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We’ve hit peak interest rates - senior analyst speaks out

Markets are saying the UK - and for that matter the US and mainland Europe - have all hit peak interest rates.

That’s the view of the senior investment analyst at business consultancy Hargreaves Lansdown, who says the US Federal Reserve and Bank of England held rates again at the start of November and that both the UK and US reported lower-than-expected inflation levels in the past two weeks.

“We appear to have hit peak rates. At least, that’s what markets are telling us” claims Hal Cook.

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“The US 10-year Treasury yield peaked at around five per cent in mid-October and has been on a bumpy-but-downward trajectory ever since. It was 4.48 per cent on Friday. This is a big shift in sentiment. The 10-year UK gilt yield is also falling, having been at around 4.7 per cent in October, it’s now at 4.28 per cent” he continues.

“Both the Fed and the Bank of England held interest rates again at the start of November. Inflation prints in both countries have come in lower than expected too, and not just at the overall level, with core and services inflation both falling in October. Add in the announcement from the US Treasury that their future bond auctions will see lower levels of government bond issuance than was expected and you have a happy bond market.

“At the same time, we have seen stock markets go on a bit of a tear in November. All of the main developed market regions have posted meaningful gains in share prices this month. Even China has posted positive returns, having fallen dramatically over the three months to end of October. The FTSE 250 in particular is rallying hard, up 9.4 per cent in the past month.”

But he says caution is the byword, and warns that markets may just be getting ahead of themselves. 

He concludes: “It wouldn’t take much for this ‘everything rally’ to reverse: higher than expected unemployment or sticky inflation could knock things for example. It would not be a surprise for there to be some data point over the next month or two which sends markets back down again and yields tick up. The consensus view, however, is that we’ve hit peak rates, and I broadly agree - even if there may be some more volatility from here.”

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    I certainly hope they've peaked. The current rates are horrific on current property values.
    It's all well and good people talking about historic average rates but historically property values were much lower. Ultimately the only thing that really matters is the monthly mortgage payment. Right now mortgage rates and property values are miles out of sync with household incomes.

    I'm just about to come off a 3.55% fix this week and have to choose whether to let it go onto its SVR at 8.75% for a few weeks or take a 5 year fix at 6.69% with no fee or pay a 2% fee and take a 2 year discount tracker at 6.12%. Either way it's hideous and bakes in rent increases over the next few years. Remortgaging to another lender looks more attractive now than it did a few weeks ago but the fees and timescale it would take wipe out any potential savings.

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    Totally agree, its a nightmare. We knew rates would have to start going up at some point, but it was always said this would be gradual so as not to crash the economy. The only reason it hasn't is because most people were on fixed rate deals, but as those are coming to an end it's really painful. Those who took a 5 year fix (mainly home owners) have been protected so far, but most BTL deals were 2 years. I don't believe its had any effect on inflation, as that problem was caused by other factors including brexit and war in Ukraine.

     
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    Worried. I have always got 5 year BTL mortgages for both personal and corporation BTL. Corporation rates at a higher rates with some lenders. I managed to mortgage a few of my properties for 5 years last year before the rate rises and managed to get them for less than 3% rates with £2k arrangement fees. One of the smaller mortgages, without the fees at 3.1%. One other, fixed rates will end in about 15 months time and may fix it for 2 or 3 or 5 years out of choice, but I know that lender and others will have a 5 year fix available. I do not like to pay arrangement fees just for 2 years term, as it is the same for both 2 and 5 year terms.

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