Bank of England 5 Year Rate Anniversary

Bank of England 5 Year Rate Anniversary.

Today marks the 5^th anniversary of Bank of England base rates being held at 0.5%pa.

Estimates suggest that British savers have lost in the region on £120bn in lost interest and the misery for hard pressed savers will continue for the time being.

The converse to this is that mortgage payers have done well if they have been on tracker rates that they locked into 5 years ago.

Most of the mortgage market has not really benefitted from these low rates as most banking groups has been tasked with improving their capital position, so despite central borrowing rates being low, the market differential has increased meaning that consumers paying upwards of 3,4 and 5% on mortgages, so many have not seen huge savings.

What we expect of interest rates?

Already, we have seen the Bank of England change its message:  Interest rates were linked to inflation figures, then the move was made to link with unemployment and now they have dropped this, citing a range a key economic indicators to be used before rates will increase.

We have suggested many times that there is a conflict of interest as Government, and indeed the Bank of England that now regulates banks, need toxic debt i.e. negative equity and large debt mortgage exposure to be reduced, how are they doing this?  By encouraging house price growth.

We suspect that excuses that the economy is not stable yet will be used to keep interest rates low.  This in turn will lead to an ever increasing house price bubble.  We also have a general election looming in May 2015.  Interest rates, we suggest, will remain at their current level until at least after the next general election despite there supposedly being no Government control and the Bank of England being independent.