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Uk Interest Rates To Rise This Year And Could Peak At 5Pc

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http://www.telegraph.co.uk/finance/economics/10897820/UK-interest-rates-to-rise-this-year-and-could-peak-at-5pc.html

Mr Lyons, though, goes further than Mr Carney, arguing that UK rates could peak “at a very high level”

Mr Lyons told The Telegraph. “I think that rates, eventually, in 4 or 5 years' time will have to peak at over 5pc”.

Er 'ang on a minute, since when is 5pc a 'very high level'?

More like: Interest rates could RETURN TO NORMAL!

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They'll use "forward guidance" for as long as possible without actually doing anything until the markets grow impatient. Could be a few years yet!

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Imagine earning around 5% interest on your savings account again !

It did happen, it seems so long ago... Come on BoE, spank those naughty debt junkies. Lets have some schadenfraude

Here are the average savings account interest since 1960

2013 1.75

2012 2.80

2011 2.75

2010 2.80

2009 2.21

2008 5.09

2007 5.55

2006 4.68

2005 4.92

2004 4.56

2003 3.73

2002 4.00

2001 4.31

2000 5.00

1999 5.17

1998 5.75

1997 5.17

1996 4.54

1995 5.60

1994 5.36

1993 5.66

1992 8.19

1991 10.57

1990 13.56

1989 11.96

1988 9.30

1987 9.83

1986 9.22

1985 7.57

1984 7.00

1983 6.75

1982 8.54

1981 8.90

1980 10.50

1979 8.31

1978 6.25

1977 7.00

1976 6.88

1975 7.21

1974 7.50

1973 6.58

1972 4.88

1971 5.00

1970 5.00

1969 4.88

1968 4.17

1967 4.25

1966 4.00

1965 3.88

1964 3.50

1963 3.56

1962 3.75

1961 3.56

1960 3.38

Edited by Reck B

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No chance!

Carney says 2.5%

I plump for possibly 1.5% and more likely 1% assuming it rises at all

Edited by Killer Bunny

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They'll use "forward guidance" for as long as possible without actually doing anything until the markets grow impatient. Could be a few years yet!

I agree. When there is no downside and the markets still shift in the direction you want why wouldn't you just use forward guidance. People suggest central bankers are very guarded...that isn't true. They just use pointless statements that mean nothing in order to create the impression that something will change - "animal spirits" "exuberance" etc are just a clever way to manage expectations and get a desired reaction.

Feel free to read the new freakonomics book - think like a freak - which talks about a group of people who simply make predictions or statements as there is no real downside for them - no one records their failures and measures them against statements as the people doing the measuring have as much to lose e.g newspapers who need news and 24Hr TV stations that need to sell ads. These people are simply showmen/women who want attention.

For my 2 penny's worth....if interest rates rose to 5% the government would interest on debt would probably destroy the budget. We already will pay more than education and defence to keep our current loans going. My question to this group is - If you were a debtor who could attempt to control your own interest rates on the debt you paid would you logically be aiming to put it up or down?

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Imagine earning around 5% interest on your savings account again !

It did happen, it seems so long ago... Come on BoE, spank those naughty debt junkies. Lets have some schadenfraude

Here are the average savings account interest since 1960

2013 1.75

2012 2.80

2011 2.75

2010 2.80

2009 2.21

2008 5.09

2007 5.55

2006 4.68

2005 4.92

2004 4.56

2003 3.73

2002 4.00

2001 4.31

2000 5.00

1999 5.17

1998 5.75

1997 5.17

1996 4.54

1995 5.60

1994 5.36

1993 5.66

1992 8.19

1991 10.57

1990 13.56

1989 11.96

1988 9.30

1987 9.83

1986 9.22

1985 7.57

1984 7.00

1983 6.75

1982 8.54

1981 8.90

1980 10.50

1979 8.31

1978 6.25

1977 7.00

1976 6.88

1975 7.21

1974 7.50

1973 6.58

1972 4.88

1971 5.00

1970 5.00

1969 4.88

1968 4.17

1967 4.25

1966 4.00

1965 3.88

1964 3.50

1963 3.56

1962 3.75

1961 3.56

1960 3.38

It doesn't seem to make a lot of difference to savings rates these days. It's been 0.5% for years but you could easily get 3 or 4% on savings accounts until our wonderful government brought in Funding for Lending and that was that, the banks didn't need saver's money any more.

It's funny to see them squirm now they have some serious competition from UKIP.

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A higher tax on unearned income will come before any interest rate rises. The governbankment will obviously want a cut of the extra income, that they can then pass on to any debtors struggling with higher interest payments.

Ireland are showing them how to do it....

Savings interest to be hit with tax rate of 45% after PRSI levy and DIRT hike
By Vincent Ryan
Thursday, October 17, 2013
The effective tax rate on interest earned on savings will be as high as 45% as both the new higher rate of Deposit Interest Retention Tax (DIRT) tax and the PRSI levy on unearned income will both come into force on Jan 1.
Finance Minister Michael Noonan announced in the budget that the DIRT rate would be increased to as high as 41%.
However, it has emerged that a second tax will operate in conjunction with the DIRT tax and will be also be applied to unearned income such as earnings from rents, dividends and deposit interest.
The PRSI levy of 4% was announced in last year’s budget and will apply to all unearned income for those under the age of 66.
"In Budget 2013 it was announced that from Jan 1, 2014, the exemption from PRSI applying to employed contributors and occupational pensioners aged under 66 years whose only additional income is unearned income, will be abolished. This means that unearned income such as rental income, investment income, dividends and interest on deposits and savings will be liable to PRSI," a spokesperson for the department said.
Despite the new levy being paid into the social insurance fund, there will be no benefits to those who pay the tax.
"The new PRSI charge will be at 4%. It will not give rise to any social insurance entitlements," the spokesperson said.

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I agree. When there is no downside and the markets still shift in the direction you want why wouldn't you just use forward guidance.

Because, as Mario Draghi is seemingly still failing to learn, at some point you've got to stop flirting and start ****ing. Otherwise nobody takes any notice.

Edited by Fully Detached

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If the neutral rate turns out to be 0% real (or thereabouts) and they maintain a 2% inflation target then it's difficult to see how the policy rate will peak at much higher than 3% or so.

If that is the outcome then house (and other asset) prices look set to remain high. Moreover there currently still a massive spread between base rate and lending rates which one would expect to narrow significantly as banks no longer require recapitalising and these new entrants (TSB, Virgin, Aldemore, Tesco et al) compete for lending business. I'm very sceptical how much effect higher base rates will have on lending rates if/as the spread tightens. Looks to me largely for show.

Of course, they could always decide to raise the inflation rate, or target nominal GDP or nominal wages at some point.

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They'll have to start slowly to see the effect on tracker mortgages. Lot of people paying £500 per month, on IO + 1.5% over base rate. RK's guess at 3% looks reasonable, so that's more than double, £1250 pm.

Carney said it's going to be slow, so not a return to "normal" - unless it's the new normal! But that's been cancelled. See how you go, react every step of the way.

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Rising interest rates and falling to flat rents would be a disaster for some BTL. If the capital value falls could really see problems.

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They'll have to start slowly to see the effect on tracker mortgages. Lot of people paying £500 per month, on IO + 1.5% over base rate. RK's guess at 3% looks reasonable, so that's more than double, £1250 pm.

Carney said it's going to be slow, so not a return to "normal" - unless it's the new normal! But that's been cancelled. See how you go, react every step of the way.

3% base rate? Not before 'Abenomics' gets here. But why bother to tighten at all when you're simultaneously borrowing 7% of GDP every year and subsidising house prices? It doesn't make sense.

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3% base rate? Not before 'Abenomics' gets here. But why bother to tighten at all when you're simultaneously borrowing 7% of GDP every year and subsidising house prices? It doesn't make sense.

It's a good guess based on the current talk about the natural rate.

I can see the employment figures being questioned, along with the exposure of IDS, in which case bets are off. But look how long it took to expose Libor manipulation.

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Rising interest rates and falling to flat rents would be a disaster for some BTL. If the capital value falls could really see problems.

Oh I do love a story with a happy ending. ;)

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The Tories have realised they are losing the grey vote to UKIP who have seen their saving interest decimated to help those who took out risky mortgages. They want the grey vote back and the only way they can do that is with the promise of interest rate rises.

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The Tories have realised they are losing the grey vote to UKIP who have seen their saving interest decimated to help those who took out risky mortgages. They want the grey vote back and the only way they can do that is with the promise of interest rate rises.

It's a balancing act, though: any grey votes gained would be offset by the younger "squeezed middle" finding they're having to scrape together a few quid more for their mortgage payments.

My prediction: IRs won[t rise till after the election.

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It's a balancing act, though: any grey votes gained would be offset by the younger "squeezed middle" finding they're having to scrape together a few quid more for their mortgage payments.

My prediction: IRs won[t rise till after the election.

You mean younger people will see property prices fall and they just might be able to afford one, thus voting for the lying blues instead of the reds.

Edited by Corruption

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The Tories have realised they are losing the grey vote to UKIP who have seen their saving interest decimated to help those who took out risky mortgages. They want the grey vote back and the only way they can do that is with the promise of interest rate rises.

This is bloody great anyway....

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It's a good guess based on the current talk about the natural rate.

I can see the employment figures being questioned, along with the exposure of IDS, in which case bets are off. But look how long it took to expose Libor manipulation.

And what if there is no 'natural' rate? What if the economy isn't static, stable and equilibrium-seeking but dynamic, unstable and equilibrium-disturbing? You might in your ignorance keep base rates too low for long periods while chasing this chimera and allow vast, elaborate debt bubbles to flourish. Alternatively, you might tighten too quickly in the aftermath of a slump, or raise rates too far, and drive the economy straight back into recession.

What you really need instead is a macroeconomic model from which money, debt and time have not been abstracted.

Edited by zugzwang

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