Today’s newspapers are full of headlines about hikes in interest rates, but is this likely? And should you fix your mortgage now?

3 min Read Published: 27 May 2010

I amaze myself at times with my dedication to the cause as yesterday afternoon I found myself tweeting, on the OECD announcement that UK interest rates must rise, with one hand while hanging on for dear life with the other as my packed commuter train rattled out of Cannon Street station.

So now that I am calmly sitting at my desk this morning, rather than swinging from a train hand rail like a chimp, what do I make of the story? And more importantly will the Money to the Masses ‘interest rate clock’ be wound forward?

To sum up, the world’s leading think-tank, the Organisation for Economic Co-operation and Development (OECD), said rates would have to start rising this year from the historically low level of 0.5pc because inflation expectations were creeping up. They then went on to say that the projected increase of core inflation to the Bank of England target warrants rates to be increased to 3.5pc by the end of 2011.

Now today’s papers are running with this story as it makes good headlines. But in short, the OECD are saying that if inflation does not drop later in the year as predicted by Mervyn King, at the Bank of England, then rates will need to go up. So that’s nothing we didn’t really know. The OECD report went on to say the Government will need to cut the UK deficit, again something we already knew. But, on a more positive note they upwardly revised their forecast for UK growth over the next two years.

So what the OECD really did was add some figure to what often is an anecdotal debate. That in itself is pretty useful.

What does this mean for the interest rate clock? Well…nothing. Regular readers will know that the current time is indicative of a potential for an interest rate rise towards the end of the year. And I still believe this to be the case. Also data elsewhere shows that the housing market is being undermined by slower lending figures. So I definitely don’t see any reason to change the clock time. So just keep clock watching for now…………

But should you fix your mortgage now? Have a look at my post Should you fix your mortgage now? for help.

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