Mortgage Rate Rises

[Martini1991]

The problem is we have a super bubble and nobody wants to pop it. Government is actively fighting the BoE and making higher interest rates more likely as well. Honestly the whole situation is a big mess.

When one looks to buy a house, they don't have an option of being out of the bubble, that bubble was forced upon them.

And popping that bubble is likely to hurt the generation that keeps getting hurt.

 

[200sols]

This gets said, but the inflation we're experiencing will not be solved by interest rates etc. People aren't splashing out, they're barely surviving which is why we've had to give out so much support

Government policy is to prop up houses prices as well.

Second round inflation is what they are fighting, stopping it becoming entrenched in the economy via massive salary increases etc. Also there are big interest rate differentials now, the plummeting pound pushes up inflation.

When one looks to buy a house, they don't have an option of being out of the bubble, that bubble was forced upon them.

When one buys a house via mortgage they are also stress tested at I believe 3% above the lenders SVR. So it should be no surprise to people that rates can go to 5/6/7%.

And popping that bubble is likely to hurt the generation that keeps getting hurt.

Is there an asset bubble in history that hasn't burst? I cant think of one, and the larger they get the larger the pain when it happens.

 

[Martini1991]

I don't see a house as an asset, it's my home.
Same for many, the just want a home.

 

[200sols]

I don't see a house as an asset, it's my home.

It doesn't matter how you see it, they are seen as assets in the market.

 

[HACO]

And popping that bubble is likely to hurt the generation that keeps getting hurt.

Popping the bubble and keeping the market as it is would hurt the average people (although debatable whether that's more hurtful than keeping the inflated bubble), but the government can protect people (instead of developers/bankers/landlords) during a downturn.

I don't see a house as an asset, it's my home.
Same for many, the just want a home.

Then you shouldn't be concerned about its value going down.

 

[photoshop]

Brilliant, I can earn enough to pay for one month's worth of extra mortgage costs.....

Honestly people who go on about interest rates for savings aren't in the realms of the majority of people

I could earn nearly £8000 a year if the savings rates go up to 4% which would be nearly a years worth of mortgage payments

 

[Freakbro]

This gets said, but the inflation we're experiencing will not be solved by interest rates etc.

It will, it'll just be painful for everyone involved. We're in a similar situation to the high inflation of the 70's/80's which again was an external energy price shock and supply side issue, and the Fed increased rates to 15% at one point.....it cured inflation

People aren't splashing out,

That's not that true, there's still a lot of money in the system from all that was saved during Covid. Try and get a plumber, builder etc and they are all still absolutely flat out, even with commodity prices being sky high!

they're barely surviving which is why we've had to give out so much support

A lot of people haven't been hit from the rising energy rates yet as they are still in fixed rate contracts. The action taken has been more pre-emptive.

Government policy is to prop up houses prices as well.

Yep, that I agree with.

 

[Ayahuasca]

The tour is over for bare-minimumcels.

 

[Martini1991]

Then you shouldn't be concerned about its value going down.

I've never said I'm concerned about it's value?

 

[Martini1991]

I could earn nearly £8000 a year if the savings rates go up to 4% which would be nearly a years worth of mortgage payments

Must be lonely there at the top of the hill.

 

[Ayahuasca]

I could earn nearly £8000 a year if the savings rates go up to 4% which would be nearly a years worth of mortgage payments

Oh, it looks like we've got ourselves a top revenue earner.

 

[ljt]

I could earn nearly £8000 a year if the savings rates go up to 4% which would be nearly a years worth of mortgage payments

Good for you. You are however, in the minority.

This forum is skewed in favour of higher earners, who don't seem to grasp that the vast majority can't afford to save vast amounts because there aren't enough highly paid jobs to go around. Equally, all the lower paid, but absolutely essential jobs would still need doing even if by some miracle there were enough high paid jobs for anybody that wanted them.

 

[Haggisman]

At least people can stop moaning about the 2008 bank bailouts now given the public have had a few over the last few years. Energy prices today, furlough in 2020 .

The banks needing a bailout was their own fault for engaging in far too risky behaviour - they reaped the rewards of doing so, but guess who paid for the risk (hint: it wasn't the bankers getting rich when things were going well for them)?

Meanwhile, the "bailouts" given to the public via furlough and the energy price cap are going to be paid for by that same public through increased taxation (or a reduction in spending on public services) over the next few years.

Yeah, well think about other people in society. Its not all about housing you know. Interest rates rising and cooling the market is a good thing in my opinion, low rates have fuelled such a distorted view of what is reasonable.

The problem is that while low rates means savers getting a few less £ on their disposable income, high rates means people losing their homes.

I don't see a house as an asset, it's my home.
Same for many, the just want a home.

Exactly this - many people aren't worried about losing a few quid in interest. While I'm sure it's very stressful and traumatising having to worry about whether you're going to make £4k or £8k on the several hundred £k worth of savings you have in the bank, maybe spare a thought for those who are more concerned about keeping a roof over their family's head.

Then you shouldn't be concerned about its value going down.

It's not so much a concern about the value going down, as the payments going up significantly.

 

[Freakbro]

who don't seem to grasp that the vast majority can't afford to save vast amounts because there aren't enough highly paid jobs to go around.

You're just not up with the modern Conservative Britain message there dude, where you just need to work harder, longer and get a better paid job. (But don't ask for a payrise!)

Equally, all the lower paid, but absolutely essential jobs would still need doing even if by some miracle there were enough high paid jobs for anybody that wanted them.

it's best not to look at inconvenient facts like that!

 

[200sols]

The problem is that while low rates means savers getting a few less £ on their disposable income, high rates means people losing their homes

I think we should first acknowledge these rates are not high, they are 2.25%. Very low historically. Unlike the last 10 years where everyone kept rates low to prop up their economies keeping rates low now is causing people to lose confidence in the BoE and the UK, we rely on foreign money to prop up our currency and now with interest rate differentials it is harder to attract that money so low interest rates also means a collapsing currency and extra imported inflation. I guess now we can all just enjoy our stagflation and look forward to parity with the dollar.

 

[purplesky]

It will but them only doing 0.5 just means there will be another 0.25 by the end of the year. with another 1% most likely in 2023. They are very reluctant to hit with 0.75%

Agreed. Not keeping pace with the Fed (who set the price of money, in case there was any doubt) will see the GBP under 1 USD by year end, likely much sooner. We'll see what happens tomorrow and how much more inflation Truss and gang are going to add following the mini budget.

 

[ZeroG]

I guess I'm kinda lucky that my mortgage is still fixed for another 2 years. But it does make me nervous as I can't see things settling down by the time it comes for me to renew.

 

[Haggisman]

I think we should first acknowledge these rates are not high, they are 2.25%. Very low historically. Unlike the last 10 years where everyone kept rates low to prop up their economies keeping rates low now is causing people to lose confidence in the BoE and the UK, we rely on foreign money to prop up our currency and now with interest rate differentials it is harder to attract that money so low interest rates also means a collapsing currency and extra imported inflation. I guess now we can all just enjoy our stagflation and look forward to parity with the dollar.

Maybe not high if you compare over the last 20-30 years, but the highest they have been in over a decade, and rapidly approaching a 20 year high, how much have house prices increased since then? Would you rather be paying 10% on a 50k mortgage or 5% on a 200k mortgage?

 

[Ayahuasca]

Maybe not high if you compare over the last 20-30 years, but how much have house prices increased since then? Would you rather be paying 10% on a 50k mortgage or 5% on a 200k mortgage?

Careful, basic math is a bit much for some folk around here as a counter point.

 

[Martini1991]

I think we should first acknowledge these rates are not high, they are 2.25%. Very low historically. Unlike the last 10 years where everyone kept rates low to prop up their economies keeping rates low now is causing people to lose confidence in the BoE and the UK, we rely on foreign money to prop up our currency and now with interest rate differentials it is harder to attract that money so low interest rates also means a collapsing currency and extra imported inflation. I guess now we can all just enjoy our stagflation and look forward to parity with the dollar.

Coming at it from a house point of view though, houses still raising in value with higher interest just means higher cost for being able to have a home.

Sure if houses were half what they are then higher interest rates wouldn't result in the carnage they're going to do. Although if that happened right now you'd basically turn a generation into mortgage prisoners.