Interest rates increased

[Richie]

Inflation is still predicted to rise until the end of the year.

This is where I feel the BoE have made an error. I realise that the only way they have to try and affect inflation is to control consumer spending by changing interest rates and that it's their remit to manage inflation.

The issue this time around is that inflation is not being caused by rampant consumer spending but by the high cost of, what I would call, the necessities i.e. gas/Elec, petrol/diesel and food.

If the prices of these 3 items cannot be brought down then you can raise interest rates as high as you want and inflation won't decrease. Death rates and crime rates will increase though.

 

[throwaway4372]

Pretty sure the BoE know that and they're doing it because it needs doing at some point and they don't foresee a better time.

 

[dlockers]

Pretty sure the BoE know that and they're doing it because it needs doing at some point and they don't foresee a better time.

The same BoE that have been printing money whilst inflation hit 10%?

 

[Worthy]

This is where I feel the BoE have made an error. I realise that the only way they have to try and affect inflation is to control consumer spending by changing interest rates and that it's their remit to manage inflation.

The issue this time around is that inflation is not being caused by rampant consumer spending but by the high cost of, what I would call, the necessities i.e. gas/Elec, petrol/diesel and food.

If the prices of these 3 items cannot be brought down then you can raise interest rates as high as you want and inflation won't decrease. Death rates and crime rates will increase though.

There’s definitely some testing times ahead

 

[martin363]

Pretty sure the BoE know that and they're doing it because it needs doing at some point and they don't foresee a better time.

The BOE is late, they should have raised interest rates at least 6 month ago, and more steeply than they are. Anyone in manufacturing and shipping could see where things were going, and still are, unfortunately the BOE didn't, which means we are likely going to see a worse situation in the future as a result.

It is a bit like trying to stop a car when it has gathered speed, far harder.

 

[Richie]

Pretty sure the BoE know that and they're doing it because it needs doing at some point and they don't foresee a better time.

If all the government/official institutions knew what they were doing then this country wouldn't be in half the pickle it has been in for a while

 

[Goodie]

There must be a ticking time bomb going on with with the amount of people spending big in houses this last 18 months…

 

[Uther]

The BOE is late, they should have raised interest rates at least 6 month ago, and more steeply than they are. Anyone in manufacturing and shipping could see where things were going, and still are, unfortunately the BOE didn't, which means we are likely going to see a worse situation in the future as a result.

It is a bit like trying to stop a car when it has gathered speed, far harder.

Yep, they were not alone though, the Fed dropped the ball too, and now it's all going to be a lot more painful.

 

[martin363]

Yep, they were not alone though, the Fed dropped the ball too, and now it's all going to be a lot more painful.

I actually suspect they both saw it, but were worried about tipping their economies into recession after Covid, the reality is all they did was delay the recession, and likely make it far worse. Recession is coming, and it is going to be nasty. The one interesting thing is that I am not sure it will result in significant unemployment in the UK, because there is a huge shortage of skilled labour, which doesnt help.

 

[glenimp617]

There must be a ticking time bomb going on with with the amount of people spending big in houses this last 18 months…

I honestly don't know where everyone is getting the money from. People are spending though, and spending big.

Fixing low rates probably, so they'll be ok for a few years.

 

[jaybee]

There should be no surprise that people keep buying houses at record high prices even during COVID times. This will continue forever. People will keep saying the spending on houses is crazy yet it will keep happening. A crash will never occur. It won't be allowed to. The general rule is that you buy as soon as you can afford to do so. This has NEVER not been beneficial even if you bought during the 2007/08 financial crash. You still would be better off after the few years that took to recover. People are just doing the best they can and buying to get on the ladder whenever possible. Bringing interest rates up to 5-10% won't stop people still trying to get on the ladder. There will never be a point where people give in to rent for life, because it's never going to be beneficial to do that over the course of a life time all the while you are paying into someone else's mortgage.

 

[Goodie]

There is no surprise that people are buying houses, I just can't get my head around there being so many people with apparently so much money to pay such rates or be able to take the burden of large mortgages with the rates that are on the horizon. Any 4 bed house around me at now is going for £400k+, and that's in the midlands.

 

[Puzzled]

House prices can't just keep rising forever though as the majority won't be able to afford them.

Parents might be able to help out today but the generation buying now won't be able to assist their kids in the same way. They'll be paying off their own mortgage for a longer period and are unlikely to see the sort of growth that their parents benefitted from.

 

[DanTheMan]

I do worry about people who have spent big over the past few years on houses. I know it's not always through choice but nearly everyone I know has either mortgaged or remortgaged above 90% LTV and maxed out their borrowing.

I do think we've got a whole generation who have been so used to easily manageable debt and living life on credit, that it will be a huge culture shock when borrowing isn't as cheap.

It doesn't help that a lot of the inflation is due to increasing energy and material costs that we have very little control over.

 

[touch]

There is no surprise that people are buying houses, I just can't get my head around there being so many people with apparently so much money to pay such rates or be able to take the burden of large mortgages with the rates that are on the horizon. Any 4 bed house around me at now is going for £400k+, and that's in the midlands.

It's not usually first time buyers buying 4 bed homes for 400k. If you've already owned a house for 5-10 years it's difficult not to build up a decent amount of equity in it. An average homeowner who has had a property for that time could easily be looking at 50% LTV for that 400k house. Mortgage payments on that would be around £800-900.

 

[Skynet5]

My fixed mortgage ends in September.

Just looked and it'll cost me £277 to exit early. If I wait until the end of June I wont have to pay that as they give me 90 days retainer of the offer.

Current rate is 1.89% another 5 year fixed with HSBC is 2.49% with no booking fee.

Hmm. Probably should have done it last month or the month before...but too much stuff going on..

 

[Skynet5]

3k mortgage is bold, fair play. Hope you either kept the receipts for the lube or have some seriously good income protection insurance.

My 5 year fix is ending in September, desperate to try and renew soon. We fixed for 5 (at a relatively high rate of 2.32%) as expected brexit to be a disaster, turns out that it's been the lowest ever rates-wise, and my high fix is now ending just after rates pick up again, maddening. Around 3k in early repayment fees if I remortgage now with current provider, or no repayment fees if I do it no earlier than 1st July.

Mind you I think I can probably get a better deal away from current provider, but that means waiting another 3 months during which time rates will rise more. Groan.

Sounds like you and I are in a similar position. I've no idea why my ERC if only £277 though. Seems cheap..but I am literally 6 weeks from not having to pay it with HSBC due to the 90 day offer validity period.

 

[Housey]

Fixed my mortgage to its end pretty much at low rate.

For once I timed a financial decision well.

 

[413x]

House prices can't just keep rising forever though as the majority won't be able to afford them.

Parents might be able to help out today but the generation buying now won't be able to assist their kids in the same way. They'll be paying off their own mortgage for a longer period and are unlikely to see the sort of growth that their parents benefitted from.

Isn't this what happened in Japan?

Property prices have been declining?

I agree. It cannot continue. There will be too many expensive houses and not enough buyers. Even propping up the market with multi generational or some other tool to keep the prices rising won't be able to maintain this.

I think of how many houses like my parents there are.. And how few people can afford them.
My parents will be sold and split.
It's a house I could never afford. Nor could any of my siblings. That's if there's any left after potential care.

Surely as the boomer population dies off prices must come down?

House prices need to stop rising. They need to stabilise so people stop using them as a dead cert type of investment.

 

[413x]

I do worry about people who have spent big over the past few years on houses. I know it's not always through choice but nearly everyone I know has either mortgaged or remortgaged above 90% LTV and maxed out their borrowing.

I do think we've got a whole generation who have been so used to easily manageable debt and living life on credit, that it will be a huge culture shock when borrowing isn't as cheap.

It doesn't help that a lot of the inflation is due to increasing energy and material costs that we have very little control over.

This.
Same goes for me. I've basically lived interest free. Only ever loan has been my mortgage and its a small 1.79.

The thought of 6,5 even 4 percent base rate is life changing. That's a bad situation to be in