When will interest rates rise? One-minute briefing: As our chart shows, predictions have shifted in the past three months. We explain what it means for mortgages and savings A rise in interest rates in 2014 is looking unlikely. Thats the conclusion of analysts and the market following the Bank of Englands quarterly Inflation Report. Read the coverage in the Bank of England channel for in-depth coverage of the Banks latest views on the economy, which are so crucial to the anticipated timing of base rate rises. Below we cover the main points and explain what it all means for savings and mortgages. What has happened to predictions? Once again, it feels like another false dawn on rising interest rates. At the last quarterly report in May it was widely predicted that the Bank of England would warn of looming rate rises. It didnt. That said, the current prediction of early 2015 is markedly different from the beginning months of the year when markets predicted late summer 2015 for the first rise. Of course it should also be noted that economists and markets have a woeful record of predicting rates. It was only several years into the crisis that both stopped predictings rate rises were around the corner. So no rush to fix that mortgage? Possibly, but its never wise to try to call future rates accurately (as economists will tell you). The cost of fixed rates remains historically low compared with trackers, especially on longer-term loans, making it a simple choice: protection from rate rises at little extra premium. Industry figures show more than 90pc of those buying and remortgaging are buying fixed rates. See the latest best buy mortgages here and try the interest rate rise calculator here. And savings? Thats a more difficult decision. The best variable-rate savings account (non-Isa) pays 1.5pc (offered by Kent Reliance) and the best two-year fixed savings rate is 2.35pc (from Aldermore). Either way its a gamble, but 2.4pc may feel like a good rate if the Bank Rate still hasnt risen by the middle of next year. Its also worth noting that when money markets price in a slightly better chance of a rate rise then it is usually passed on with higher rates on fixed-rate savings and mortgages. This has not been the case. The best two year fixed rate of 2.35pc is lower than the 2.4pc being offered three months ago by Close Brothers, for example. dhhmortgages.co.uk/
Posted on: Mon, 18 Aug 2014 11:48:39 +0000
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