To be pissed off about mortgages rates being so low and down to 1%

[feellikeahugefailure]

All in the headlines today about the 1% mortgage to last 10 years.

Oh great so landlords and those lucky enough to own will be paying even less than the have nots that cant afford to buy.

I doubt my rent will be going down, but the tiny savings I have towards a deposit and emergencys will be earning less interest than inflation :(

I'm not sure I entirely agree with you OP in this particular analysus, but I completely agree that we live in a society that is designed to entrench inequality - and if you're on the 'have not' side, it is extremely difficult to break out of that.

I remember when I was renting. I paid much more than my current mortgage. And the idea of saving a deposit out of my 'average' salary when rent and other living expenses were so high was just a pipe dream.

Things changed for me, but I'm not so pompous I can't admit it was largely good fortune rather than all my own making (yes I worked hard, but so do many others for no financial pay off).

"Writing enormous posts with some biased economics in there did not change that fact."

Um biased? The OP is bemoaning low interest rates and hoping that a rise would benefit her/him. I have spelled out what would happen in the case of a large or even moderate interest rate rise. No one has posted an adequate rebuttal of that. Its not biased, its a pretty sound analysis of the impact.

Outside of London and the S.E house prices for FTB are still mostly very affordable in most areas, inside the M25 you need two people earning median London salaries to get on who have made it their aim for a while.

The idea that it just "happens" or that it was easy in the past is ridiculous, the PP saying that her former house was now rented at a much higher price, why would people saving for a deposit have a house? Rent a room/flat instead? I know not everyone can stay child free until they buy and circumstances differ but you can't expect the whole market to cater to your very specific individual needs.

I do actually know several people who have used shared ownership as a way of getting on the ladder, they tend to move on after a couple of years of paying down their equity and small increases in value give them larger deposits for their next mortgage.

The OP is bemoaning low interest rates and hoping that a rise would benefit her/him.

All economics is just theory not science. On the point above a raise in interest rates would lead to house prices going down. Yes, there are positives and negatives in this but it isn't as clear cut as good or bad. It's all very complex.

I bought a house in 2000 when interest rates were higher (6.5%ish I think). The house was cheaper, but mortgage repayments a fair bit. As time went on the rates went down, our interest payments nearly hit the floor and the 'value' of the house doubled in 5 years. Our repayments were so low that we managed in 9 years to entirely pay off the whole mortgage. So interest rates being high then going down helped me. With IR low people have to stretch themselves and the only possibilities are they stay the same (neutral situation) or go up (bad). So if they go up before you buy that could be seen as an opportunity! Particularly if it helps you save a deposit.

I'm thankful our dc seem to be managing to support each other to have 2 houses paid for in cash, both under 25.
They are moving onto more properties now with another mortgage, will do this up and either rent it out or sell.
Only one of them has a full time job, the other just does houses and delivers take aways.
I don't think they'd have managed otherwise, unless they wanted to be solicitors, lawyers, doctors or something equally as boring, to them.

Interesting that they manage to make money on that with no job to support the mortgage application and what with the effect of the capital gains tax on the property. Presumably this will also become a lot more difficult with the higher stamp duty on investment properties.

In 2016 the rules for lending on buy to lets changed due to the EU I think so they might find it harder to get a new loan. Certainly when the rules changed in the last year or two my son could not do what his sister did - which was live at home or on friend's floors for a few years whilst buying a buy to let on a buy to let loan. Now the lenders won't give a buy to let loan unless you already have bought a property you live in.

redhat

They do what they have to do to make money during these times.
Neither had a very good education, it was dire.
Their opportunities were very limited, so they looked at their talents and got to work.
Ds1 was the one with the original mortgage, he sold shares from his job at ASDA he had these for about 8 years having started work there when young.
It's a case of the survival of the fittest and the only way they could see of getting a property.
You can work for years atm and still have nothing to show for it.

Thanks tobysmum was hoping someone like you would pop along.

All economics is just theory not science. On the point above a raise in interest rates would lead to house prices going down. Yes, there are positives and negatives in this but it isn't as clear cut as good or bad. It's all very complex.

Totally agree. I think some people are wanting the current system to continue as it is, as they are doing well out of it and believe it was not at all down to luck and timing.

Writing enormous posts with some biased economics in there did not change that fact.

Yes yes yes!

"Totally agree. I think some people are wanting the current system to continue as it is, as they are doing well out of it and believe it was not at all down to luck and timing."

Yet you want the current system to change to benefit yourself?

I haven't really benefited from low interest rates as the vast bulk of my mortgage I paid off at large interest rates and needed sizeable deposits when wages were lower. I'm mortgage free, and could actually do with a higher rate to enhance my savings.

"Writing enormous posts with some biased economics in there did not change that fact."

That neither of you have been able to rebut! other than saying that its biased, which is not really an argument, yes economics is theory but it is fairly easy to make accurate predictions in the short run of the impact of a change in monetary policy.

Tell me how you think higher interest rates would benefit everyone , without saying people will have more to spend on goods and services because they won't have to spend as much on housing. This is easy to dismiss because it doesn't take into account anyone who currently has a home or a mortgage!

Also it's not true that all economics is just assumptions and made up stuff. Lots of it is accurate and provable.

Yes and the other half isn't Deo.

The problem op that you have is that it is a different time, and in the absence of a time machine I can't see 2000 happening again anytime soon...... So you're going to have to take out a ftb isa and get on with it.

Tobysmum, you can say its assmuptions and made up all you like but you haven't actually been able to offer another scenario.

I agree with the fact that the OP is going to have to get the government ISA and get on with it.

The thing is that from an economics perspective one of the biggest factors that people don't even consider is expectation and confidence.

Right now the interest rates are staying low because inflation as it is measured is low. Advantages of higher interest rates are:

• better returns for savers/ easier to save for pension etc
• stronger pound which means cheaper holidays and imports
• control of inflation if we have it

The issue that governments have is that monetary economics uses low interest rates to boost the economy. We are not in recession and have them practically at zero. So that is why there are discussions around negative interest rates. Interesting times.

And as I said personally I benefited from higher rates but it was a different time.

I get what you're saying OP, also know a couple of people who made out like bandits when the rates got really low around 2008 (labour government actually). Able to pay a lot off their tracker mortgages and both bought rental properties at the time as had it so good. I guess there are always some winners in every situation but yep does benefit those who have already owned for a long time which seems unfair. No point in dwelling though! Maybe find some other saving/investment options, sure you can only better than 1%

"advantages of higher interest rates are:

• better returns for savers/ easier to save for pension etc
• stronger pound which means cheaper holidays and imports
• control of inflation if we have it."

On the savings aspect, you have to look at the opportunity cost. In order to increase the propensity to save you would have to increase interest rates significantly and threaten the fairly weak economic recovery by sucking a out a load of demand for goods and services.

"stronger pound which means cheaper holidays and imports"

As an economy we need a weaker pound to stop our trade deficit increasing any further, the cheaper the imports the more money is withdrawn from our economy. Cheaper holidays abroad also mean the same thing they count as an import too.

We don't have inflation, in fact very nearly the opposite.

I'm sorry but your argument isn't convincing at all.

The system isn't designed to do that. It's a side effect. The system is designed to ensure that the economy stands the best chance of success.

that's not the BofE mandate. The explicit mandate of the BofE is essentially the same as the US federal reserve, and that's maintaining price stability. The side effect is supposed to be a successful economy.

You could equally argue that if interest rates were higher then those would would like to own their own home wouldn't be able to afford to anyway because they couldn't afford the mortgage payments.

high interest rates would take a lot of players out of the market. If interest rates were 5%, that would wipe out the ROI for a lot of people. That would make prices drop. "The" hope (quotes, because it depends on who you are. I current BTL this doesn't help) is that the price drop won't be wiped out by higher payments.

On the savings aspect, you have to look at the opportunity cost. In order to increase the propensity to save you would have to increase interest rates significantly and threaten the fairly weak economic recovery by sucking a out a load of demand for goods and services.

that depends on your point of view. We have a consumption based economy, and yes it will kill demand. But we are essentially borrowing to buy and overspending. Where is this money coming from? It's coming from our children.

We don't have inflation, in fact very nearly the opposite.

we don't have CPI inflation, but we have a lot of other inflation. Perhaps we aren't looking in the right place.

Depends if you think growth is good. At present we want people to spend more (not save) as that aids growth. Poor old Cameron got in trouble a couple of years back for saying people were wise to save as the party line for most Governments is supposed to be spend spend spend. However on an individual basis Cameron is of course right. Those of us on the thread who have done well will be those who don't spend more than we earn and who save.

Lurked I am not saying that higher interest rates are better. I am saying there are advantages and disadvantages to each high and low which there are for different situations. That is fact, not sure how much more convincing the argument on that can be

FWIW I have a degree in economics so I am well aware of the flip sides and don't need a lecture in them.

So do I! So if you do then you'd know that the economic context is key and the benefits of raising interest rates can be in general not applied them to the current economic situation.

You still haven't managed to offer a decent reason why interest rates should be raised now, or to counter my analysis of what would happen if they did raise them.

I'm not trying to lecture you, but the O.P seemed really unaware of how an increase in rates would not be beneficial for them.

Those of us on the thread who have done well will be those who don't spend more than we earn and who save.

but that's discouraged by low rates.

you'd know that the economic context is key and the benefits of raising interest rates can be in general not applied them to the current economic situation.

I am not sure history is much of a guide right now. We have basically never done this before. Rates have been near 0 for years. The issue was lowering them in the first place to such levels. Now we are up to our eyeballs in debt, and the low rates encourage more debt.

Debt bubbles have always ended badly, and we have never seen a debt bubble like this before. Raising rates will be painful, but keeping them so low for so long may be worse.

We have seen debt bubbles like this before in 2008 there were much higher levels of personal unsecured debt, and more 100% mortgages, also throughout most of the country house prices have not increased the same way that they have in London, but we also have tighter lending controls.

Interest rates will likely remain low for around 10 years, and it will be a long time for the historical average of 5% to return.

There is lots of hyperbole on this thread.

We have seen debt bubbles like this before in 2008

No we haven't. The run up to that debt saw interest rates at 5%, and we only saw a little of that debt unwind during the crash.

We have much higher personal and public debt now. I'll believe you when you say more of the debt is secured now, but that's with historically high house prices. shave some of that down and you don't have such rosy numbers.

The level of personal debt in was higher in 2008, we are still below those levels now, also post the crash personal debt was paid off considerably and households had a surplus of around £67 bn in 2010.

Finally, the level of debt, when student loans are removed sits at around£2,759 per household ( as of Nov 2015). when you account for overdrafts, loans, car payments etc it isn't that high.

I am saying there are advantages and disadvantages to each high and low which there are for different situations.

Exactly, lurked has put been spouting one sided stuff as if its that simple.

I'm not trying to lecture you, but the O.P seemed really unaware of how an increase in rates would not be beneficial for them.

Again with your know it all one sided attitude. A IR rise will have many affects for me some beneficial some not, but on balance and IR will probably benefit me. You have no idea what I have my money in, what industry im trained in and work in so it is ridiculous to just say outright IR rise wont benefit me.

We have seen debt bubbles like this before in 2008

What a ridiculous statement, debt has ballooned since 2008! They are running out of ways to manipulate the economy, they "saved" it and achieved tiny growth by printing money and slashing rates. What happens next time the SHTF, they can't lower IR any more.

There is lots of hyperbole on this thread.

Totally agree