Could latest financial problem cause interest rates to rise?

JBod

JBod

JBod

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Hi all, I am not an expert ... at all.

I got stiffed with a 5 year fixed at about 5.8% just before bank crash so been paying about £300 more than I should have been each month. It is due to end April next year. I am of course worried that this will stiff me again if rates rise before my term ends.

I got penaltys if I pay off my mortgage early so it is careful calculations to ensure I actually save money long term.

So the question is, despite the BoE having just continued 0.5% for the 29th week running this was before billions were wiped off yesterday.

Million dorrah question - could interest rates rise in response? Or will interest rates stay low to encourage more borrowing?
 
Who knows.

April next year is too far away to make any kind of accurate prediction. Much depends on inflation.

They won't be going down however.....
 
Beer mat economics:
Markets fall, economies slow, low interest rates are required to stimulate growth.

So, maybe the BoE will stick for another few months
(I'm not an economist and have no real clue what I'm talking about)
 
I think it is unlikely there will be a significant rise in base rate before April next year. If the Euro devalues we'll need to keep rates low in order to remain competitive on exports.
However, I can see lenders rates starting to creep back up, as over the past year they have sunk quite a bit but fears about risk could see them edging back up again.

Inflation for 2011 was always going to be 'artificially' (I use the term loosely, as I'm not a fan of making excuses for facts as the reasons are often irrelevant) high due to the rise in VAT, what will be interesting to see is in 2012 whether it remains high and that could put some pressure on the BoE to raise rates.
 
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It depends, the base rate is unlikely to change, the interbank lending rates might, although only really if we have another potential default crisis like the sub prime issue. High interbank lending rates are the reason why mortgage rates etc remained high even though the base rate was cut in 2007-2008.
 
There's an argument to suggest that savers have had it too good for too long, getting modest yields (6%+) on cash savings accounts. I'm not convinced that we should necessarily view monetary policy as rewarding or punishing particular groups, ideally people would be more dynamic and adjust their stance accordingly, although I appreciate that isn't feasible in practice.

In theory having a base rate ~4% lower than inflation should get people out spending, but consumers don't tend to think in those terms.
 
Castiel said:
They won't be going down however.....
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:D

I have been expecting interest rates to rise for the last year or so and they haven't. I expect partly it's the housing market that is helping to artificially supress them, as large interest rate rises are going to cripple everyone with these high mortgages.

The benefit of a fixed mortgage is at least you know where you stand every month with a fixed budget, though the difference for me with fixed to variable was only about £30 a month (small mortgage)

The thing to look at is if you got a variable/tracker mortgage, how far would the interest rates have to rise before you were paying more than your fixed rate.

Because when they do start to rise, they will probably do so slowly and you should have a good bit of time to react before even variable rates become a problem.

In the meantime you could overpay on the mortgage, by still paying the same amount as you did on the fixed rate and work on reducing the capital loan faster (check small print for how much you can overpay in 1 year)
 
interest rates could do anything, just depends on what some loony politician decides to do next to save the world (banks).

Can't see them going up myself though, I can see a devaluation though.
 
I don't think the economy could withstand a rise in interest rates.

I would think it will be quite some time before we start to see them going up.
 
I fixed mine in a gamble that they would go up. They didn't - they dropped! It was no real big deal as I know what my payments will be. I'll probably fix again if the rates are right when i come out of this fixed deal.

Rates will rise at some point and that is real bad news for those on the breadline who over-stretched themselves borrowing whilst rates are low.
 
Well, they are avoiding raising rates so folks don't start defaulting on interest only mortgages, which will lead to a proper house market crash.

A good big jump in rates would be useful for those who wish to move and/or buy, as within 6 months it shold give the house market a good trashing.
They will avoid this as much as possible, as currently most if not all of the inflataion factors are from 'without' the country, and thereforewon't be controlled at all by a hike in interest rates.

It shows the impotence of the BoE in controlling even the UK inflatation rates, which have spiralled and there is basically nothing they can do, except devalue our currency even more, make our money more worthless.

We're still 35-40% down currency wise against second world countries from 5 years ago, all the second rate economies such as Indonesia, big population, used to have massive currency fluctuations, and now is stable against the pound. Each slight recovery is slapped hard by a new Euro or US crisis bringing the pounds value back now, not up as one might think.
 
LordSplodge said:
I fixed mine in a gamble that they would go up. They didn't - they dropped! It was no real big deal as I know what my payments will be. I'll probably fix again if the rates are right when i come out of this fixed deal.

Rates will rise at some point and that is real bad news for those on the breadline who over-stretched themselves borrowing whilst rates are low.
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Who advised you on that mortgage? Someone heavily overinvested in subprime perhaps. 5.8% at current time seems excessive. It is doubful we shall ever return to the Maggie haydays of Icelandicly high interest rates.
 
[TW]Fox;19756754 said:
And savers continue to be punished for the actions of over stretched borrowers :(
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Too damned right . . . and I would never have believed I could say that about a post by Foxy :eek:

brb . . . I'm off to wash my mouth out :p
 
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