To ask when interest rates will likely go down?

[AnxietyLevelMax]

We are close to remortgaging for the first time. Long long time ago i was happy and excited thinking we will be paying less by £200 min per month. Right now our rate would change. We still have 5 more months before we can remortgage so we can end up paying even more than now.

how long do u think it will all last?

i dont know how we are going to do that, we cant save anything now because we are paying debts, childcare is expensive as hell, everything is expensive, we barely make it month to month paying debts off but it will still take us 1.5-2 yrs min. We have no financial cushion. I am worried as hell, cant sleep worrying if something happens we dont have any extra money.

Inflation is expected to peak at the end of the year, so I expect that interest rates will peak at some point in 2023. I can't imagine them getting very high because I think we'll be in well into a recession before they get anywhere near 5% - but who knows.

Can you extend your mortgage term to reduce monthly payments? That's what I would probably do in your situation.

If forecasts are wrong and inflation continues to rise, then wages will have to rise significantly over the next few years. We are already seeing record wage rises this year. While inflation is associated with higher interest rates, it also erodes the value of the debt.

I agree, @TwinklingFairyLights .

The big difference between now and the high rates of the 80s and 90s is that most people now have fixed rates. They were still quite a new thing in the 80s, not many people had them, and because rates were high, people expected them to go down, which made fixing less attractive.

With most people now being on fixed rates, they won't all be affected at once, and the impact on prices will be more gradual. I don't think we'll see anything like the big crash we saw back then.

Pre-crash, the house I had then was valued at £87.5k, I eventually sold it 4 years later for just under £50k.

What is so very different to our mortgages from the 80s/90s is that back then , you had to just suck up the high interest rates or sell ( often with negative equity ) so many just moved into rented accommodation.

Today, the majority, I believe (but can someone put me right) live in rentals and house shares which were not common back then.

There are too many rentals that have been purchased on a 'buy to let' basis so if the landlord cannot afford the mortgage repayments then the landlord will have to sell meaning tenants could be forced out.

Or , the landlord could put the rent up meaning tenants could be forced out.

It's not a great time for homeowners buts it's a more precarious situation for renters.

And you won't be paying the interest on that £6k.

You save more because it's kind of like compound interest, but in reverse.

"Normal" inflation might erode the value of the debt but that probably last happened in the 1970`s (it was very high inflation but the debt certainly got eroded for many people due to wage rises) but remember workers were heavily unionised back then and the cheap credit housing bubble has been a convenient way for politicians to hide the lack of any real wage growth for a couple of decades at least. Now we are in the uncharted waters of central banks trying to fix the policy mistakes related to too much money printing with supply chain shocks and a war ongoing that is creating even more inflation, slamming on the brakes at this stage could result in "stagflation" with even higher costs and job losses related to demand destruction, not good for paying down debt.

Homeowners probably don`t care too much, unless the were banking on a windfall for their retirement, mortgage debtors need to care a lot more because they will be paying a lot more, and I believe it is a lot harder to "force tenants out" than it used to be?

This is an informative read

The pros of 10-year fixes

I'm allowed unlimited overpayments on my mortgage so have already increased my standing order so it's not such a shock when they go up again, was nearly 3 times as much when I took it out 15 years ago but I'll never get such a good deal again so not looking to change. Fortunately I've paid of a good chunk of capital through overpaying so should be affordable when the rates inevitably go up, up, up!

We paid off a big chunk and owe much less. Our mortgage payments went up when we remortgaged.
We don’t have a huge mortgage either.

I think rates are only going up.

You know they are going up. You have no control over that. Stop panicking and start planning. You must pay mortgage, council tax, childcare and getting to work. All other debts are negotiable.
If they cannot evict you or jail you then those debts take their chance
If things are really bad look at debt repayment plans. Otherwise, as soon as you know the new mortgage payments write to your non secured creditors and re organise your repayments.
I am afraid we are in for a long haul
Good luck

My best guess: 2025

5 years plus.

I don’t get why interest rates are going to increase because the inflationary pressures are price of energy and commodity prices. This is all going to put us in a recession and there’s nothing interest rises are going to do to stop that.

There's two sides to this coin. I'm 65, a WASPI and had a mortgage during those periods, that others have mentioned, when mortgage interest rates hit 16%. In the latter years the interest rates on our savings fell away to near nothing. So asked me if I'm bovvered about them rising again or if I want them to rise even higher.

thinkplutus.com/uk-interest-rate-history/

The interest rates have been abnormally low for quite some time.

Hi, I don't know about intrest rate. But I would like to suggest, you have a chat to step change, they are a debt management company, its totally free and they are helping me.
They will be able to help you do a budget, then they can talk you through some different options. I am doing a debt management, but there are IVA's and other options to suit.
I am paying what I can afford every month, it will take me a while to pay off, but it doesn't over stretch me. They will take into account your mortgage. You don't have to go with them, but they can help and you pay them, they then pay your creditors. I pay £58 a month between 6 creditors. Some companies take a cut of your money, but step change don't. So all your money goes to the creditors.

@Bard6817 the Bank base Rate doesn’t just affect consumers, it affects commodity prices too because businesses also have debt. You’re right that inflation is currently being driven by supply-side shocks. For prices to stay stable, you need to balance supply and demand - in this case that means reducing demand, by essentially increasing the cost of money.

The 18% mortgage was real at the end of the 70's and it lasted for a couple of years. We had to cash in the endowment policy and swap to a repayment mortgage at the time to afford the repayments.

Will this do? I remember having a mortgage in the late eighties early nineties that literally doubled. I had to get a full time job instead of part time, couldn’t afford child care so had to work the afternoon shift while my husband worked nights.

Back in the early 90's. I purchased a house in 1991, by 1993 the interest rate was 17%

It's a bit odd that they are no longer stress testing mortgages

www.thisismoney.co.uk/money/mortgageshome/article-10934603/amp/Mortgage-affordability-test-axed-Bank-England.html

I noticed that earlier but haven't read up on it properly yet.

is it because most people would fail on a stress test at around 8% which is what it would be?

I also read that 7% on today's mortgages is the equivalent hit to disposable income that the double fig rates were in the past

Sorry but it’s all been too low for too long. A lot of assumptions made that everyone can continue to max out their finance, get a massive increase in equity and have a low, low rates of a mortgage so they it’s practically free money. It’s unrealistic.