Hope the above chart is useful, click on it to make it larger if you want to see the detail. I have been to several presentations in recent weeks given by respected City economists. This is my effort at amalgamating their interest rates predictions for the next 5 years.
Such long term predictions are very hard to do and always wrong; hence economics being known as the dismal science.
However, if you are looking to invest some money right now or make a borrowing, this will give you some guide as to what to do. For example, keep a floating rate mortgage for another year and then switch to a five-year fix.
What is behind the numbers? Well effectively the consensus is that next year will be poor for sometime, then the real long-term effects of QE will kick in driving a big growth spurt in 2011/2012. The resulting inflation and need to finance the fiscal deficit will create a need to raise rates quite sharply back up to more expected rates.
So if you are a saver, only another year to go, if a borrower only one more year of the head-in-the-sand can be maintained. it will be interesting to look back and see what the outcome is. There could be several external shocks which make the chart a lot more exciting.