Interest Rates Watch

[Freetodowhatiwant]

Just posting to see if anyone else is keenly watching out for the interest rate announcement. My mortgage is fixed for almost another two years anyway so I don’t have any personal skin in the game in that sense, but I have work involvement in the property market so I have a keen interest.

What I don’t understand is if the government are using interest rates as a tool to bring down inflation but are also encouraging the banks to be lenient and do things like extend mortgage terms surely the latter counteracts the desired effect on spending? Not that anyone is out spending on luxuries but instead the rising cost of living is having this effect on inflation. Although I guess it is the only real tool they have and it has in the past been proven to work.

Apologies for any sloppy wording with this, I am on my phone on the bus. Anyway, just thought I would start an interest rate watch thread. What with that and the rain.

An interesting piece by the economics editor of the Guardian here, guessing that the next interest rate move is downwards. Will be interesting to see if that is the case. Apologies for the over use of interest/interesting. Next CPI announcement, when we will see what inflation was doing in October is 15th November and the next BoE interest rate decision is a month after that on 14th December.

https://www.theguardian.com/business/2023/nov/02/despite-the-bank-of-englands-hawkish-tone-the-next-interest-rate-move-is-likely-down

Gosh I would have assumed we were a long way off interest rates dropping!!

They need to push down with a recession looming.
A 4% base rate end of 2024 seems realistic.

Yeah me too tbh! But it’s an interesting angle. I hope it turns out to be correct but we will see.

It's possible, although I can't see big falls.
Of course, what a lot of people forget is that rates will be cut because we are in a significant recession. There is no point in cheering rates in isolation as lots of people are likely to lose their jobs and suffer worse!

Exactly, and at the first sign of inflation spiking again they will just raise rates again, trapping more people into expensive debt when their fix ends, Big test this Thursday I think it is with U.S bond sales? Also Middle East, Japan Yield Curve Control, Russia/Ukraine situation can all feed into future inflation, they are definitely not going to use QE now IMO as a way to control the economy (maybe small doses like during the Truss budget emergency), that has led us to the absolute disaster we have now with millions of ordinary people fully exposed to the bond markets in a way that used to only affect Wall St./City Of London traders, absolutely ridiculous situation! It is interest rates all the way now I think, so be careful what you borrow for!

Inflation down to 4.6%. Hopefully will have a knock on effect on interest rates at some point! I say 'hopefully' but of course that means for borrowings rather than savings. Next BoE rate announcement is 14th December.

https://www.bbc.co.uk/news/business-67412740

A good indication that the BoE base rate will stick at 5.25% in December which is reassuring for FTBs and people currently remortgaging.

Not such good news for savers as you say but I’m less concerned about my savings than worried for younger people trying to cope with big mortgages.

Hope the current 5.25% rate is indeed the peak as now looks likely and begins to slowly fall in 2024.

Reviving the thread for anyone else keenly watching what the announcement will be for interest rates on Thursday and also the BoE's quarterly assessment of the state of the UK economy and forecasts for inflation. Many speculating rates will be held this time with some cuts to come later in the year. Mortgage rates are already going down, well compared to last year's high anyway and that it won't be too long before we will see cuts, with rates expected to hit 4% by the end of the year.

https://www.standard.co.uk/business/bank-of-england-interest-rates-borrowing-boe-andrew-bailey-mortgage-prices-inflation-costs-b1135509.html

Faisal Islam on BBC News speculating that inflation might even hit the 2% mark by spring although saying that interest rates will not of course reach this low by then:

https://www.bbc.co.uk/news/business-68106731

Green shoots, as one might call them, in the housing market with mortgage approvals rising:

https://www.ft.com/content/c7abc82c-8d1e-4ec9-8630-971fd806cc54

And a very comprehensive look at the whole thing here. https://commonslibrary.parliament.uk/economic-update-inflation-set-to-fall-over-2024/

Of course with thousands of people now paying a lot more for their mortgage repayments, some businesses are struggling more than any time since 1993 according to this article in the Indy. Not many people have the spare cash for the homewares, art prints and other non-essentials. It's a sad time for anyone in such businesses and of course in an election year doesn't make for good PR.

https://www.independent.co.uk/news/uk/home-news/interest-rates-businesses-insolvency-30-years-b2487377.html

that's what they want us to think ;)

I think it’ll go unchanged. I don’t think inflation has gone down at all, depends on the source and what they use to calculate it. Our food shop is still very high and we put things back on the aisle.
I dont believe mortgage interest rates are even using the BoE rates anymore. Banks have been losing money from not giving mortgages, because no one is buying and the market is stale. Banks rely on lending money and investing to make profit.

i believe we are in unchartered waters. Economists have no idea what will happen but it is not looking great for the economy.

It will almost definitely go unchanged on Thursday from what I've read recently. It seems likely that the base rate will reduce to 5% in May/June and they are still expecting a few more small falls throughout the year.

We've just been offered 4.65% with Halifax

Not bad at all considering what they have been @holycrabsticks. I am on 4.69 with Nationwide fixed for 2 years last May. It felt high at the time but actually they then went much higher! Really hoping for much less by the time I come to change in spring 2025.

I agree
@cupcakesarelife about the feeling of unchartered waters and banks seemingly going off piste with their rates. After all being stagnant with little lending doesn't do them any good either.

And yes @Twiglets1 I agree it seems that we are looking at no change. Reallt hoping for a nice few cuts after that though. No house price crash yet either it seems!

Good post, it is absolutely uncharted waters, they have no idea what inflation is going to do and they won`t be able to cut if the U.S holds or raises, all they are doing at the moment is trying to make soothing sounds so people will keep borrowing.

I do agree with this. I don't think anything the gov or BoE say should ever be taken seriously. A lot of politics is about psychology (of the public). The last thing they want to do is panic everyone. When people panic, they make bad decisions. Especially at the voting polls ;)

I don't know if there will be a sudden house crash any time soon tbf, although prices on houses have been coming down slowly in many areas (there are the odd areas they are still doing okay, but tbh, that is odd). I think there is definitely a slow crash though, if that makes any sense. I realised this a few weeks ago because a house came up in St Albans that I really would have gone for (but I'm already buying something else now and at the conveyancing process now). I really love that road on St Albans and there were three houses sold on it 2021 and they were snapped up in a matter of days (I got outbid on all of them haha). Anyways, this house that's come up is only 30k higher than the houses back in 2021 AND it's a bigger house. So technically, it's cheaper than the 2021 houses! To me, that has meant the housing market has gone past "corrections" and now entered a new phase - it's really down turning.

Also, the global economy is pretty bad and I work in business so I know it's definitely turbulent times at the moment because big businesses that wanted to IPO still aren't since investors are holding onto their money.

Everyone is. If you feel yourself reluctant to spend, then it's pretty certain everyone from small to big money feels the same way. This is not going to end in a year, it will be for a good long while.

The second you start to feel confident spending and not even a second thought goes to worrying if something is too expensive or will your job be secure (even if it is, for now), then you know the economy has changed. But it's not like that for most people now. I hope we'll all be ok!

I mean, if you read this from the BoE, they kinda are saying "we make it up as we go along". They don't really know what they're doing tbf

https://www.bankofengland.co.uk/explainers/why-are-interest-rates-in-the-uk-going-up

The base rate has stayed at 5.25% at today's meeting anyway.

Yes, were you expecting a cut?

Pretty sure @Twiglets1 has said up thread that all indications were for it to remain the same rather than be a cut @CrashyTime. although strong indications there will be a cut if not next time the BoE meet than certainly the following one or two. Inflation is set to be on target by the spring. Of course things can change but such is the out look at the moment.

I have been holding off on remortgaging until today just in case they dropped a bit. However they didn’t so stuck myself on a 2 year fix at 4.84% aghh. Was due at the end of feb so thought its not going to get much better. How I will miss my 1.68% mortgage 😫

I’ve been offered a 5 year fix at 3.89 with Santander, I don’t need to remortgage until August…it’s so hard to know whether to lock it in or not.

The vote went 6 hold, 2 increase, 1 reduce.
Doesn’t look like a rate cut coming in the next 3 months.

And if they dont cut then they will most certainly cut at some vague undefined time in the future, or maybe they wont?

"The Bank’s governor Andrew Bailey noted that, based on amount of the interest rates that had been implied by the market, inflation would likely remain above the Bank’s 2% target all the way until 2027."

@Pollyannamex is your offer valid for six months? If so I'd wait and see where things go.