zoog

Can anyone with an informed opinion tell me what the consensus is for interest rates over the next few years please?

The bottom line is: are we at serious risk of rises to 8-10% or even more like the early 90's, so hammering us on mortgage repayments?

Thanks in advance,


Adrian

back marker

Consensus is for a small rise (using UK gilt market as a guide) to around 4.2% in the 5-10yr timeframe. This fits with the kind of rates you can get on 5-10yr fixed mortgages.

For historic rates try:
http://www.bankofengland.co.uk/mfsd/rates/baserates.xls
(Quite scarey - theres a chart on page 2 of just how high rates have gone in the past!)

For gilt yields try:
http://specials.ft.com/ukgilts/UKG250403.pdf

On gilts (apologies if this is sucking-eggs time but if not it will help interpret the table) - the most important columns for you are the first (type of gilt including timeframe - you're interested in gilts with an 08 up to 13 for a 5-10 yr view) and the final column 'red yield' which tells you the effective interest rate ON AVERAGE over that timeframe. It isn't a forecast of the end interest rate.

Gilt prices are only the market's estimate of what interest rates might do - like most financial markets they are not perfect by any means, and can be (catastrophically!) wrong sometimes. One large US hedge fund got it wrong and destroyed enough money to buy Subaru's entire output (including WRC cars) for the next hundred years.

Hope this helps and isn't complete gibberish.

zoog

thanks "back marker" that's the sort of thing i was after.

scoobynutta555

Interest rate levels are a tricky thing to predict. There is no hard and fast rule that says what they are going to be. In the shorter term is possible to predict with a certain % error of accuracy, middle to long term its pratically impossible.

Circumstances locally and globally are constantly changing, the best brains in the financial market would not be able to predict what rates will be in the future.

Given that, id say that they are going to remain relatively stable at the moment possibly nosing downwards. Now that the war is off and oil will be flowing, oil prices should come down.

Eddie George and the crew have been asked by the government to try and keep inflation at a low level (equal or less than 2.5%?). They seem to be using interest rates to try and control this.

The main 2 pressures on inflation at the moment are house prices and oil prices. Both of which recently have seen their peak and are possibly shifting downwards. Not forgetting recent tax rises, which also pinch spending.

On the whole in the shorter term i would say that interest rates are staying the same or going down a point. All IMHO of course

[Edited by scoobynutta555 - 4/26/2003 5:31:41 PM]