Thursday, April 9, 2009

Interest Rates held at 0.5%

Bank keeps interest rates at 0.5%

The Bank of England has held UK interest rates on hold at 0.5%, in a widely expected move following a number of rate cuts in recent months. Rates remain at an all-time low after six cuts since October last year, when interest rates stood at 5%.

Posted by jack c @ 12:02 PM (1670 views)
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10 thoughts on “Interest Rates held at 0.5%

  • Surprise surprise, the BoE have chosen not to reverse their decision to reverse last month’s cut which was voted for despite the MPC having full prior knowledge of the inflation statistics showing CPI increasing from its already above target level.

    When the UK goes begging to the IMF, I imagine the first thing the IMF will lay down as a condition of the loan is that the Bank of England stops targeting high house prices at the expense of the interests of the majority of UK taxpayers.

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  • little professor says:

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  • The focus is still on minimizing deflation of the housing bubble.

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  • little professor says:

    or rather, maximing inflation for housing debtholders

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  • Just for a laugh, any predictions on how long we can keep rates below 1%? I’ve a suspicion that this might be a good time for homedebtors to get a long-term fix.

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  • quiet guy – I know it was ‘just for a laugh’ because you expect rates to shoot up pretty soon, but…

    …the trouble is you won’t find a long term fix anywhere near the base rate, b = 0.5% (or 1%, more like f = 5% I think – have a look at an on line comparison site). The basis for a tracker is about s = 2.9% (again comparison site) so the current cost of fixing is f – (b + s) = 1.6% (effectively what you are paying for the interest rate swap*), what you want to consider is when this will go negative with f constant over your scenarios and present value this to find your saving or expense (the present value of expected cash flows).

    * yes, by fixing your mortgage, you are adding to the oft-quoted, big, notional outstanding in derivatives contracts.

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  • @666

    I’m honestly unsure how long we can keep rates this low. I can remember thinking that the housing bubble was pretty much over in 2005 but the MPC kept the plates spinning until 2007.

    I certainly do expect rates to revert to the norm, or much higher, at some point and that’s assuming that we don’t go to the IMF. Surely, we cannot have rates below 1% forever. A five year fix at (say) 5% seems worthy considering as insurance against the worst hence my question.

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  • I’m honestly unsure how long we can keep rates this low. I can remember thinking that the housing bubble was pretty much over in 2005 but the MPC kept the plates spinning until 2007.

    But we didn’t have the credit crunch or the recession then…HAHAHHAHAHAHAHAHAHAHAHAH

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  • I suspect we can’t keep rates this low for much longer.

    Long term borrowing rates are being forced upward.

    Several years back, house price inflation was a choice subject at dinner parties/pub lunches. Now its the dreadful state of the economy (unless you are all employed by central government). Everyone is becoming aware that we are in a recession , the like of which has not been seen before.

    That is….except for Stephen Timms ( London Evening Standard, tonight) who thinks the UK will buck up by the year end!!! Who elected this dawk!

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  • My bank keeps on hammering me to put money into a 9 month web savings account at 3% interest. Everytime I log in there are banner ads for the account etc. It doesnt make sense because I already have all my money with them, so there is nothing for them to gain by me putting my money into this account – unless of course they think rates are going to shoot back up shortly and they are trying to lock me in…

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