Will Interest rates ever rise again???

Happy days if you're a banker.  Printing money never solved anything and it won't this time either.  The Fed is destroying the dollar and we are going to see massive inflation on a global scale over the coming months and years.

That may actually be what they want?? Thing is , every other nation will follow suit to stay competitive. That is why unwinding this thing will be so difficult.

you are a mortgage broker & you ask this? Head-in-hands man, please...

How else do you think, unless a new, gold-backed greenback is created, do you think the
QE-inspired burst of hyper-inflation will be cured??

what if qe doesn't inspire hyperinflation japan style?

the QE and low interest rates benefit no one but banks and the very wealthy. cant see why this makes you happy chisel.

mightymoyes

For sure , the banks are doing th ebest out of this at the expense of the jolly old taxpayer!.. The giovernemnt is also set to do well out of this. What better way to eek more tax revenue than give people cheap loans etc.. More spare cash each month equals more revenue for teh government. Why increase interest rates when you can increase taxes?? It ultimately has the same affect right?

government uses interest rate rises to control inflation. unfortunately since the british public is completely skint we cant cope with interest rate rises. hence inevitable inflation and a vastly lower standard of living

worth watching this interview:

http://www.democracynow.org/2010/11/5/new_600b_fed_stimulus_fuels_fears

Question about how the rates staying low etc will (if at all) damage me.
I bought my first house just outside the M25 in 2007 for £200k paying a 5% deposit. Obviously the house price then went down but my next door neighbour sold their house (exact same size/condition pretty much) for £212k about 3 months ago. My mortgage is now moved onto the SVR tracking 2% above the base rate so i am paying off the capital regularly now my payments have shrunk. To my simple understanding of everything, the rates staying low can only benefit me as i am saving plenty every month on interest whilst and using that money (approx £700 per month)to pay down the mortgage.

In this situation, is there any downside to me whatsoever for the rates to stay low?

the only downside for you is that general inflation is going to rise (RPI 4.7% at the moment) and instead of putting up interest rates to control inflation (which the government cant do because it would cause mortgage default on a massive scale and also seriously reduce people's spending power) they are gonna keep the rates low. Prices of commodities like cotton, sugar, metals, wheat etc etc are going through the roof and this will very soon filter through to the loaf of bread u need to survive. People who have money in the bank and dont owe any are being hammered by the low interest rates and higher inflation. Savers are being shafted to bail out the borrowers.

so in short, the cost of yr mortgage will be cheap but the cost of just about everything else (food, energy etc) is gonna rocket!

Rogar,
Re your "i am paying off the capital regularly now my payments have shrunk"

Is this an interest only mortgage and you are only paying the capital down because rates are so low? Or do you mean you are just overpaying a repayment mortgage?

Rollo Tomasi

I have an interest only mortgage and i am now repaying the mortgage. I was overpaying before the rates went down though so it's not going to be a problem for me if my rate suddenly went up to 6% again or higher. I am just trying to get rid of as much of it as possible while this opportunity is around. This is my first mortgage but i am not getting carried away thinking it will be this cheap in the future. Could do with 4-5 years of 2.5% though to get majority of it paid.

Is there any downside to having an interest only mortgage compared to a repayment if i am sensible and make regular overpayments?

An Interest Only mortgage is a massive punt on interest rates and house prices.

Without a repayment vehicle what are you going to do if at the end of the mortgage house prices haven't increased dramatically? How are would you pay for the house? If interest rates rise a lot it's a double whammy - you pay more interest but house prices will be crushed.

I think you are doing the right thing paying down as much debt as you can while rates are low - but then I don't like debt - which seems to put me in a minority in the UK.

i suppose having an interest only mortgage basically amounts to renting off the bank

Rollo

Rogar explained to you that he is overpaying his mortgage, and it is therefore his responsibility to make sure that the mortgage os paid off within the mortgage term!! His mortgage is therefore an Interest only mortgage in name alone.

Sir Dennis, you made some very good points about the current situation. As you are aware , it is unusual for Inflation to be going up when teh money supply is so low. There is not too much money out there chasing too few goods and pushing up prices. Prices are increasing in spite of more and more people struggling, and those that are not struggling are paying off loans and saving in case of an emergency. The banks are still not lending at sensible rates, and their margins are huge. The governemnet seems absolutely committed to seeing the banks recover, sell their stakes for a taxpayer profit.

Rogar

For you , interest rates being so low is the best situation. It not only kkeeps your interest payments low , but it also keeps teh value of your home higher. In my opinion it also makes it more likely for YOU to keep your job and earn more money. For people like you with a job and a mortgage Low interest rates are great.No downside to you at all.

I do not think rates will rise for a long long time.. The governor of BOE admitted last week that inflation was likely to stay high for much longer, but implied that he was committed to keeping base rate low. In my opinion , the reason rates will stay low is that by the time inflation falls, interest rates will not have risen. As the BOE mandate will still be staving off inflation , they will be forced to inject more money into the economy via QE .

Chisel, Mervyn King is as clueless a buffoon as Bernanke I wouldn't listen to a word he says. 

Quantitative easing creates inflation, by definition it IS inflation.  So your last sentence doesn't make any sense.

Could you please define a "long, long time" and what do you think will cause inflation to fall?  The more debt we accumulate, the more the pound depreciates, the more money they print, the more inflation we will see.

interest rates just went up again here in aust.Aussie economy goes well.

lets hope they stay low to help all those people who are tightening there belts

roger must have borrowed 190 grand even on his figures he,s only payed  it down by a max of 8 grand a tear 30 grand so far,which leaves 160 grand or 20 years left,by a long time do you mean 20 years

What point are you trying to make poster?  Rogar is enjoying his current situation , and obviously earns the money to support a mortgage at higher interets rates than he is currently paying.

Live 4

Inflation is inevitable in a Wolrd where emerging economies want a piece of the action. In reality inflation should not be happening, as people are adopting characteristics usually associated with Deflation i.e holding onto cash, paying off mortgages/loans, putting off big purchases. Taxation is fueling inflation in the form of VAT increases. The money supply is not getting out to the poepl that the BOE wats it to. Banks are hoarding cash and rationing the money they lend. When I say a long time I mean a few years. Like I said, The BOE appears committed to low interets rates despite "short term inflation". They ar econvinced that in the medium term inflation will fall, which is why they are keeping rates so low.

why does he obviously earn the money to pay higher interest rates,the payments on 190 grand mortgage would be bordering on over a grand a month and he,s overpaying by 700 so even on these rates he,s 4 or 500 down on the mortgage if it was a repayment,so if interest rates should rise in the next 5 to 20 years you can double at least any payments leaving him twice as much as his overpayments

the theory goes that QE will cause inflation and that interest rates will rise to deal with that inflation.Bernanke has stated that more inflation is acceptable[reading between the lines}.

Interest rates up to date have been the blunt insrument used to contain inflation.However will that work if the system is flooded with cash?
Point 2 will the QE actually get into the economy? Apparently approx 60% of QE 1 has entered the economy, the rest is being sat on.I think it was roubini who recently said that less than 20% of QE 2 will enter the actual economy.
  Therefore will the claimed rise in inflation to meet the twin QE's actually occur?

Thanks for the opinions guys. With regards to my situation, i am completely comfortable being on an interest only mortgage as i trust myself to overpay enough to cover the mortgage and i prefer the flexibilty of overpaying when it suits me rather than every month like on a repayment mortgage.

I don't know a great deal about mortgages and not sure how much extra monthly payments are on a repayment mortgage to be honest. I am looking at overpaying approx £20k per year whilst my current payments are so low so i haven't really looked at repayment mortgages as i am pretty sure it won't be anywhere near what i am paying already - but at my own pace and when it suits my cash flow.

So basically, in my circumstances - just cheer 0.5% base rate for as long as possible!

There goes Mrben spewing nonsense again.

ZERO part of QEI entered the economy. I repeat ZERO, it was never intended to. It was a nothing more than a bailout for the banks who unloaded their toxic paper onto the FED at par, recapitalized and shored up their balance sheets (with the help of changing M2M FASB rules - the hole is too big to cover), and used the new collateral (WITH LEVERAGE) to buy the S&P. That's why economic conditions continued and unemployment to deteriorate even after QEI.

Most of QEII will be going into the economy because the FED this time is not just swapping assets, they are actually monetizing the USG's debt. The PDs get to skim their cut as the intermediaries of this process and use the proceeds to buy the market or commodities as they have been with the FED's POMO. The USG will use the money to fund itself. End result. INFLATION. It's already here, it just takes 6-12 months to work itself through the system.

Get a clue.

Menelaus

Your response is too simplistic. If the banks had not benefoited from QE the people that are borrowing money now would never have been able to borrow it. So it is difficult to judge how much has entered the economy.

There is also no waty that QE can get to the man in the street in the same way as the lending free for all that preceeded it.Peopel are struggling to get credit in teh form of loans, mortgages and credit cards.

It's not difficult at all. Published data by the FED is indicating that consumer deleveraging accelerated the last 24 months in the US despite QEI. Loans are being written off, credit lines are being pulled back and consumers have cut back on borrowing. ZERO effect from QEI.

Ben Bernanke doesn't work for the "man on the street" and contrary to popular belief, nor does he care about unemployment or the economy. Bernanke cares about his owners and that's who he is trying to protect at the expense of the American taxpayer. The "we will drop money from helicopter" fable is just that, a fable. Recapitalizing the banks (who are still totally insolvent) and causing inflation is all he is interested in. His ZIRP and QE policies are decimating savers, pensioners and the US middle class but Congress and the White House are looking the other way. Such is the problem when your elected representatives have been captured by the money cartel.

Menelaus

The fact is that the situation is better than it would have been without it right??

Are you saying QE in the states is any different to QE in the UK...? Generally speaking the property market and sub prime mortgage meltdown in the states has not happened in teh UK. That is why UK banks appear to be recovering so quickly. Only when banks really start to lend will we see money getting into the economy, and REAL inflation take hold. There are too many artificial stimulants to Inflation , VAT increasing from 15% to 17.5% and then of course VAT increasing again in January 2011. Sterling appears to be recovering against teh Euro and Dollar yet M King appears to think it has fallen in value("is Weaker")

M Kings letter to Osbourne suggests that teh BAnk is happy to accept higher inflation in teh short term  and George Osbornes reply appears to say that he does not give a toss about inflation at teh moment!! Work that one out

chisel, your post is so wrong on so many different levels I don't even know where to start.

You think things would be worse without QEI. Prove it. This is the same lame old argument that every politician on the face of the planet spews every time yet another one of their ill conceived programs blows up. "It would have been worse if we didn't act". B.ollocks.

You think that UK banks are recovering? How do you know that, since with mark-to-fantasy accounting we have no idea how much toxic paper is still being hidden and with OBS entries that intentionally obfuscate their balance sheet?

Chisel, the ONLY reason the FED is fighting tooth and nail to keep interest rates low is because if interest rates increase the global (including UK) banking system blows up tomorrow. The elephant in the room is interest rate swaps.

rogar you change every post earlier post says you are overpaying 700 a month although in reality you are underpaying because a 190 grand mortgage would be more that 700 plus interest,then you say you hope to overpay by 20 grand a year which would be 1,800 a month overpayment,seems to me you are taking all the best bits from everyones best deal acting like a schmuck, and getting yourself caught out

Sorry if not explained myself perfectly, was just asking for opinions on my situation and rates. To clarify, I said i am saving £700 per month (approx) from my original mortgage payments compared to now, and i am using that money to overpay but the nature of my job means i get an end of year bonus and hence am aiming to use that to top up my payments. I didn't think it was necessary to write every detail of how much i get paid, when i get paid and my exact payment schedule. Was just looking for some opinions on a subject i am not 100% confident.

Dont think there was any need for you to try and be clever to 'catch me out'. I am hardly going to try and make up my story to not look stupid or a schmuk as you say on an anoymous forum. You seem like you are just hoping to try and prove i have made a mistake and haven't thought about my future. Bit sad really.

Out of interest, how do i work out what my payments would be on a repayment mortgage? Current interest rate 2.5%

A bit about QE here:

http://www.youtube.com/watch?v=PTUY16CkS-k

so when you say you are overpaying you mean overpaying the interest,what about the 190 grand of capital what plans have you got for that

Well, when i overpay that is nibbling into the capital. Im not sure how quickly i am going to pay it off as circumstances change but if i continued to pay £20k a year it would be less than 10 years and there wouldn't be any capital left to pay.

This crisis won't be over until people like Chisel have disappeared and stopped talking like they know even the first thing about macroeconomics.

So in effect chisel your saying interest rates stay low, reall rates are negative........therefore the value of paper money is destroyed and hence gold goes off the chart????? I agree

if interest rates go up, the cost of government borrowing will also go up. additionally a lot of businesses are only surviving because interest rates are so low.

Jimmy

Dont bring Interest rates into it where businesses are concerned. I do not know the figures but it would not surprise me if it was as expensive or even more expensive for businesses(particularly small )to borrow money now than it was 3 years ago!! Businesses are being screwed by the banks not just in rtaes but in the fees they are being asked to pay.

Interest rates as Predicted are staying at current level well beyond teh end of this year, and probable until the end of next year

If you dont know the figures how do you know that businesses are being screwed by the banks.

That makes no sense at all.

The exact figures Dotchinite. I do not knwo the exact figures. All , I know is that a number of my customers with renewable credit are being asked for high fees and m,assive increases in the rate of interest they pay.

Another month of rates at 0.5% . In fact you can now tick off 2010. We will be sitting here this time next year spurting the exact same thing. Time is standing still where interest rates are concerned

Homeowners warned of return to 5% interest ratesBank of England official says people must be aware that rates will gradually rise to 'normalised position' of 5%
http://www.guardian.co.uk/business/2010/dec/23/home-owners-return-interest-rates?CMP=twt_fd

comments made to support the pound,the fear being a forced rise to stop the slide.