Interest rates

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Anyone know what the latest predictions are for mortgage rates?

Central banks (Bank of England and Federal Reseve and ECB and Bank of Japan) are promising/hinting that they intend to keep official base rates close to zero for several years.

Mortgage rates are usually 2% above base rates so if you have plenty of equity and a good credit record you should not expect mortgage rates to up for next 2 years.

If you have a bad credit record or little equity you may struggle to get a mortgage at all as banks do not really want to lend to any risky borrowers.

Thanks, have a good amount of equity and low risk for lenders. We are renting out our current house and buying another one on interest only. We can get a cheap deal for 2 years but wondered what would happen after that. I can't imagine that there will be any kind of steep increase.

More than 2 yrs out it is really hard to say. If inflation starts to rise sharply the Bank of England might raise rates sharply to stop it. On the other hand, if the UK slips into deflation then rates could stay low for a very long time like they have been in Japan for the last decade.

Central banks are beginning to even talk of theoretically imposing negative base rates!

What implications would negative base rates have Morebeta?

In effect the Bank of England would be charging banks money if they dared to deposit spare money back with it rather than lend it out to the economy.

Handily, the UK Govt would also benefit from negative short term rates as it would also be being paid by savers/investors if they want to buy Govt T Bills as somewhere to keep their money safe.

So if you were to take a bet would you say low interest rates for the next 5 years?

I was worrying about this very thing today! No way could we afford our mortgage is rates rose too sharply :( dangerous game.

I'm betting low for 3 years then higher.

Could you lock in a lowish fixed rate for 5 years if you need certainty?

How much higher? Are we talking 5% or 15%

If they wanted to cool inflation down, currently RPI is about 4.8%, then they would need to raise interest rates to at least 5% for a while.

The Bank of England Base Rate went from 6.5% at the beginning of 1978 to 17% by the end of 1979.

If you have a PDF reader software on your PC you can look at a full table of UK Bank Base rates since 1970.

They surely wouldn't raise interest rates to levels like 15%. I'm a very risk averse person but if you have to make a move isn't it safe enough to think they will be low for a while?

Yes, it is very unlikely that Base Rates will get to 15% unless inflation got out of control.

I was just pointing out that interest rates can move very sharply in a short space of time.

Oh that's better. We could afford that just barely but not those 1979 figures