Don’t listen to base rate Mystic Megs.
Posted on October 19th 2009
I haven’t seen or heard of Mystic Meg for years but I was reminded of her this week when I read the various predictions about where base rates would move over the coming years. One prediction I saw was that BBR would stay at 0.5% for the next five years another said rates would be at their current levels for two to three years. I gave up the notion ages ago that I could actually predict anything accurately and settled for the fact that whilst I have my opinions they are little more than that.
However, these very influential sounding Think Tanks must have a crystal ball to be able to predict rates so far out. The Credit Crunch has proven that pretty much anything can happen in the financial markets and they can happen overnight. Therefore, I take these predictions with a pinch of salt, much preferring to see how things are going and trying to guess what will be happening in three to six months time. It must be pretty difficult being a mortgage adviser right now given all the conflicting information coming out of the press. Do you advise your clients to fix or go for a tracker? I am sure the answer is to ignore all the Mystic Megs and focus on the customers circumstances.
Anyway here is my opinion on base rates. They are only going one way and that is up. Quantitative easing and historically low mortgage payments will cause inflationary pressure within two years. As soon as there is signs that the economy is out of recession expect an increase in BBR. SWAPS are predicting that Libor will be an average of 1.88% over the next two years.
*Disclaimer* My predictions are probably totally useless, are likely to go up and down and possibly sideways and therefore should not be relied upon in any way whatsoever.
