Your mortgage rate is going up...it's "odds on"
- 9 Aug 06, 02:21 PM
I've just been to the Quarterly Inflation Report press conference at the Bank of England. Last week they surprised the markets and raised interest rates to 4.75%. Today they gave a detailed account of the reasons and it brings no joy to mortgage payers but, maybe some to housebuyers. The bank's boss Mervyn King never gives "steers" about what future interest rates might do. But asked whether he might breach the 3% inflation benchmark, upon which he has to "write a letter" to Gordon Brown, he said it was 50/50 that it would happen in the next six months and odds on to happen over the next two years...
This is a signal of two further interest rate rises: one as early as the start of next year, one in 2008, taking base rates then to 5.5%. This is what happens if the markets are right (the main inflation prediction in the Quarterly Report is based on market suppositions of interest rates).
However Mervyn's comment was a bit curious, because, the bank's central projection for inflation never goes beyond 2.8% roundabout February 2007. And it only tops 3% on the more extreme of the Bank's probablilty chart. And over the next two years it then falls, lessening the chance of going above 3%, not making it odds on. Mmm. Has magic realism crept into the literary genre of inflation reports? I will be exploring this tonight on the programme. Have a look at the graph on page 8 to see what I am on about.
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We have had the same arrangement here in Miami Florida.
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Excellent news. Lets hope this development provides the long overdue 'reality check' for the housing market!
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