A decade of higher interest rates.

If you listen to what he said, all he said was they will probably be higher rather than lower. NO real surprise there. He didnt say how much. But not such a good news story as the scare that the tablods cared to report? They truly are scum.

There is little chance of them going down any further - inflation is above the government target and credit debt is spiralling out of control. Something's got to put a brake on it, and the only two things available are taxes and interest rates. The government won't do the former with a general election in the offing with less than 2 years to go so the only thing left to stop people spending money like there's no tomorrow is to hike interest rates. Interest rate hikes in the short to medium term don't hurt consumers and home owners much so they it should be enough to take us thru' to after the next election. After the election, interest rates hikes will start to pinch and then before we know it, millions of home owners will be wanting to sell their houses to ease the burden of their mortgages, increased substantially to consolidate all their other credit card, loan and other debt. Over night there will be a surge of houses being sold and the housing market will collapse. In comes negative equity and hey presto, thousands of properties start being repossessed. The second crunch will come when New Labour, who've just secured a third historic victory as government arrogantly increase taxes to shore up an ever burgeoning public sector. This in turn will push inflation higher again, leading the Bank of England to increase interest rates. It is now 2007 and the economy is now in nose dive.

and people were saying that a year ago and more. There was even a professor of economics who in an article in the ?Times? advised people to sell their houses (though it turned out he hadn't sold his!).

Besides which, why would the government (_any_ government) wish to ramp up interest rates to gte this scenario,and to what end? Its not exactly going to do their chnaces of winninga subsequent election any good, is it? Especially given the longer term political push to get into the Euro, which means going in at a low exchange rate which means low interest rates.

But I'm so sure that you believe what you've written that you've sold your house and are living in rented, right?

I hear this all the time yet i never understand it. Why does going into the Euro mean we will always have low interest rates? And also what is considered a low and what is consider a high interest rate?

"Jane Tweedynn" wrote

I don't think it could possibly mean that interest rates would *always* be low.

However AIUI, for the transition to work properly, I believe you need some kind of "convergence" from Sterling into Euro. For this to work better, it will be best to have British interest rates close to "Euro" rates when Britain starts to use the Euro. As European rates are generally a little lower than British rates *currently*, the British rates would need to fall slightly in order to enable a smooth transition from Sterling to Euro.

"Jane Tweedynn" wrote

I guess all things are relative! ;-)

This has probably got a lot to do with the fact that there is a much longer term view from business when considering ROI and as such it is easier to get equity investment (as the punters are not looking for their money back plus 100% in two years) so there is less demand for borrowing, which in turn means that rates are lower. ISTM that this short-termism in the UK isn't going to change and thus rates will always be higher.

Tim

the British rates would need to fall

Well, except that they're about to change the target to HICP where the target will probably be above the current level, and credit card interest rates are almost totally disconnected from base rates.

Why wouldn't I borrow at lower rate from a European bank if the currency risk was eliminated?

The UK mortgage market is probably more competitive, so the rates for consumers might not be that different, though in the long-term Euro entry would probably mean lower inflation and therefore interests rates might stay low for longer.

Thom