AIBU to think that people were daft if they thought intrest rates would stay low

[thekidsrule]

sorry if been done

intrest rates rising for some over the next few months and some people saying they may lose their homes/cant afford the hike

personally cant believe people thought they would stay so low forever

i took rises (took morgage out at approx 6-7%) into account was years ago though and realised that they may go up as well as down

at one point we were paying 14% that was a struggle

though thinking about it i suppose general cost of living added will have an added impact but so

so aibu to think people were daft to budget for only tiny rates

I think people should stop panicking and not rush into fix rates.

They might increase a little bit but they are still historically very low and there is a reason for that. Houses for first time buyers are 4 x their salary, not 3 as they were in 90's if interest rates rocket the market will crash and where exactly will the government put all the homeless families ?

Plus all of our money is going on petrol and mortgage right now, how will that help the economy recover ?

Actually some of the smartest economists out there are reckoning with long-term low interest rates because of the deflationary environment in the global economy and worldwide collapse in demand. The UK has experienced inflation and a rise in the cost of living but that's because of the devaluation of the pound, not structural, embedded inflation.

So actually, from an economic point of view, you're the daft one to have been paying 6 / 7% in a global economy where interest rates are at the zero bound and deflation has set in, Japan-style. The smartest people are the ones who got good tracker deals that set their rate at 0.5% or 1% above base rate during the boom. They must be laughing all the way to the bank now!

ALso, anyone who got interest rate predictions wrong is in good company because most of the banks assumed rates were on an upward trajectory in 2007 because of oil prices and never saw the financial crisis coming. Hence the crazy 0.5%/1% above base rate deals that people could get then... also people have been predicting increased rates for a couple of years now but it's never materialized because Mervyn King knows only too well that the UK needs zero rates to keep the economy on life support and a hike in interest rates would spell disaster.

Although if the eurozone crisis blows up then his hand could be forced if there was a massive currency crisis.

Anyway, YABU, because even top analysts get interest rate shifts wrong so what hope is there for people on the street? It would be more accurate to say that anyone who borrowed beyond their means e.g. 100% 7 x income mortgages, interest only etc was daft.

Yanbu, however I don't want to have to watch anyone lose anything, however inevitable it might be.

I understand that other things have been rising in price too (don't need to tell me, my wages have fallen in real terms 30% in 4 years and probably a further 20% in nominal). if however, this 1 or 2 base points rise (750 quid a year) tips you over the edge then fuck me were you sailing close to the wind!

BTW op, it's "lose", not "loose".

As I understand it the SVR is the worst possible rate to be on (unless you did a long term fix before the crash which we did - ended now thank God). You go on it after whatever fix / tracker deal you have ends, so is it not the case that the onus is to some extent on the borrower to arrange a new deal at a more preferable rate? Is that right? If so, then yes I do think people need to be more cautious about signing up to deals that they can JUST afford, you always have to build in a safety net and yes assume that other costs may change. This isn't the first time we have been in a recession, my parents were caught out in the late 80s and though they didn't lose the house, has to radically re-think finances to service the mortgage that massively shot up. We should take a long term view both back and forwards as far as possible.

We are with BOI - we knew rates would rise, but we didnt think it would jump up 50%.

I've been kicking myself for the last year since taking out a 2 year fixed rate. Now I'm relieved. However, yes you should plan for interest rate rises but the banks have a cheek increasing rates when the BoE has not. Nobody would expect that.

ElenorRigby - I think you've rather misunderstood what happens to interest rates during recessions. They generally go down to stimulate demand in the economy, so it wasn't a big surprise when they fell during the last recession (how far they fell and for as long, was a surprise!). With the 90s recession people often remember massively high interest rates, however if you look at the context around those interest rates, they were at their highest prior to the start of the recession and fell steadily throughout the recession.

BTW, I'm no fan of banks, but the reasons they're raising their SVR and fixed rates now is not profiteering, but because the interest they have to pay on their loans (LIBOR, the interbank lending rate) has increased because of the eurozone crisis. I'm sure banks wish that they were borrowing money at 0.5% but they can't!

The thing with fixed rates is that they are always skewed in the favour of the lender. Hence why most fixed rates are substantially higher than tracker/variable rates.

Our financial advisor told us last summer, when we were looking to move house, that you are better off taking out a tracker/variable on a lower rate and overpaying it at the fixed rate level, IYSWIM.

cavey that's only actually true for the last few years, and, is easy to identify in hindsight. If however you were to sign up to a fixed today at 5% and interest rates were 7% by October and remained that way for 3 years, who would be the winner then?

Also remember, you don't do yourself any favours signing up to a 'cheap' deal whose arrangement fees work out higher than the less enticing rate.

It's all a gamble.

I for example am risk adverse, suspecting that prices would fall and I'd be in NE I took a fix until 2018 as I suspect turbulent times in the interim. Once in NE I would not get a good deal - by 2018 I expect things to seem clearer, on a family as well as global economic scale.

YANBU to think that p[eople should realise interest rates can go up as well as down.

YABU to not understand all of the other things that are putting people financially close to the edge at the moment - higher food prices, redundancies, cuts to wages, etc

YANBU - a lot of people have taken out mortgages they can't afford unless rates stay stupidly low.

so you expect your groceries to cost the same in 25yrs time then and your wages to stay the same,ummmmmmmmm dont think so

Do you budget on the basis of prices in 25 years time?

Lydia - or they've taken out mortgages they could afford, even if rates rose, but their circumstances have changed due to the economic crisis or ill-health or other bad luck.

We've never borrowed what we could have done, even in the boom years - kept our mortgage relatively very modest and have a correspondingly modest house. I'm glad we did. But circumstances have changed and now we are struggling even to keep up with that, thanks to ill-health and bad luck with dh's and my jobs. We are lucky compared to some in that at least I managed to find a job, but it pays 25% less than my previous role and dh has only been able to find contract work thanks to public sector spending cuts, with regular gaps of several months in between contracts. He's damn good at what he does BUT there are loads of people fighting for every vacancy - I advertised one job in my team and got 200 completed applications, including form, cuttings and a task I'd set. At least half of them would have been worth interviewing. But I could only see a handful.

Nabacab,please read my post i said i took my morgage out at 6-7% YEARS ago when that was the going rate not now,uh so hardly daft

Also i did say that with everyday things going up all the time i could see where people might be pushed over edge

Iggly,do you really expect to have a morgage or rent and NOT have an increase overtime,dont you factor that in especially with a morgage,or am i missing something

Thanks to all and some of the explanations of the economy and how things generaly work,not to proud to admit it hopfully learn something new everyday

YANBU. Of course the IR wasn't going to stay at 0.5% indefinitely.

I think most people were surprised it lasted for as long as it did.

Some people only operate in the here and now though and don't have the wherewithall to project into the future.

Erm, the BoE interest rate still is 0.5%

Isn't that what they were talking about rising?

oh crap, I know even less than I thought!

Sometimes sh*t hppens. So you might not stretch yourself to the limit, and you might even have managed regular savings, but you weren't actually expecting redundancy, relationship breakdown, ill health or something along those lines, or even something like a change in circumstances at work which greatly increase your travel costs, combined with the fuel price rises...

My situation has changed enormously since we took out a large mortgage 3 years ago. And we are about to come off the fixed rate in July...

the BOE rate is still the same but some of the banks,building societies have started to raise theres,thats how i understand it

so will start to affect some

i thought most new was in the news last week i think

apologies crap spelling

so will people look to fix their rate now ????,there is a lot to decide regarding that i guess

I have just got a 5-yr fixed because I think that rates cannot stay this low for ever and did not want to be coming out fo 2-yr fixed just when I expect rates to start rising - 2014-15.

But it is impossible to anticipate over 25 years what will happen. I just have to hope that we can get another decent deal when our fixed term is coming to an end. You can only cover yourself to some extent.