Interest rates going up on Thursday?

[FabulousSophie]

The financial markets are 90% certain the Bank of England will finally pull the trigger on its long expected rising cycle in interest rates. If so, will this affect sentiment in an already stagnant property market?

Depends what happens with the £ but German manufacturing figures today not looking good on back of weak Eurozone data last week ought to give support against the Euro and China / US trade spat keeping $ in check. ( I don't subscribe to the BoE view that the UK economy is already at full capacity)

The £ is at $1.295 now. It has been falling since the rate rise, which probably means higher inflation down the line (which probably means higher interest rates down the line). I am therefore pretty confident that all roads are leading to higher rates - it's just trying to work out how fast "a walk" is? Roger thinks normal rates will be around 2 to 3%.

I think normal will be around 4-5%

cloudtree I would love that to be true, but I am not expecting something so good,

Although I readily admit that 4-5% is the average UK interest rate over the last 300 years.

Why would high rates be so good? Better return for your savings?

RiddleyW Yes, I would love to get a decent rate on my savings, plus it would encourage young people to save for the future rather than put everything on credit.

I'd like a better savings rate but I'd rather have a lower mortgage. I have a fixed rate for 10 years though so don't really have a horse in the race at the moment.

I am not convinced high rates will make any difference to young people in that way. Your hypothetical young person putting everything on credit is presumably doing so because they don't have enough money to fund themselves. They aren't suddenly going to have money available to save because the returns are better. It will help people who have lots of liquid funds.

Basically (as always) the rich will get richer and the poor poorer.

RiddleyW I don't agree that higher interest rates would not encourage young people to save. It would get them into good habits from an early age. I remember when I was about 8 year old having a savings account at the TSB that had a couple of quid in it, and paid 4% (I also remember thinking at the time that 4% was a pretty lousy return!).

RiddleyW – “Why would high rates be so good?… I’d rather have a lower mortgage.”

Lower rates = more expensive houses; housing inflates to meet the amount of money that can be spent on it. It may be nice if you’re already paying off a mortgage, but for those who haven’t yet bought, these absurdly low rates have only hurt them.

Gosh, the £ is down to nearly $1.29 now! The BoE is going to have to hike rates again soon if it doesn't want to let high inflation out of the box.

The pound is down because of Carney trash talking the uk economy straight after the rise last thursday. I doubt he wanted to raise it but went along with everyone so he wasnt the only no vote

Alexalee
Same difference. Even if Carney's trash talk caused it, a lower £ still means higher imported inflation down the line, which leads on to higher interest rates.

Or sack Carney replace him with someone bullish and the pound will rise again.
Markets are fickle and are based more on news and sentiment than fundamentals these days