There are good reasons for my increasingly urgent desire to lock in a new rate. Firstly, I've been keen to take advantage of the low rates currently on offer - at just over 3 per cent 5-year fixes have never been as low, around half of what they were five years ago. I’d be surprised if they fell much lower, but not if they rose again. Certainly the outlook for interest rates has changed markedly in recent weeks, with talk of QE tapering in the US and the belief that the West's economic recovery is gathering momentum.
Indeed, while Bank of England governor Mark Carney has suggested that bank rate would remain on hold until 2016, many are now betting against his forward guidance. Ten year gilt yields are back above the significant 3 per cent level having more than doubled in 12 months. That thinking appears to be shared by European companies, which according to Dealogic have been issuing bonds at a rate of knots over the past few months to lock in low borrowing costs.
So while for years the worry has been that growth was nigh on impossible to come by, now Mr Carney’s problem is that growth seems to be coming too quickly, to the extent that some commentators have suggested that the governor would welcome a bit of bad news to give him reason to keep a lid on rates. Even if he can, the rising market cost of debt could mean that the cost of consumer borrowing could rise even if the base rate doesn't.
The obvious concern is that any increase in lending rates could kill off the recovery very quickly. Many of the signs of economic recovery that we are experiencing are dependent upon the health of the consumer, which has been boosted by the low costs of servicing their mortgage debt or borrowing to buy new cars. As John Plender put it in the FT this week, this is “the wrong type of recovery”, arguing that increased business investment is what we really need, but not what we're seeing.
Rising rates, meanwhile, could hurt the stock market, too, given how high shares in blue-chip dividend payers have been bid up as an alternative source of income. After all, a simplistic theory suggests that when bond yields rise share prices should fall. So with the recovery throwing up new uncertainties, I’d be grabbing on to any certainties that you can, whether that be five years of fixed mortgage payments or, as we demonstrate in this week's cover feature, the mathematic principles that underpin all investment.
