Interest rate predictions

[Mick Mac]

womanofdulwich Wrote:

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> Wow-you all sound soo wise- so if you are lucky

> enough to have a low mortgage that is at 1.5%

> above base for another 15 years on a small amount

> -should you pay it off asap or stick it somewhere

> else? ie unit trust s etc and wait until interest

> rates go up on your mortgage and then pay it off?

1.5 above base is likely to remain cheap for some time. Id keep it and invest in a balance of worldwide unit trusts as you suggest. There may be good growth opportunities over a 5 year period. You may not be able to get 1.5 above base again so i would not pay it off.

[????]

Pay off...

...unless you've got a guaranteed post tax return of above 1% above the rate you can borrow in which case borrow as much as you can ;-)

OR, if you like a risk and the upside is say 10%+, then have a punt on that

[Mick Mac]

Never pay off cheap loans in my opinion Quids. They free up money to invest elsewhere. You don't need to look for a guaranteed return, guaranteed returns usually factor in a cut to a third party.

In the current climate I'd personally like to have more money rather than less money available to invest.

[macroban]

!!!!

I almost agree with ????.

I'd add three supplementaries:

[1] Do you have a target retirement date?

[2] Do you want to be debt-free by that date?

[3] How risk adverse are you to not achieving [1] and [2]?

And now back on topic...

For ????:

You've opened the can of worms of interest rate and inflation differentials - a subject for another thread.

Based on your quoted 4% differential do you think that the current base rate would be 3.25% or 6.5% without the current aggresive market manipulation?

[SteveT]

womanofdulwich wrote :- Come on you gurus - share your knowledge with me please.

There aint no gurus in ED or government, and it seems to me that it is run not by any grand strategic plan but on a system of crisis feed back.

Soooooo your guesses are as valid as any other non-guru.

[Mick Mac]

I don't think WOD took a blind bit of notice of anything said here Steve - but its good fun batting around the issue. Of course noone knows.

[R&A]

i think i disagree with most comments on this thread, but then again i only skim read them

I thought debt was GOOD in a high inflationary environment. Your debt effectively diminishes over time as the asset (house) increases in value. But you only benefit if you fix the rate you're paying over the long term.

it's all guess work but personally i'm assuming low IR for 12+ months

So in approx 6 months time i'm going to fix my debt for 10 years, hopefully at less than 6%

Any debt less than 6% is a fair price in my opinion, especially in light of what's been going on.

i also have a variable debt loan which i'm paying down as quickly as possible but as someone said 'cheap debt is great - grab it while you can'

anyway - i'm no expert but this plan makes sense to me.

[Mick Mac]

I think R&A you might be in agreement with me. Cheap money is always good provided you do something constructive with it.

Quids is more conservative though.

[womanofdulwich]

Hey Mick mac, of course I take note-it is a revelation to know some forumites take such an interest in this sort of thing. I had no idea there was such doom and gloom out there. I resolve to pay off some mortgage when my endowment comes in.

;-)

[Mick Mac]

Ok I'll rephrase that WOD - you take no notice of what I say.

Nothing new there though, I'm used to it, happens at home all the time.

[womanofdulwich]

I will in the meantime try and put some money into unit trusts- once I have found out which ones to invest in, what do yo suggest MM?

[womanofdulwich]

I will of course invest the rest in unit trusts - what do you suggest MM?

[The Chair]

The Chair suggests you start a separate thread for financial advice.

[????]

macroban Wrote:

-------------------------------------------------------

> > !!!!

>

> I almost agree with ????.

>

> I'd add three supplementaries:

>

> [1] Do you have a target retirement date?

>

> [2] Do you want to be debt-free by that date?

>

> [3] How risk adverse are you to not achieving [1]

> and [2]?

>

>

> And now back on topic...

>

> For ????:

>

> You've opened the can of worms of interest rate

> and inflation differentials - a subject for

> another thread.

>

> Based on your quoted 4% differential do you think

> that the current base rate would be 3.25% or 6.5%

> without the current aggresive market manipulation?

Apologies for tardy response...but it's all relative, the 4% differential isn't comparable. 4% differential in a world of 12% inflation is minor (a 1/3) in a world of 2% inflation that equates to a base rate on 2.7ish%

[sophiesofa]

bbc rate predictions article

interesting article.

[SteveT]

If that article is correct one would be wise to dump stirling and buy euro's.

[HAL9000]

You may have missed the boat slightly...

GBP/USD from 1.70 in mid-Sep to 1.571 today.

EUR/GBP from 0.84 in mid-Aug to 0.941 today.

EUR/USD from 1.25 on 4 March to 1.486 today.

[matthew123]

HAL9000 Wrote:

-------------------------------------------------------

> You may have missed the boat slightly...

>

> GBP/USD from 1.70 in mid-Sep to 1.571 today.

> EUR/GBP from 0.84 in mid-Aug to 0.941 today.

> EUR/USD from 1.25 on 4 March to 1.486 today.

Oh I negotiated a EUR/GBP rate of 0.8 last Thursday ;-)

There'll come a point where US or Euro zone rates will be increased and I don't see how the UK cannot follow suit - to do otherwise will cripple the Pound and if so the best place to invest would be in London property as those exchange rates will make London prices a lot more attractive to the foreign investor.

[herbie8]

haven't reead any comments, but going from the title i think i kow the path.

interest rates will hold below 1% for at least the next 4 years, not quite as long as the japanese stagnation but a similar paradigm depending on other factors in US and obviously the new and 'improved' EU that is en route. it is low interest rates in 2003 that have set up this whole credit experience late in the naughties.

[5imon]

With today's announcement that y.o.y CPI exceeded analyst estimates, I would disagree with the statement that rates will stay <1% for the next 4 years. Our economy has had a massive injection of liquidity via quantitative easing. The reason inflation has not increased already is largely due to continuing problems in the credit markets (for eg the acvailablility of credit for homebuyers) and subdued consumer confidence.

I would agree that there's little wiggle room for the BOE until at least mid 2010, but I'm expecting rate hikes in the 3rd quarter next year. I believe it will take this long for credit to become unstuck and for the mortgage-market landgrab to establish itself amongst the banks

(..and before i'm accused of talking my book, I've just got a new mortgage..discount tracker..so I'm actually short Cpi)

[herbie8]

i would ask that you wait for public sector unemplyment to be added to present unemployment and a further massive stock market crash....just quietly. such liquidity into our economy thrown at banks and the stock market is throwing borrowed after bad, let the market correct itself whether it takes ten years or more.....a generation need to be re-taught the value of saving and living within means or the future will be alot worse in comparative real terms. frugility and keynes - bankers should lend with a gay and light heart to 15% of their coffers......this kind of attitude is redundant with many.

retailers are presently advertising up to 70% off when they have had poor trading year, on the run up to xmas consumers will buy stuff, the 3rd week in nov all the big retailers are advertising sales!!! reason, no1 is spending whats required or forecasted!

the housing market could never make such a hasty return and banks positions are still very uneasy, BoE could not take the risk of moving IRs and affect consumer spending further by taking more disposable income away from a fragile market...a fragile market expected to pay higher taxes within this medium term further diminishing disposables.......mid 2013 after the olympics things may exceed 1% in my opinion.

[Mick Mac]

I'm in the mood for bumping old threads.

Because, now we are a couple of years since the beginning of the end for the economy, its interesting to look back at peoples predictions from almost 2 years ago....

Who was on the money? and who was way off?

[????]

well they've only got to go up another 5.5 %age points in 15 monthd and I'll be sopot on :))

[DJKillaQueen]

3.5% is the prediction but you are not far off.........