The only certainty in today's market is that interest rates are going to rise at some point. The big question is "when?" There are a couple of pointers that can help us to make predictions but not with any real accuracy.
Inflation and unemployment figures have targets that give us clues as to how the economy is performing and when the Bank of England may decide to increase what we pay on our mortgages. If inflation remains below 2% then there is less pressure to control spending by increasing the Base Rate. The good news is that this was 1.6% for March 2014. Unemployment must be below 7% before the Bank of England will consider raising rates. We are at 6.9% so this condition has been met. However, this does not mean that a rise is imminent.
House prices continue to go up and the housing market does seem bouyant at present in our part of the country. Unless these increases are seen as a threat to the economy then raising interest rates to dampen the market and slow things down - especially whilst inflation is below target - does seem unlikely.
So bearing in mind these clues, what are the predictions?
The Bank of England sees a rise happening in the middle of 2015. They feel a settled normal rate of between 2% and 3% will be the standard going forward (rather than 5% in the pre-recession years).
A survey of the City saw an average forecast for the Base Rate to be 1.25% at the end of 2015. This is a 0.75% increase. The higher predictions were 1.75%.
The Money Markets are forecasting a rise in early 2015 to 0.75%
IHS Global Insights believe the first rise will be in the 2nd quarter of 2015 and will see the Base Rate at 1% by the end of the year. Increasing to 2% by the end of 2016.
So there seems to be a general concensus that a rise will happen in the first half of 2015 but that any increase will be slow and steady.
Only time will tell if this is right - or a crystal ball would be useful!
Inflation and unemployment figures have targets that give us clues as to how the economy is performing and when the Bank of England may decide to increase what we pay on our mortgages. If inflation remains below 2% then there is less pressure to control spending by increasing the Base Rate. The good news is that this was 1.6% for March 2014. Unemployment must be below 7% before the Bank of England will consider raising rates. We are at 6.9% so this condition has been met. However, this does not mean that a rise is imminent.
House prices continue to go up and the housing market does seem bouyant at present in our part of the country. Unless these increases are seen as a threat to the economy then raising interest rates to dampen the market and slow things down - especially whilst inflation is below target - does seem unlikely.
So bearing in mind these clues, what are the predictions?
The Bank of England sees a rise happening in the middle of 2015. They feel a settled normal rate of between 2% and 3% will be the standard going forward (rather than 5% in the pre-recession years).
A survey of the City saw an average forecast for the Base Rate to be 1.25% at the end of 2015. This is a 0.75% increase. The higher predictions were 1.75%.
The Money Markets are forecasting a rise in early 2015 to 0.75%
IHS Global Insights believe the first rise will be in the 2nd quarter of 2015 and will see the Base Rate at 1% by the end of the year. Increasing to 2% by the end of 2016.
So there seems to be a general concensus that a rise will happen in the first half of 2015 but that any increase will be slow and steady.
Only time will tell if this is right - or a crystal ball would be useful!
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