[Finance] 'Possible' BofE Base Interest Rate Rise this Thursday .....

[Westdene Seagull]

So, yesterday morning I get an email from my mortgage lender saying that the base interest rate had just been increased. Few hours later an apology email saying the email was a error and that the BofE doesn't meet until Thursday this week.

I'm a massive cynic generally and to me this looks like the decision is made in advance of the BofE meeting and communicated to mortgage lenders ahead of the meeting supposedly to make the decision. I know it doesn't make much difference as if the rate goes up it goes up and millions pay more. Am I being too cynical ? Was it a genuine mistake ? I guess we find out tomorrow ! If true it's nice of the BofE to add to the cost of living crisis.

 

[jakarta]

So, yesterday morning I get an email from my mortgage lender saying that the base interest rate had just been increased. Few hours later an apology email saying the email was a error and that the BofE doesn't meet until Thursday this week.

I'm a massive cynic generally and to me this looks like the decision is made in advance of the BofE meeting and communicated to mortgage lenders ahead of the meeting supposedly to make the decision. I know it doesn't make much difference as if the rate goes up it goes up and millions pay more. Am I being too cynical ? Was it a genuine mistake ? I guess we find out tomorrow ! If true it's nice of the BofE to add to the cost of living crisis.

Interest Rates are incredibly low and puffing them up by even 1 per cent will make little difference to peoples lives, unless they have hugely overexstended themselves in terms of property etc...

 

[Mancgull]

The mortgage lender won't know. I expect it's their letters being prepared in case there is an increase which is quite possible. Shameful really that they are so 'quick off the mark' to increase the rates when a decrease in the BoE rate would probably take them a while to pass onto their customers.
For what it's worth I wouldn't be surprised if rates were increased again by 0.25%.

 

[dazzer6666]

So, yesterday morning I get an email from my mortgage lender saying that the base interest rate had just been increased. Few hours later an apology email saying the email was a error and that the BofE doesn't meet until Thursday this week.

I'm a massive cynic generally and to me this looks like the decision is made in advance of the BofE meeting and communicated to mortgage lenders ahead of the meeting supposedly to make the decision. I know it doesn't make much difference as if the rate goes up it goes up and millions pay more. Am I being too cynical ? Was it a genuine mistake ? I guess we find out tomorrow ! If true it's nice of the BofE to add to the cost of living crisis.

It’ll be a mistake but FIs will be prepared for it as virtually every forecaster is expecting it, so everything will be ready to implement and communicate the increase. Someone has hit the ‘send’ button too early.

Central banks (it’s not just the BoE, it’s global) don’t have a lot of choice at the moment…..raising interest rates is the biggest weapon they have to cool down inflation.

 

[bhafc99]

The mortgage lender won't know. I expect it's their letters being prepared in case there is an increase which is quite possible. Shameful really that they are so 'quick off the mark' to increase the rates when a decrease in the BoE rate would probably take them a while to pass onto their customers.
For what it's worth I wouldn't be surprised if rates were increased again by 0.25%.

Absolutely. Institutions literally fall over themselves with eagerness – as this email shows – to pass increases onto debtors. Meanwhile there's a deafening silence when it comes to reciprocating things for investors and savers.

 

[usernamed]

So, yesterday morning I get an email from my mortgage lender saying that the base interest rate had just been increased. Few hours later an apology email saying the email was a error and that the BofE doesn't meet until Thursday this week.

I'm a massive cynic generally and to me this looks like the decision is made in advance of the BofE meeting and communicated to mortgage lenders ahead of the meeting supposedly to make the decision. I know it doesn't make much difference as if the rate goes up it goes up and millions pay more. Am I being too cynical ? Was it a genuine mistake ? I guess we find out tomorrow ! If true it's nice of the BofE to add to the cost of living crisis.

I think it’s an open secret that the rate will rise, and your mortgage lender had probably prepped the communication in advance. It’s entirely possible that the decision is taken in advance of the meeting (it will certainly have been discussed before the meeting) and key stakeholders involved in that discussion.

Inflation is proving persistent, and while I can understand that from an economic perspective wage rises can feed an inflationary cycle, there’s a large swathe of the 29.6 million employed who are increasingly struggling. Something has to give.

It’s looking increasingly like this round of inflation isn’t going to go away soon, but pressure is being put on the bank to raise rates slowly. I can see the rest of this year and most of the next being spent in 0.25% rate increases, in the hope that people won’t notice in the same way that a boiling frog doesn’t notice the water getting warmer.

If this inflationary period is prolonged, wages are going to have to rise as well, which may well prolong the cycle further.

 

[Deleted member 37369]

Absolutely. Institutions literally fall over themselves with eagerness – as this email shows – to pass increases onto debtors. Meanwhile there's a deafening silence when it comes to reciprocating things for investors and savers.

I have an Instant Saver account with ATOM bank. They’ve increased the rate 4 times this year. Small increments each time … but at least the rate is improving.

 

[Westdene Seagull]

I think it’s an open secret that the rate will rise, and your mortgage lender had probably prepped the communication in advance. It’s entirely possible that the decision is taken in advance of the meeting (it will certainly have been discussed before the meeting) and key stakeholders involved in that discussion.

Inflation is proving persistent, and while I can understand that from an economic perspective wage rises can feed an inflationary cycle, there’s a large swathe of the 29.6 million employed who are increasingly struggling. Something has to give.

It’s looking increasingly like this round of inflation isn’t going to go away soon, but pressure is being put on the bank to raise rates slowly. I can see the rest of this year and most of the next being spent in 0.25% rate increases, in the hope that people won’t notice in the same way that a boiling frog doesn’t notice the water getting warmer.

If this inflationary period is prolonged, wages are going to have to rise as well, which may well prolong the cycle further.

Thank you - nice comprehensive answer. So apologies, additional questions. Thirty Five years ago I scraped a pass in my A Level Economics so what I'm about to say might be completely wrong. I thought the purpose of interest rate increases was to encourage people to save rather than spend. Thus prices would go down to encourage people to buy. I know, very basic description ! Price rises this time ( i.e. inflation ) is mainly due to anything governments or central banks can control - increases in fuel, basics using sunflower oil, energy etc - because of lack of supply ? Partly but not completely down to the war ? How does forcing many people to pay more for their mortgage etc mean they will save rather than spend when ALL their costs have gone up ? Surely most people will have less to be able to put into their savings account.

 

[nicko31]

I'd hold rates, economy too fragile, we're probably already in recession. Plus government up to their eyeballs in debt...

 

[dazzer6666]

Thank you - nice comprehensive answer. So apologies, additional questions. Thirty Five years ago I scraped a pass in my A Level Economics so what I'm about to say might be completely wrong. I thought the purpose of interest rate increases was to encourage people to save rather than spend. Thus prices would go down to encourage people to buy. I know, very basic description ! Price rises this time ( i.e. inflation ) is mainly due to anything governments or central banks can control - increases in fuel, basics using sunflower oil, energy etc - because of lack of supply ? Partly but not completely down to the war ? How does forcing many people to pay more for their mortgage etc mean they will save rather than spend when ALL their costs have gone up ? Surely most people will have less to be able to put into their savings account.

Simple answer is it intends to dampen demand (it’s not primarily to encourage saving)……but as you intimate the current inflationary cycle isn’t so much demand-led.

 

[Bold Seagull]

Interest Rates are incredibly low and puffing them up by even 1 per cent will make little difference to peoples lives, unless they have hugely overexstended themselves in terms of property etc...

Interest rates have been incredibly low for nearly 15 years. People's lives have grown and developed around these rates rightly or wrongly. Throw big changes into the mix since the pandemic in people's circumstances like redundancies, loss of earnings, hikes in energy, fuel, cost of living generally, then you have a lot more going on than just writing it off to 'over extending' themselves. Perhaps one or two pressures on finances should be able to be accommodated by prudent planning, but this is pressure from all angles.

Given the huge rises in property values over 2 decades and how difficult it is for young people to get on the ladder, it must be great sat up in an ivory tower blaming everyone in difficulty for over extending themselves.

 

[Blue Valkyrie]

Is a "bae interest rate rise" a cute one

 

[Harry Wilson's tackle]

Thank you - nice comprehensive answer. So apologies, additional questions. Thirty Five years ago I scraped a pass in my A Level Economics so what I'm about to say might be completely wrong. I thought the purpose of interest rate increases was to encourage people to save rather than spend. Thus prices would go down to encourage people to buy. I know, very basic description ! Price rises this time ( i.e. inflation ) is mainly due to anything governments or central banks can control - increases in fuel, basics using sunflower oil, energy etc - because of lack of supply ? Partly but not completely down to the war ? How does forcing many people to pay more for their mortgage etc mean they will save rather than spend when ALL their costs have gone up ? Surely most people will have less to be able to put into their savings account.

The official line is that rates are set to maintain 'price stability'. Until Blair separated the BoE from the grip of the chancellor, BoE rates were increasingly being set in order to garner votes*. However, the BoE still operates a 'monetary policy' to accomodate the inflation target set by the government.

*Culminating in the Major cock-up:

 

[BNthree]

Interest Rates are incredibly low and puffing them up by even 1 per cent will make little difference to peoples lives, unless they have hugely overexstended themselves in terms of property etc...

There are loads of people that have done exactly that as a way of getting on the property ladder.

 

[Iggle Piggle]

For those ITK financially, isn't the government debt through the roof following covid and furlough, giving money to their mates for dodgy contracts and the T&T hole plus many more i am sure?

Point being, won't prolonged Interest rate rises mean this debt become larger and unsustainable. It certainly isn't in the Governments interests for Interest rates to rise from a debt perspective. Equally, they don't want rates to stay low from an inflationary perspective as this is the only weapon against it. In summary, we are expected to take a bite out of shit sandwich either way and there isn't much we can do about it and the storm will hit in one form or another.

 

[beorhthelm]

Thank you - nice comprehensive answer. So apologies, additional questions. Thirty Five years ago I scraped a pass in my A Level Economics so what I'm about to say might be completely wrong. I thought the purpose of interest rate increases was to encourage people to save rather than spend. Thus prices would go down to encourage people to buy. I know, very basic description ! Price rises this time ( i.e. inflation ) is mainly due to anything governments or central banks can control - increases in fuel, basics using sunflower oil, energy etc - because of lack of supply ? Partly but not completely down to the war ? How does forcing many people to pay more for their mortgage etc mean they will save rather than spend when ALL their costs have gone up ? Surely most people will have less to be able to put into their savings account.

we're told its about saving, really these days its more about borrowing, yield curves and other complexities. you're right there's little that interest rates caa appear to do about prices rising from supply chain shortages and oil, but they have to be seen to do something. heading for recession with stagflation what ever banks do, because they can fix the suppy issues in the same time frame as the numbers rise.

 

[ForestRowSeagull]

They're walking a tightrope between raising rates too far/quickly and tipping us into a recession and not touching them and letting inflation run away from us (even more!). Trouble is they're behind the curve on the inflation story, and additionally the majority of the inflationary pressures we're experiencing are supply side (chip shortage, lockdowns in china, elevated fuel prices from the war etc) and monetary policy in the form of rate rises doesn't really touch the sides here. It's certainly a pretty worrying picture at the moment

 

[jakarta]

Interest rates have been incredibly low for nearly 15 years. People's lives have grown and developed around these rates rightly or wrongly. Throw big changes into the mix since the pandemic in people's circumstances like redundancies, loss of earnings, hikes in energy, fuel, cost of living generally, then you have a lot more going on than just writing it off to 'over extending' themselves. Perhaps one or two pressures on finances should be able to be accommodated by prudent planning, but this is pressure from all angles.

Given the huge rises in property values over 2 decades and how difficult it is for young people to get on the ladder, it must be great sat up in an ivory tower blaming everyone in difficulty for over extending themselves.

When Mrs Jakarta and I sat down over 20 years ago and had a good hard look at our in goings and outgoings since we were buying a house in RH20. We were offered a £500K Mortgage but we took one one of £250K and bought a smaller property.

I went back offshore & worked my butt off to pay it down. 1990's interest rates would make youngsters eyes water.

So no I don't have too much sympathy for the entitled generation that can't cope with 1-2% bank rates...

 

[Dick Swiveller]

When Mrs Jakarta and I sat down over 20 years ago and had a good hard look at our in goings and outgoings since we were buying a house in RH20. We were offered a £500K Mortgage but we took one one of £250K and bought a smaller property.

I went back offshore & worked my butt off to pay it down. 1990's interest rates would make youngsters eyes water.

So no I don't have too much sympathy for the entitled generation that can't cope with 1-2% bank rates...

Yep - and you had the pandemic, the unprecedented rise in energy prices, the increase in NI ...... oh, wait.

 

[Da Man Clay]

When Mrs Jakarta and I sat down over 20 years ago and had a good hard look at our in goings and outgoings since we were buying a house in RH20. We were offered a £500K Mortgage but we took one one of £250K and bought a smaller property.

I went back offshore & worked my butt off to pay it down. 1990's interest rates would make youngsters eyes water.

So no I don't have too much sympathy for the entitled generation that can't cope with 1-2% bank rates...

As long as you’re alright chap. Cost of living has gone up hugely in the last year. Another £50 a month will make a difference to some.