Interest rates increased

[rhobbyh]

1.5% by the end of the year at the very least. I'm in the holiday business which will be amongst the first to go on the squeeze on disposable incomes starts really affecting things.

Rioting coming in October when the energy cap doubles again coinciding with unprecedented profits reported by the energy companies.

 

[Colonel_Klinck]

As said it's used to increase cost of borrowing hence reducing spending thus bringing inflation down.

But as others have said with it being mainly energy and essential food prices its just going to run many into the ground

Rather than just screwing the poor it will be screwing the middle, especially those with hefty mortgages. Which are kind of unavoidable for most.

Am I grateful I took a 10 year fixed 3 years ago when my mortgage renewed. Its only going 1 way.

 

[413x]

Kind of situation my mums in. she had to switch to an interest only mortgage due to a big change in her financial circumstances. The idea was to go to the end of the mortgage and hope her equity would rise enough for her to sell up and buy a house outright elsewhere.

So far her equity stands at £320k and she’s in an area where prices rise faster than 80% of the country. The last thing she wants to see are house prices stagnating and possibly receding.

Ive tried to tell her she’s better off just moving now. £320k is plenty for a house outside London and as she works from home, she can keep her job. All her wages with no mortgage. Win/win.

My parents sit on what I believe to be 700k mortgage free (could be 1 . They are miserable (money / inheritance / land issues) and in poor health with a ridiculous house for thier age. We (us kids) told them again and again to sell up. Live somewhere small and cheap for half. Have all the money extra to do whatever with. But they can't give it up. They are committed. Like someone who can't sell a stock. They are burning thier last years unhappy.
People rarely do the sensible thing. They literally could have sold at the peak!

 

[Mercenary Keyboard Warrior]

While I agree in principle, it's all gone too far now, they've got at least 10 years of wreckless borrowing to give a soft landing to. If they don't get a soft landing it will be carnage.
They need sacrificial lambs they can throw under a bus, it may be that the majority of voters are also renters so may be the property investors are going to get it.

Totally this

I have long stressed that people could not see rate rises and no idea why they should be anything higher than they are
But the impact of going too far too quickly could be truly massive

IMO absolute max should be 1% per year for 2-3 years.
We should be aiming for a base rate of 3-5% IMO to give enough play should it be needed later

The thing is, how long ago were the good times for many!
Sure some trades etc get silly money now but for many basic desk jobs, care jobs, retail jobs etc times have been tough for many years and only look to get worse.

Equally the government cant keep giving money away they havent got. Taxing more yet seemingly everything is getting worse, its a right old pickle

 

[CapitalOne]

My parents sit on what I believe to be 700k mortgage free (could be 1 . They are miserable (money / inheritance / land issues) and in poor health with a ridiculous house for thier age. We (us kids) told them again and again to sell up. Live somewhere small and cheap for half. Have all the money extra to do whatever with. But they can't give it up. They are committed. Like someone who can't sell a stock. They are burning thier last years unhappy.
People rarely do the sensible thing. They literally could have sold at the peak!

We are about 7/8 years away from retiring (early I hasten to add!) and are toying with the idea of renting the house out here (as opposed to selling) and then nomadding around the globe (visa and moggy permitting) renting less that our "too big for us" house. We then get some income from the rent plus pension income. We''ll be alcoholics within 18 months! Also, when we really need care or the like or we get bored we can omve back home or sell up. Still chewing this over as there must be a catch.

 

[LabR@t]

Once rates return to historical norms people will be screwed. 1% is very low

 

[Dg834man]

They never solved anything ten years ago at the last recession they just kicked the can down the road interest rates next to nothing + quantitative easing, it has created generation finance 1k phone on tick bmw/audi on tick, silly increases in house prices due to a combination of BTL / lose lending + low rates.

 

[purplesky]

People losing their homes because they can't pay their mortgage due to ever increasing interest rates? God, like this hasn't happened before!! Really, what is the average age of people on this forum? I'm not sure why people think the above can't happen, when actually, it already has in times gone by. Yes, people lose their homes. Yes, people lose their jobs. Yes, people die.

I'd be watching the currency markets personally. The US Federal Reserve increased rates by 0.5% yesterday and they've signaled many more to come. The US Dollar is soaring compared with the GBP and Euro, and because everything is priced in USD, you can expect to pay a lot more for things that you need until the BOE and ECB make that difficult decision to really stick interest rates up to where they need to go. Cheaper fuel and food is much more important than people who borrowed too much money to buy an over-priced box. The banks will happily take back ownership of the property, something they probably want anyway as the rent would be a nice little revenue earner in it's own right. And if a house price crash really does start to gain traction, the banks don't care as it all came about from free/worthless money printing/quantitative easing, and if need be, there's plenty more of that about.

 

[413x]

We are about 7/8 years away from retiring (early I hasten to add!) and are toying with the idea of renting the house out here (as opposed to selling) and then nomadding around the globe (visa and moggy permitting) renting less that our "too big for us" house. We then get some income from the rent plus pension income. We''ll be alcoholics within 18 months! Also, when we really need care or the like or we get bored we can omve back home or sell up. Still chewing this over as there must be a catch.

Sounds amazing. Life's to short to waste it away.
I'm late to the house owning party. Reduced my term to 24 years.
On a 5 year fix now. If interest rates are still rough after 5 I hope to be able to dump a load of savings I will make during next 5 years to get this down to 10 years.

If rates are back down at 1 percent obviously I won't do that. But this 5 year fix is an important part to getting this debt down to manageable.

 

[BUDFORCE]

It's at 1%, not 10.

Look at the historic data, base rates have been the lowest ever for around 12 years.

I guess maybe people think 12 years is a long time but this is an unusual 'blip" in the scheme of things and certainly not normal.

I agree that putting them up quickly could cause problems, but if people are panicking because they haven't budgeted for what .5% increase then you need your head examined.

There will a be a few people on the breadline who I feel sorry for, I suspect the vast majority probably borrowed to the hilt to get that slightly bigger house or the one with the convervatory etc and left themselves no room.

You need to live within your means, and well within your means. I appreciate it's not possible for some, but most crying they can't pay their mortgages whilst forking out for sky packages and Netflix, the annual holiday to Spain, the BMW on lease hire and all the other things you couldn't possibly live without.

 

[dlockers]

We are about 7/8 years away from retiring (early I hasten to add!) and are toying with the idea of renting the house out here (as opposed to selling) and then nomadding around the globe (visa and moggy permitting) renting less that our "too big for us" house. We then get some income from the rent plus pension income. We''ll be alcoholics within 18 months! Also, when we really need care or the like or we get bored we can omve back home or sell up. Still chewing this over as there must be a catch.

A house I was planning to buy - the couple were in this stichy. Rather than renting they took the cash to move to a low cost of living place.

 

[CapitalOne]

A house I was planning to buy - the couple were in this stichy. Rather than renting they took the cash to move to a low cost of living place.

Fair enough - I think the point is we don't want to sell to downsize, but to "Place in the Sun" it for a few years (6 months each or so in different countries) without the pitfalls of going all in overseas. That way if it's more ex-**** than ex-pat we've got somewhere to go

 

[eddiemcgarrigle]

Why on earth would you want to inflict that on people?

It'll be because he's likely paid off his mortgage and got savings. Poor diddums hasn't seen his investments grow so wants everyone else to suffer so he can make a few quid.

 

[dlockers]

Fair enough - I think the point is we don't want to sell to downsize, but to "Place in the Sun" it for a few years (6 months each or so in different countries) without the pitfalls of going all in overseas. That way if it's more ex-**** than ex-pat we've got somewhere to go

Oh right, well 6 months is hardly nothing so just save up.

 

[dlockers]

It'll be because he's likely paid off his mortgage and got savings. Poor diddums hasn't seen his investments grow so wants everyone else to suffer so he can make a few quid.

Or if you read the poster you've quoted's other post, you'll see they have paid jack all of the capital part of the house repayment off and are counting on the house price rises to buy a house outright in a low cost of living area.

Which one is more toxic?

 

[adam cool dude]

Am I grateful I took a 10 year fixed 3 years ago when my mortgage renewed. Its only going 1 way.

Mine is up at the beginning of next year and we only have 10 years left. Think I will just go for that and overpay as much as can. World is going to be tough for the next 5 years.

 

[mattyfez]

Once rates return to historical norms people will be screwed. 1% is very low

Very much this... people don't seem to plan for what they will do about thier mortgage if interest base rates hit 5% or more and when thier fixed rate deal expires.

Christ I remember getting 4%+ on my savings account, halcyon days, more like 0.25% ATM but it means loans, in particular mortgages, are more expensive too.

 

[CapitalOne]

Oh right, well 6 months is hardly nothing so just save up.

Yeah I mean - rent out Chez Cap
6 months rent in Madrid -> 6 months rent in Crete -> 3 months Carribean -> 6 months Amalfi and so on until bored. Arb the rent between ours and those = income + pension income = win (I believe it goes)

 

[Uther]

It's a great plan to bring down demand. As long as everyone stops buying food or even thinks about turning the heating on.

 

[danlightbulb]

Kind of situation my mums in. she had to switch to an interest only mortgage due to a big change in her financial circumstances. The idea was to go to the end of the mortgage and hope her equity would rise enough for her to sell up and buy a house outright elsewhere.

So far her equity stands at £320k and she’s in an area where prices rise faster than 80% of the country. The last thing she wants to see are house prices stagnating and possibly receding.

Ive tried to tell her she’s better off just moving now. £320k is plenty for a house outside London and as she works from home, she can keep her job. All her wages with no mortgage. Win/win.

Doesn't make sense at all. If your mom's house falls in value, so will the cheaper houses outside of London that she wants to downsize to.

With £320k equity your mom is in a great position overall, just ride this out and see what happens.



On a point of principle - part of the root cause of the housing issue is everyone relying on house price inflation to fund their lives. Its a travesty that we've been sucked into this eternal slavery to debt via the housing market.