A poll done by the BBC has shown that the many leading economists believe interest rates will not rise until next year.
32 economists took part in the poll, 26 said rates would not rise until 2012 and three even said there would be no rate increase until 2013.
Whilst it is the Bank of England’s nine strong Monetary Policy Committee (MPC) which sets interest rates they canvas opinion from 35 leading economists. It is the views of these economists or the organisation they represent which the BBC sought for their poll, the results of which can be seen in the table to the right.
Bank of England base rate is currently at an all time low of 0.5%, and although no one is predicting a rate rise when the monthly announcement comes later today, more than 50% of the economists polled believe that rates will rise to at least 1.5% by the end of 2012.
The table to the left shows where the economists who took part in the poll believe Bank of England base rate will be at the end of 2012.
Weakness in the UK and indeed global economy seem to be persuading the Bank’s MPC that now is not the time to increase rates, last month they voted seven to two in favour of leaving rates unchanged.
In many ways savers are caught in a ‘perfect storm’. Low interest rates and relatively high inflation make it hard to find a ‘real return’ Furthermore increased stock market volatility is putting many savers off taking additional risk with their savings in an effort to find that elusive ‘real return’.
Many savers are also part of an older generation also hit by falling gilt rates and therefore lower Annuity rates. A simple Annuity rates comparison shows just how much Annuity rates have fallen over recent months, indeed further reductions were announced this week by leading Annuity providers.
Providing the continuing tight lending criteria are met by borrowers the environment of low interest rates though are generally good news for those people wanting to buy a property.
The cost of fixed rate mortgages has come down in recent months as the expectation of an imminent rate rise has receded. According to Moneyfacts the average five year fixed rate mortgage now has an interest rate of 5.02%, the lowest level since the start of the ‘credit crunch’.