BoE to raise interest rates on Nov 2?

[Howardh]

https://www.politicshome.com/news/u...ank-england-governor-hints-interest-rate-rise

Mark Carney said this morning if the economy continues at its current pace, the Bank of England could raise interest rates for the first time in a decade.**

The Bank will make a decision at its next monthly interest rate review on November 2nd.

Mr Carney told Radio 4’s Today programme: “If the economy continues on the track that it’s been on, and all indications are that it is, in the relatively near term we can expect that interest rates would increase somewhat”.

When asked if that meant a rise at the November meeting, Mr Carney replied: “What we have said, that if the economy continues on the track that it’s been on, and all indications are that it is, in the relatively near term we can expect that interest rates would increase somewhat.”

The interest rate is currently 0.25% and financial experts expect the Bank of England to make an increase to 0.5% in November....

Can't be far off. It will help savers a little who are losing out on having their money in a bank, but borrowers who aren't locked in will be paying more in interest no doubt.

 

[DarloRich]

https://www.politicshome.com/news/u...ank-england-governor-hints-interest-rate-rise

Can't be far off. It will help savers a little who are losing out on having their money in a bank, but borrowers who aren't locked in will be paying more in interest no doubt.

Sweet. Already getting screwed on my mortgage rate. Chances of a cheaper rate vanishing into the distance but earning an extra 0.00000000001% on my current account might soften the blow.

( I KNOW that interest rates are at an all time low and nothing like the 9bn% seen on Black Wednesday etc )

 

[yorksrob]

The narrative from our economists is that we 'need' to raise interest rates to curb inflation, as though inflation is being caused by some sort of consumer credit fueled economic boom (spotted it ? No, me neither).

The real reason inflation is rising is due to the cost of imports, which aren't remotely affected by interest rates, and the real push to raise interest rates is coming from our financial institutions, who want to cream more money off of the public.

 

[DarloRich]

The narrative from our economists is that we 'need' to raise interest rates to curb inflation, as though inflation is being caused by some sort of consumer credit fueled economic boom (spotted it ? No, me neither).

The real reason inflation is rising is due to the cost of imports, which aren't remotely affected by interest rates, and the real push to raise interest rates is coming from our financial institutions, who want to cream more money off of the public.

such cynicism.

 

[yorksrob]

Sweet. Already getting screwed on my mortgage rate. Chances of a cheaper rate vanishing into the distance but earning an extra 0.00000000001% on my current account might soften the blow.

( I KNOW that interest rates are at an all time low and nothing like the 9bn% seen on Black Wednesday etc )

You're right. These 'all time lowest' interest rates never get anywhere near the public (except if they're saving, of course).

 

[DarloRich]

You're right. These 'all time lowest' interest rates never get anywhere near the public (except if they're saving, of course).

I am getting screwed because of past finance issues caused by one unhelpful credit card company when I lost my job. I should be able to look for a more commercial rate after xmas but my current rate tracks nearly 7% above base rate. I am very lucky to have been able to find that offer.

( PS it would have been less damaging to declare myself bankrupt. all banks are barsta............)

 

[yorksrob]

I am getting screwed because of past finance issues caused by one unhelpful credit card company when I lost my job. I should be able to look for a more commercial rate after xmas but my current rate tracks nearly 7% above base rate. I am very lucky to have been able to find that offer.

( PS it would have been less damaging to declare myself bankrupt. all banks are barsta............)

Yep, you can't trust 'em.

 

[Howardh]

I have substantial savings - mainly built up to help provide for my old age if I get there. However the paltry interest rates mean I cut back on my spending to make up for the savings *loss* - thus hurting the economy. If all savers do the same the economy takes a hit.
On the other hand, those spending on the card - what happens to the economy if rates rise significantly and they can't pay back?

 

[gordonthemoron]

Credit card rates seem to bear no relation to base rates at all

 

[northwichcat]

Will a small increase (0.25 or 0.5) make much difference to savings or mortgages?

When the base rate was 5%, it was virtually impossible to find a savings account offering at least 5% interest, while some mortgage interest rates weren't that much higher than the base rate.

Now with the interest rate is 0.25% banks and building societies realise they have to offer above the base rate on savings for their accounts to be in any way attractive to savers and rates of 3 times the base rate are common. A direct consequence of that is mortgage interest rates aren't as close to 0.25% as people with mortgages would like.

 

[northwichcat]

Credit card rates seem to bear no relation to base rates at all

The thing that changes on credit cards seems to be how long introductory 0% offers last when taking out a new card, rather than the interest rate. Credit card providers don't even have to offer everyone the advertised 'typical interest rate.'

 

[RichmondCommu]

:roll:

The real reason inflation is rising is due to the cost of imports, which aren't remotely affected by interest rates, and the real push to raise interest rates is coming from our financial institutions, who want to cream more money off of the public.

One of the key reason's why Sterling is so weak (especially against the Euro) is because the base rate is so low. Start to raise interest rates and Sterling starts to perform better against the Euro and the US Dollar which means the cost of our imports starts to reduce. And given how much we import that should start to see inflation reduce.

Not only that but the BoE needs to take action to make consumers think twice about taking on more personal debt, the levels of which are far too high.

 

[Howardh]

When the base rate was 5%, it was virtually impossible to find a savings account offering at least 5% interest,

Disagree with that. Up until fairly recently I never had problems finding bank or building society savings rates higher than the base rate. Sure sometimes you had to put the money away for a year or so, but they were there. But now the best I can find is just over 1.05% which is what I get on my ISA.

 

[greatkingrat]

Disagree with that. Up until fairly recently I never had problems finding bank or building society savings rates higher than the base rate. Sure sometimes you had to put the money away for a year or so, but they were there. But now the best I can find is just over 1.05% which is what I get on my ISA.

But the point is that you are still getting over four times the official base rate.

 

[northwichcat]

Disagree with that. Up until fairly recently I never had problems finding bank or building society savings rates higher than the base rate. Sure sometimes you had to put the money away for a year or so, but they were there. But now the best I can find is just over 1.05% which is what I get on my ISA.

Yes the top rate accounts always had restrictions on them, whether it was a maximum amount you could pay in per month, an ISA which didn't allow you to transfer previous year's subscriptions to it or whether you had to lock the money away for up to 5 years or whether the rate included a short term bonus. I remembering having a Barclays ISA which I think was above the base rate when taking in account a 12 month bonus on the interest (one of the few accounts at the time offering above the base rate) but I had Britannia ISA which which had an interest rate below the base rate because the Barclays one didn't allow me to transfer previous year's subscriptions in to it.

1.05% isn't the best rate around currently. Ulster Bank do a 1.25% instant access eSavings account and you don't have to be in Northern Ireland to open one - they allow you to have between £1 and £5m in the account! Although, personally I would be weary of withdrawing ISA funds and putting them in a standard account even with the £1000 tax free interest allowance, unless you have a flexible ISA, as the Chancellor could withdraw the £1000 tax free interest allowance and reduce the annual subscription limits on ISAs.

 

[yorksrob]

:roll:

One of the key reason's why Sterling is so weak (especially against the Euro) is because the base rate is so low. Start to raise interest rates and Sterling starts to perform better against the Euro and the US Dollar which means the cost of our imports starts to reduce. And given how much we import that should start to see inflation reduce.

Not only that but the BoE needs to take action to make consumers think twice about taking on more personal debt, the levels of which are far too high.

Or either not import as much, or export more in the first place.

If personal debt is too high, there must surely be better ways of limiting it than just jacking up interest rates. Perhaps limiting as a proportion of income might be an idea. And I'm sure that current levels of personal debt would be more manageable if people were charged something nearer to the base rate in the first place.

 

[Howardh]

But the point is that you are still getting over four times the official base rate.

See what you mean but still way below inflation - whereas in the past the savings rates were both above the base rate and inflation.

Has inflation (currently 2.9%) ever been 12x higher than the base rate, and 3x higher than the best savings rates?

Of course this is because the figures are low, should base rates be 0.75% the differential would be much smaller. But at .75% I'd expect the best savings rates to be at least 3%.

 

[Bald Rick]

Fixed my mortgage this morning! Cracking rate too.

 

[radamfi]

Because of the historically poor interest rates, savers who don't want their money in the stock market have been using peer-to-peer lending which currently offer much higher rates than savings accounts. It is not risk free, but the likelihood of losing money is low as long as you have a diversified portfolio. With some providers, you can't choose who you lend to so you are diversified automatically.

(spotted it ? No, me neither).

Zopa, the peer to peer lender, have spotted a worsening in the level of consumer bad debt

https://blog.zopa.com/2017/08/22/changes-uk-consumer-credit-outlook/

Since 2010 the UK has seen continually improving consumer credit performance leading to historically low levels of bad debt.

In early 2016, we at Zopa started to see some early signs of a possible change in this trend. It now looks like the change is real:

Publicly available data suggests consumer default and insolvency levels are reaching levels which are more consistent with historic norms prior to 2010; and

The Bank of England in their credit conditions survey stated “Lenders reported that default rates on both credit cards and other unsecured lending to households were reported to have increased significantly in Q2 [of 2017].”

This means that they are reducing the amount they are lending to higher risk borrowers. Because these are the ones that pay the higher interest rates, savers will be getting a lower return.

 

[najaB]

One of the key reason's why Sterling is so weak (especially against the Euro) is because the base rate is so low. Start to raise interest rates and Sterling starts to perform better against the Euro and the US Dollar which means the cost of our imports starts to reduce. And given how much we import that should start to see inflation reduce.

At the same time making our exports much less attractive...

 

[Starmill]

At least those of us with no hope of purchasing a house any time soon don't have the stress of mortgage approvals and rate searching to put up with.

So what if that still means living with your mother or house-sharing throughout your 20s eh. :/

 

[DarloRich]

At least those of us with no hope of purchasing a house any time soon don't have the stress of mortgage approvals and rate searching to put up with.

So what if that still means living with your mother or house-sharing throughout your 20s eh. :/

It took me nearly 7 years to save up and pay off debt. it is very hard but can be done if you dedicate yourself to it. BTW having had my own house in my 20's I I was house sharing into my 30's!

 

[RichmondCommu]

At the same time making our exports much less attractive...

Well the word "much" would of course depend on the level of the interest rate rise and I don't expect to see any sharp increases. It's worth mentioning here that despite a sharp fall in Sterling last June increases in exports have only been modest, partly because so many components are imported. The obvious answer is to set up component suppliers in this country but that cannot be done overnight.

Given the disappointing economic data released today it will be interesting to see when the bank does decide to take action. Of course none of this likely to do our current account deficit much good and the threat of a hard Brexit isn't doing much for overseas investor confidence. I would still be surprised if we see a interest rate increase in 2017.

 

[yorksrob]

Because of the historically poor interest rates, savers who don't want their money in the stock market have been using peer-to-peer lending which currently offer much higher rates than savings accounts. It is not risk free, but the likelihood of losing money is low as long as you have a diversified portfolio. With some providers, you can't choose who you lend to so you are diversified automatically.



Zopa, the peer to peer lender, have spotted a worsening in the level of consumer bad debt

https://blog.zopa.com/2017/08/22/changes-uk-consumer-credit-outlook/



This means that they are reducing the amount they are lending to higher risk borrowers. Because these are the ones that pay the higher interest rates, savers will be getting a lower return.

Well the word "much" would of course depend on the level of the interest rate rise and I don't expect to see any sharp increases. It's worth mentioning here that despite a sharp fall in Sterling last June increases in exports have only been modest, partly because so many components are imported. The obvious answer is to set up component suppliers in this country but that cannot be done overnight.

Given the disappointing economic data released today it will be interesting to see when the bank does decide to take action. Of course none of this likely to do our current account deficit much good and the threat of a hard Brexit isn't doing much for overseas investor confidence. I would still be surprised if we see a interest rate increase in 2017.

Of course, disappointing economic data should more likely result in a freeze in interest rates, because consumer spending is about the only thing the economy has going for it.

If only we had a mittelstrand of businesses like Germany that haven't been flogged to multinationals, or if only we'd protected some of our larger companies from predatory takeovers like France.

Still, the market will sort everything out.

 

[RichmondCommu]

If personal debt is too high, there must surely be better ways of limiting it than just jacking up interest rates. Perhaps limiting as a proportion of income might be an idea. And I'm sure that current levels of personal debt would be more manageable if people were charged something nearer to the base rate in the first place.

The problem is there is far too much cheap credit available at the moment, car finance being one of the biggest problems. I don't think everyone is completely honest when they apply for credit and credit card companies don't help by continuing to offer more credit. The only way forward is for the UK to start to become a nation of savers and not borrowers.

 

[Dave1987]

The problem is there is far too much cheap credit available at the moment, car finance being one of the biggest problems. I don't think everyone is completely honest when they apply for credit and credit card companies don't help by continuing to offer more credit. The only way forward is for the UK to start to become a nation of savers and not borrowers.

Really?? The current economy of the UK would fall to bits if consumer spending stops. The economy is full of insecure jobs. If people stop spending there is likely to be a massive recession. The current Government proudly boasts about record numbers in employment, yet wages are stagnant. Why? Because the norm now if for insecure jobs and short term contracts. I’ve heard it banded around plenty (mostly by the right wing) that people short be thankful for having a job. So jobs are so insecure. The chickens are coming home to roost now. If consumers stop spending the economy falters. The BoE is going to be forced to raise interest rates to control inflation yet they know the economy isn’t really strong enough to cope with it.

 

[yorksrob]

The problem is there is far too much cheap credit available at the moment, car finance being one of the biggest problems. I don't think everyone is completely honest when they apply for credit and credit card companies don't help by continuing to offer more credit. The only way forward is for the UK to start to become a nation of savers and not borrowers.

If we all become a nation of savers, we've got a big chance of emulating Japan's two decades of recession. Keynes was right in that for the economy to prosper, wealth needs to be transferred around, not 'saved'.

 

[RichmondCommu]

If we all become a nation of savers, we've got a big chance of emulating Japan's two decades of recession. Keynes was right in that for the economy to prosper, wealth needs to be transferred around, not 'saved'.

Take a look at Germany. Their levels of personal debt are nothing like ours and yet they still buy consumer goods and cars etc. There is nothing wrong with saving up for consumer goods and then buying them. The population needs to become more patient.

 

[Busaholic]

I've still got some playable VHS tapes of some old Channel 4 shows dating, I guess, from mid 1990s, with ads for building societies offering 12% interest. Liquid Gold, anyone?!