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How Inevitable Is An Interest Rate Rise?

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I've been on this site since around November last year and having given it a lot of thought, I've now come to the conclusion that the only hope of a HPC is an interest rate rise.

However, how likely is this? When the Nationwide is offering a 10 year fixed rate mortgage, do they know something we don't?

Is it possible that interest rates could stay under 5% for a very, very long time? If not, why not?

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When the Nationwide is offering a 10 year fixed rate mortgage, do they know something we don't?

They know they can borrow money at a 10 year fixed rate for less than they lend it on as a mortgage. But those rates are going up, no matter what the MPC does.

Is it possible that interest rates could stay under 5% for a very, very long time?

Not with a fiat currency, unless lending restrictions are reintroduced.

Edited by MarkG

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Have a look at swap rates for yourself: http://www.futuresource.com/quotes/quotes.jsp?s=LSS

Apr '06 - 4.64%

May '06 - 4.65%

Jun '06 - 4.66%

Sep '06 - 4.73%

Dec '06 - 4.82%

Mar '07 - 4.91%

Jun '07 - 4.98%

Sep '07 - 5.02%

Dec '07 - 5.04%

Mar '08 - 5.05%

Jun '08 - 5.04%

Sep '08 - 5.03%

Dec '08 - 5.03%

Mar '09 - 5.02%

Jun '09 - 5.01%

Sep '09 - 5%

Dec '09 - 5%

Mar '10 - 4.99%

Jun '10 - 4.99%

Sep '10 - 4.98%

Dec '10 - 4.98%

Mar '11 - 4.98%

Jun '11 - 4.98%

A rate rise looks a certainty, the question is when?

Edited by Jason

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I've been on this site since around November last year and having given it a lot of thought, I've now come to the conclusion that the only hope of a HPC is an interest rate rise.

Then why did prices go down in many areas, some at "crash speed", without an interest rate rise.

Billy Shears

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I've been on this site since around November last year and having given it a lot of thought, I've now come to the conclusion that the only hope of a HPC is an interest rate rise.

However, how likely is this? When the Nationwide is offering a 10 year fixed rate mortgage, do they know something we don't?

Is it possible that interest rates could stay under 5% for a very, very long time? If not, why not?

I dont believe that they will stay under 5% for long. Bear in mind your mortgage is 25 years. I suspect that the average IR will be 6% in that period. With a peak of 7% and a low of 4%. IR's are at UNUSUAL LOWS. If the economy was strong and unemployment and all the other factors were in good shape then it would be safe to say that rates of SUB 5% are sustainable.

As it is, the country is phucked, and we are looking at high inflation, high unemployment, asset bubbles, weak economy etc. So something HAS to give. I think the only way to have stability in inflation and growth is with IR's at 6%.

If you are looking at a mortgage I would advise strongly a REPAYMENT MORTGAGE with the possibility if IR's at 7%. If this is comfortable then go for it. However, dont look at an I/O mortgage at 5% because it looks easily affordable. YOU STILL HAVE TO FIND THE MONEY TO BUY THE HOUSE.

If Labour get pushed out next term expect the Conservatives to UP IR's to stop these asset bubbles. They will not be popular but it is what is needed to get the economy back on track. Labour has shafted the voters with their MIRACLE ECONOMY and some poor b@stard is gonna have to get them out of the shit they have got us in. I hope its LABOUR and GB that has to deal with it but they aint getting my vote if that KNOB gets in.

Sorry going off-topic on a rant.

6% average long-term IR's for me.

TB

Edited by teddyboy

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Natiowide raised its IR last week. INcluding the "fixed rates."

They have no choice as the Gilts are dropping forcing IR up. When Japan begins to increase rates more then our rates will have to rise also.

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Natiowide raised its IR last week. INcluding the "fixed rates."

They have no choice as the Gilts are dropping forcing IR up. When Japan begins to increase rates more then our rates will have to rise also.

They raised their *fixed* rates!?!? Anybody got a reference for this?

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Then why did prices go down in many areas, some at "crash speed", without an interest rate rise.

Billy Shears

They didn't. Prices started to go down after the rate rises in 2004. The rate fall last Autumn killed it off. Stayed slow until Christmas. Now, normal boom bull market has been resumed.

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Relax - they raised the rates for new potential customers, not existing ones!!!

Oh right. Damn, I was thinking I'd missed a major scandal there...

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Won't banks start to put up interest rates on their variable lending products (i.e. credit cards) to compensate for increased bad debts anyway?

Not if they think it'll stop people borrowing.

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I dont believe that they will stay under 5% for long. Bear in mind your mortgage is 25 years. I suspect that the average IR will be 6% in that period. With a peak of 7% and a low of 4%. IR's are at UNUSUAL LOWS. If the economy was strong and unemployment and all the other factors were in good shape then it would be safe to say that rates of SUB 5% are sustainable.

You have things completely back to front. When the economy is strong and employment is strong, high interest rates are used to control inflationary pressures.

A weak economy, rising unemployment and constant downward pressure on the price of imported goods as a result of globalization mean that low interest rates, and hence high property prices, are here for good.

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You have things completely back to front. When the economy is strong and employment is strong, high interest rates are used to control inflationary pressures.

A weak economy, rising unemployment and constant downward pressure on the price of imported goods as a result of globalization mean that low interest rates, and hence high property prices, are here for good.

Shouldn't you be out ordering that Ferrari?????

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Shouldn't you be out ordering that Ferrari?????

I'm getting a bit old for a Ferrari, too hard to get in and out of. A mate of mine who runs a similar sized business has just bought a boat that cost as much as a Ferrari, now that is nice. Long may this bull market continue.

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You have things completely back to front. When the economy is strong and employment is strong, high interest rates are used to control inflationary pressures.

A weak economy, rising unemployment and constant downward pressure on the price of imported goods as a result of globalization mean that low interest rates, and hence high property prices, are here for good.

there is a ferocious bull market in damn nearly all commodities as insatiable demand from china and india starts to bite and supply starts to run out of room to move. A weakening pound on the back of an over leveraged UK economy rapidly losing its petro currency credentials and yield status in comparison with the US. Add in a large and increasing structural trade deficit and you have a recipe for a weak economy, rising unemployment, constant UPWARD pressure on the price of imported goods through commodity driven inflation and a softening currency. I think this is called stagflation.

Don't get me wrong, I think the BoE may well be stupid enough to try and force through one more rate cut (although it is looking less and less possible) as we see unemployment rise after a poor easter in retail and "bull shit inflation (CPI)" dips, however, I think this would see the start of a sustained sell off in sterling leading to a sharp rise in imported inflation. Unfortunately we are a small fly in the cogs at the moment and however much lower rates would in theory help our weak economy, they are frankly impossible given the current macro environment and the only changes I can see coming will exacerbate this.

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You have things completely back to front. When the economy is strong and employment is strong, high interest rates are used to control inflationary pressures.

A weak economy, rising unemployment and constant downward pressure on the price of imported goods as a result of globalization mean that low interest rates, and hence high property prices, are here for good.

Ever heard of Stagflation?

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Ever heard of Stagflation?

I have…. And I assure you that is exactly were we are right now!

I’m in business and we have 17 suppliers, all 17 have wrote to us since Christmas saying that they have been forced to put prices up or add a “raw material surcharge”.

Furthermore 3 of the 17 have informed us over the past week or so that a 2nd wave of price increases are required. (I expect the rest to follow suit).

But our takings have fallen dramatically.

Why: because jo public is skint – he is up to his eyeballs in dept – the bank won’t give him anymore and he is struggling to pay gas bill ect

Stagflation is a word that I expect to hear quite often over the next few years. :(

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A weak economy, rising unemployment and constant downward pressure on the price of imported goods as a result of globalization mean that low interest rates, and hence high property prices, are here for good.

As reported in today's FT, The IMF appears to disagree: http://www.imf.org/external/pubs/ft/weo/2006/01/index.htm

"The chapter argues, however, that globalization is no guarantee of low inflation over the next year or two. The main reason is that robust global growth and diminishing economic slack have reduced the restraining impact of declining import prices on inflation. Indeed, with strong global growth expected to continue, the primary risk is that a further upturn in import prices could result in stronger inflationary pressures going forward, and that this will require more monetary tightening than currently expected by financial markets."

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As reported in today's FT, The IMF appears to disagree: http://www.imf.org/external/pubs/ft/weo/2006/01/index.htm

"The chapter argues, however, that globalization is no guarantee of low inflation over the next year or two. The main reason is that robust global growth and diminishing economic slack have reduced the restraining impact of declining import prices on inflation. Indeed, with strong global growth expected to continue, the primary risk is that a further upturn in import prices could result in stronger inflationary pressures going forward, and that this will require more monetary tightening than currently expected by financial markets."

Just finished trawling through that IMF report. Quite spectacularly depressing reading, should cheer many on here up then..

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IR may follow this pattern, i.e., the B o E will be ignored and lenders will hike on their own:

http://www.thepost.ie/post/pages/p/story.a...3517-qqqx=1.asp

Two-tier market to spark higher mortgage rates
16 April 2006 By David Clerkin
Borrowers could soon face a two-tier mortgage market thanks to the Financial Regulator’s plan to impose extra requirements on loans for more than 80 per cent of a home’s value, according to senior banking sources.
Lenders said last week that the requirement for banks to put up more capital to cover higher-risk mortgages was likely to result in a shift away from these mortgages towards those where the key loan-to-value (LTV) ratio was less than 80 per cent.

With confidence in the bubble dissolving lenders are going to tighten up and perhaps introduce 80% LTV standards as they cannot be guaranteed capital growth to cover default. Sign of the times?

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  • 301 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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