GDP fell by 0.5% against an expected rise of 0.5%+

That is pretty shocking. Some blame is to do with the snow, but that doesn’t make up the whole story, the economy was worse in the last quarter of last year than we expected.

We need to be a bit cautious about the story though – these figures are preliminary, we won’t really know the proper figures for a month or two yet, and they could vary by 0.5% so it may not be as bad as it looks…but it won’t look good, so what does this mean for interest rates?

Well, there has been upward pressure, and press comment on this has lead to increased demand for long term fixed rates.

The upward pressure on interest rates is reduced now, the Bank of England won’t be forced into an early move this year by these figures.

So, if it were just the money markets controlling fixed rates, rates would stop rising and may settle slightly.

However, demand is another factor, and lender workload is another.

Demand – if people are demanding long term fixed rates, then lenders will put prices up to cash in on the demand.

Workload – if a lender is top of the league table, it will get swamped with business – it could just raise it’s rates to slow down the inflows, if it can’t cope.

I suspect we won’t see a great deal of change in fixed rate pricing. The upward movement will slow, but I don’t expect any serious downward movement back to, say December levels.

I will update as I learn more…