Interest rates increased to 5.5%

Rotty · 10 May 2007 at 12:02

wasn't expecting it for a couple more months, hopefully this will be the last ( or close to the last )

scorza · 10 May 2007 at 12:06

Cue all the doom-mongers telling us how its only the beginning and rates will be back at 15% soon.

Think it was inevitable that they were going to increase interest rates this month though, hopefully when the next inflation report is out we will see that last quarter's figures were only a blip.

Rotty · 10 May 2007 at 12:08

scorza said:
Cue all the doom-mongers telling us how its only the beginning and rates will be back at 15% soon.

.

nah, we banned him

Ex-RoNiN · 10 May 2007 at 12:11

Will that mean savings account interest rates (on variable rate accounts) will go up also?

The Mad Rapper · 10 May 2007 at 12:11

Rotty said:
wasn't expecting it for a couple more months, hopefully this will be the last ( or close to the last )

It's not enough. House prices are massively over-inflated. Something needs to be done to reduce them to realistic levels.

The Mad Rapper · 10 May 2007 at 12:12

Ex-RoNiN said:
Will that mean savings account interest rates (on variable rate accounts) will go up also?

Not if your account is with ING Direct

Rotty · 10 May 2007 at 12:13

The Mad Rapper said:
It's not enough. House prices are massively over-inflated. Something needs to be done to reduce them to realistic levels.

that's not part of the Bank of Englands remit, they are not allowed to take house prices into consideration

scorza · 10 May 2007 at 12:15

Ex-RoNiN said:
Will that mean savings account interest rates (on variable rate accounts) will go up also?

Yes, but unlike mortgages, not usually immediately

Nice huh.

Dangerous · 10 May 2007 at 12:21

Glad mine is locked in for 2 years I couldnt deal with these

Rebelius · 10 May 2007 at 12:24

I hate it when that happens

daven1986 · 10 May 2007 at 12:30

The Mad Rapper said:
Not if your account is with ING Direct

LOL so true, after last time I emptied my ING account and put it elsewhere.

Admiral Huddy · 10 May 2007 at 12:31

Rebelius said:
I hate it when that happens

You'd hate it more if inflation spiralled out of control.

It's best to have an even balance. 5.5% is still low.

Bug One · 10 May 2007 at 12:31

I'm planning on buying my first house this year once the other half qualifies. I'm not sure whether I want the rate to go up or not. Obviously I'd like house prices to plummet, but then I would be trapped into getting a mortgate at a ridiculously high interest rate.

Rotty · 10 May 2007 at 12:34

Admiral Huddy said:
You'd hate it more if inflation spiralled out of control.

It's best to have an even balance. 5.5% is still low.

exactly mate, historically is is still a very low rate and though house prices are high it keeps mortgages just about affordable ( in most areas )

if inflation got out of control then the remedial action needed would be very unpleasant

[TW]Fox · 10 May 2007 at 12:35

Dangerous said:
Glad mine is locked in for 2 years I couldnt deal with these

So what will you do in 2 years? Surely when taking out a mortgage or a large loan that could be easily affected by interest rate increases you budget to ensure that should the obvious happen it isn't a back-breaking occurance?

Rotty · 10 May 2007 at 12:36

fixed rate deals are basically an estimation of the average rate over the period with a bit added on

over the long term a tracker will generally work out better

Rebelius · 10 May 2007 at 12:37

what happens if inflation gets out of control? I don't know anything about economics really - an IFA told me a tracker was my best option just over a year ago. Repayments have gone up 15% since then and about to rise again

it's not back breaking, but it makes life less fun.

Bug One · 10 May 2007 at 12:40

Rebelius said:
what happens if inflation gets out of control? I don't know anything about economics really - an IFA told me a tracker was my best option just over a year ago. Repayments have gone up 15% since then and about to rise again

it's not back breaking, but it makes life less fun.

If people can't afford their mortgage repayments, then they have to sell the house.

The problem occurs when the value of the house decreases to a level less than the value of the mortgage. This turns into negative equity and really screws people over as you end up with no house and a morgage to pay.

Rotty · 10 May 2007 at 12:41

Rebelius said:
what happens if inflation gets out of control? I.

much higher and faster rate rises will be required, this will also make things difficult fo business leading to a contraction of the economy, recession and redundancies

Haircut · 10 May 2007 at 12:43

Rotty said:
fixed rate deals are basically an estimation of the average rate over the period with a bit added on

over the long term a tracker will generally work out better

I actually did an analysis a while ago (don't have the data to hand at the minute) comparing a 2 year fixed rate mortgage and a tracker mortgage.
The assumptions were: that you re-mortgage every 2 year period.
The mortgages I used were based on actual mortgages Nationwide offered when I did the analysis.

I think the fixed rate was £800 set-up fee and the tracker was zero set up fee.
It took some very bizarre interest rate conditions (rates rising very quickly in multiple 2 year periods) for the fixed rate to be better value.
It pretty much every other situation the tracker would cost less over the term of the mortgage.