as soon as possible even if it causes discomfort in the short term. Merv and co need to act next month especially if we see anywhere near the jump we saw in Feb.

Already too late, interest rates are almost immaterial - the cumulative/compounding destruction of incomes and savings is accelerating and sson it will do to their precious debt based system as HPI and land prices did for manufacturing.

Edited by OnlyMe

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Already too late, interest rates are almost immaterial - the cumulative/compounding destruction of incomes and savings is accelerating and sson it will do to their precious debt based system as HPI and land prices did for manufacturing.

Interest rates should have been upped months ago in my opinion, the endless delay has let inflation grow, and as we all know the manipulated CPI and RPI figures even show it way above the BoE target. I beleive for Jo Public inflation is much nearer 10%+ today and rising, how much interest medicine will we need to pull it back? I can't help thinking of the US in the 70's?

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When people on here talk of a 0.25% increase in base rate they always imply that the mortgage rate will rise by much more. Why should it increase by anything other than 0.25%

There have been some accurate answers already.

However I would like to explore the 'perceived' increase - what people who don't understand these things will see.

They will see that their interest has gone from 2% to 2.25%. Now although that is only as you say 0.25% increase, their payment goes from £500 a month to over £560. That is an increase of well over 10%.

The next month it jumps up by another 0.25% - taking their payment up to £620. By the third increase of 0.25% (so still only a 0.75% rise) they are now looking at at just shy of £700 a month payments.

That is not far off a 40% increase.

Remember it only takes 8 of these for someone who stretched at 2% IO tracker to double their payments. That could be in less that a year...

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Remember it only takes 8 of these for someone who stretched at 2% IO tracker to double their payments. That could be in less that a year...

That kind of rate was never offered to people taking out new mortgages so if they were stretched at that level, they must have royally miscalculated somewhere.

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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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