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Original poster

Interest rates: clever mumsnetters who know about such things, how long will they stay low?

26 replies

llareggub · 07/01/2009 12:11

Obviously I know nothing about such things or I wouldn't be asking!

We've just had a lovely letter from our mortgage company reducing our interest rate once again, which is great news as I am due to go on maternity leave shortly so the more we can save, the better.

I don't want to get too excited if interest rates are going to climb steadily again over the next 6 months or so....

So, anyone have any informed opinions on this?

OP posts:
Original poster
llareggub · 07/01/2009 12:36

hopeful bump!

OP posts:
Clarissimo · 07/01/2009 12:38

I don't thin anyone knows for sure, and as you are a saver anyway its still going to cost you, albeit in interest from savings instead

EachPeachPearMum · 07/01/2009 12:42

DH reckons they will go lower yet, but then will go very high- over a 5 year period or so, similar to 80s. (He isn;t in finance btw!)

MadameCastafiore · 07/01/2009 12:43

DH reckons they will go to 1% but then will creep up again but not to the levels of the 80s - he is in finance by the way.

Original poster
llareggub · 07/01/2009 12:45

By saving I mean short-term saving to fund a longer maternity leave.

I've just been browsing moneysavingexpert too, but no luck yet.

Thanks for views so far....really hope they don't go up to 80s levels, that would be horrendous.

OP posts:
HeadFairy · 07/01/2009 12:49

There is talk of negative interest rates, I'm not sure what the effect of that will be on mortgages etc. Most tracker mortgages are capped so they can't go below something like 1 or 2%. The question isn't really how low they'll go or how long they'll stay there, it's whether the banks will pass any of it on. As the housing market has all but dried up, no one's getting mortgages so the competition for mortgages has disappeared too so the banks have no incentive. They've taken our money and now they're going to sit on it.

HeadFairy · 07/01/2009 12:50

the other thing to consider is whether we go in to deflation as interest rates will climb to avoid that as much as possible. Interest rates have been falling to offset inflation, which was climbing and climbing, but now as retail spending falls away, there are masses of high street discounts on offer and all this adds to falling inflation, which reduces the need for low interest rates.

snorkle · 07/01/2009 13:02

if they go too low then there's a risk there will be a run on the pound which would force the government to put them up quite high.

HeadFairy · 07/01/2009 13:31

They've just said on Working Lunch that they're expected to go down tomorrow....

bran · 07/01/2009 13:52

How would a negative interest rate work in practise HF? Has it happened before?

(Isn't Working Lunch annoying now? I stopped watching it when the line-up changed. I can't take that Declan guy seriously at all, and what's with all the scripted banter on the sofa? In fact, what's with the sofa? Bring back office chairs I say.)

notnowplease · 07/01/2009 13:54

Til GB gets another term then up through the roof along with taxes to re finance the public coffers after this disaster

LaDiDaDi · 07/01/2009 13:56

HF, interest rates haven't been falling to avoid inflation but to encourage consumer spending as inflation started to fall.

They were raised earlier in 2008 when inflation was climbing but once the extent of the economic crisis started to become clear they were cut dramaticaly to try to prevent deflation from occuring.

ruddynorah · 07/01/2009 13:59

i wondered too what happens if rates drop to nil as our mortgage tracks at 0.07 below the base rate. however, had it confirmed today that our lender will enforce a 2% collar, which last time they were forced by government to ignore.

KewcumbersRoastingOnAnOpenFire · 07/01/2009 13:59

the opposing pressure on interest rates is the weak pound. The lower the interest rate, the fewer people/institutions/countries want to buy sterling to invest for a interest return. There was talk of not reducing rates (despite economic slow down) beasue of the disasterous effect it could have on the already battered pound.

Of course the answer to that is to be self- reliant as a country [wishful thinking emoticon]

KewcumbersRoastingOnAnOpenFire · 07/01/2009 14:01

PS if anyone knew what was going to happen to interest rate in the next 5 years, they'd be sitting on their carribean island laughing at us mortals raking the money in.

HeadFairy · 07/01/2009 14:18

Oh sorry I got that wrong ladida, thanks for that. I knew it was linked to inflation in some way!

I have no idea how negative interest rates work, I was asking dh about it the other day (he works in the city) and he doesn't even know. It's pretty unprecidented, I do think it's a worst case scenario though.

KewcumbersRoastingOnAnOpenFire · 07/01/2009 14:26

maybe the banks will have to pay us for the privilege of having a mortgage

I have a degree in economics, and accountancy and a treasy qualification and have never heard of negative interest rates

HeadFairy · 07/01/2009 14:32

there's a clearer definition of negative interest rates here

HeadFairy · 07/01/2009 14:33

But this is from the BBC so I'm sure it's a more reliable source

Lauriefairyonthetreeeatscake · 07/01/2009 14:36

I just went on our mortgage website as our mortgage is due for renewal. They clearly think long term interest rates will go up as they offered me a 5 year fixed term rate at 6.09 %.

Their standard variable rate at the moment is 2%.

FruitynNutty · 07/01/2009 14:36

I'm hoping the interest rates stay down so we can get a good deal when our 3 yr fixed rate (4%) is over in August! Pleeeeaaaasse!

DaddyJ · 07/01/2009 14:46

Interest rates are going to stay very low as long as we are in the shit.

The moment any kind of momentum returns to the global/uk economy
they will shoot up to combat the inevitable inflationary surge.

Timings? Ni puta idea! Just like everyone else including the central bankers..

HeadFairy · 07/01/2009 14:52

Laurie, have a look around for mortgages. My dh found a 10 year fixed rate at about 4.5%. I can't remember who it's with, but he definitely found one. They are out there, but you may have to hunt for it.

bran · 07/01/2009 14:53

I can't see a negative interest rate happening here in the sense that it's explained on the BBC link. For one thing sterling isn't a particularly strong or stable currency at the moment so money is hardly going to come flooding in from abroad, and anyone who already holds their money in sterling would surely put it under their mattress rather than pay interest to save.

It's only really a negative interest rate in the sense that fees are charge and zero interest is paid, I was thinking that it meant the base rate was negative, which is surely impossible.

Lauriefairyonthetreeeatscake · 07/01/2009 14:56

We can't change mortgage companies (mortgage was originally guaranteed by fil - he's now retired so couldn't do it again)

but thanks for that Headfairy. We will probably just be on the standard variable rate when it ends - still incredibly cheap.