Mortgage rates could reach 7% by christmas

I’ve just seen 8%, in a inews/which article can’t remember which. It was one of two options. Raise it to 8% for a short time, shrink inflation, crash housing market by up to 20% OR the more likely scenario which is keep rates at 6% for probably a period of several years. Ouch.

Ouch. I don’t even want to type 8pc into an online repayment calculator and see what figure comes out…

@Oddsockday do you k ow how much your monthly cost will vary once your fix ends if it does go to 9%? If you know that or can work it out it might be worth looking at whether it's worthwhile paying the early get out fee thing and getting a better deal now. It might not be worth it though! Rembere you can usually start looking at new fixes 6 months before your current one ends and can get one set up ready if you see a good one

Martin Lewis is doing a mortgage special at 8.00. I'm recording it so I can watch it a few times. It's a bloomin minefield this mortgage lark when you have no one to discuss with. Bank has shut down so nearest branch is half hour away. Being a grown up is shit at times

I think if people are going to make claims about mortgage rates of 8/9% they should link it to the relevant article. Otherwise people will be alarmed potentially for no reason. There are a lot of people on this site who enjoy being alarmist about the property market and providing a link to the source is a way of proving that you have read it from a legitimate source.

I'll be watching that too with interest

Couldn’t agree more. I’ve just searched for any relevant news and there are a number of articles but none mention 9% or any specific numbers where it might climb to.

Absolutely agree

@Twiglets1

This article… under ‘how long will interest rates rise’

https://inews.co.uk/inews-lifestyle/money/mortgage-rates-when-go-down-how-long-inerest-rise-why-high-2469557

@GrannieD it is rubbish at the moment

Exactly this. People had 40k mortgages not 400k like they do now!

It's pretty scary for a lot of people, I think. If interest rates do go up to even 7%, there aren't going to be many people looking to buy/move. If some landlords are having to sell up, it's very likely we could see house prices fall, and some people perhaps go into negative equity, which is not ideal if their mortgage becomes unaffordable.

I understand interest rates are being pushed up to try and control inflation, but given that housing is the biggest expense for most people, perhaps we are better off sucking up 7% inflation than 7% interest rates? Also, if the cost of borrowing goes up for businesses, isn't that just passed on to consumers, anyway?

It seems like a really flawed strategy, and one that the Tories should maybe reconsider.

Is it also the case that expectations of first time buyers have changed? Back in the day, FTBs expected to start out in a tiny flat and then gradually work their way up. Now, the expectation seems to be that you buy your 'forever home' when your children are small. Though that goes together with 'adolescence' being longer now than it was 30 years ago when I was 20. The first thing I did as a postgraduate student - so aged 20 - was buy a studio flat (I was fortunate as my parents gave me the deposit - but I had fully internalised the idea of getting on the bottom rung of the ladder as quickly as possible, and that rent was 'wasted money').

The fact that rates were 15% in1987 is not pointless information at all. What house prices were in 1987 is the irrelevant bit.

The point is that rates can go that high. It's not impossible that people may be fixing at 9% in the new year and then considering themselves lucky they got such a bargain as rates creep on up into double figures.

This is SO not true. My mortgage in the 90s was £140k, and that was with a massive deposit (by then, I was married and ex H and I both sold properties and had a big deposit). So not a patch on 400k mortgage, but bear in mind I had a high-flying professional job which paid a mere £27k pa...

Okay but this doesn’t work anymore now house prices are so high and they basically have no room to grow that much further, otherwise FTBs and many others will be priced out the market.
Two people earning 60k between them could buy a flat or small terraced house for 230k ish and your repayments would be easily circa 1250 if not higher. A very large amount of your income, stretched to the max, on that small home that you will quickly outgrow if and once you have kids. If you are buying with a small deposit, and house prices fall, you will find yourself trapped in negative equity and unable to move or remortgage - onto the much higher standard variable rate. And with children in nursery. Stamp duty and moving costs aren’t getting any cheaper either.
It’s obvious why people are trying to buy a property they can live in for as long as possible and put down roots there given the current shambles state of the market

I think you’re right that FTB expectations have changed to be fair. However, I think people are also getting on the ladder much later in life now because it’s more difficult to do so, and so starting out in a one bed flat in your 30s with kids isn’t neccesarily realistic or viable for everyone. We were mid thirties before we could afford to buy and had a young child so got a two bed rather than starting with something smaller. We would have bought earlier if we could, but we hadn’t been able to afford the deposit before then.

Thank you @FlyingSoap for providing the link. It doesn't support @Oddsockday dramatic headline that mortgages could reach 9% by Christmas.

I can see that 8% by early next year is indeed mentioned but that is described by Mr Yiu (who the article quotes) as a "much more dramatic scenario" than the likely one.

In the same article, another expert gives his opinion that base rates will probably not go higher than 5.25% and '"we think we're probably around the peak in mortgage rates now, but they will stay at this level until the middle of next year before starting to fall".

The article is well balanced in that it discusses a dramatic scenario but shows this is just one person's opinion and also gives a different opinion as well.

to those who insist on dragging up the historic 15% mortgages - it's also worth remembering that at that point most people were in single income households, so the non-working partner could get a part time or evening job to tide over the increased costs - nowadays most households are duel-income.

Not true in my experience. My partner and I were both working full time and needed to in order to afford a 1 bed flat and yes, the mortgage then went up to 15%. We were not unusual, all our friends were buying with someone and both parties both working.
I think it's a bit of a fallacy that in 1990 onwards most people were in single income households.

Martin Lewis is currently saying high interest rates are likely to stay for the next year and then predicted to fall.

I think there's understanding from younger generations now that the concept of 'the ladder' isn't applicable today in the same way it was in previous decades. That linear model can't be assumed.

As you say, people buy later now, so that does mean more of them are going to need bigger properties. A poky studio or one bed is a very different proposition at 25 than 35 with a baby or one planned. Then obviously flats are a bigger risk than houses generally, and the cladding scandal plus the experience of lockdown has meant they've sometimes been bad investments recently. People respond to that.

And of course, stamp duty and the associated fiscal drag have made the multiple moves option more expensive than it used to be. Let's say you move three times instead of none, the extra costs can really add up.

This is a very outdated view.

House prices were far lower multiples then, plus energy, food and cost of living prices are massive increased now.

Younger people today have it far, far worse.

They will do anything to get inflation down. Including a recession.