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.

so are we thinking that house prices are going down then?

@JimTheShit perhaps- but high interest rates would result in still high monthly repayments

or less houses on the market because people can’t afford to move/ negative equity might cause stagnation of housing market

I was going to post something similar to this, but jcy beat me to it.

If anything the low interest rates for the last 12 years or so has created this issue. There has been a huge bubble due to low rates which has inflated prices far higher than what the houses are really worth. Now people are going to be paying higher interest on an overvalued house. Really shit situation for a lot of people. I can't really offer any advice, but I hope you manage to find a solution. It's bad for everyone really, even renters if landlords are selling up when prices start correcting.

Debatable. No one knows. There's a fair bit of debate between the experts. No one seems to think the huge price rises of the last few years will continue. Slower growth, stagnation or small drops (10%] are all being discussed.

You can't have high interest rates & high house prices

https://www.theguardian.com/business/2022/jun/20/bank-of-england-policymaker-calls-for-faster-rate-rises-to-prevent-weak-pound-fuelling-inflation?CMP=ShareiOSAppp_Other

You can. There isn't a direct relationship between the two as affordability is not the most significant driver of property value. A fall in mean house price measured on one of the bank indices doesn't mean that every house decreases in value. Most of those in the middle don't change very much, the largest percentage decreases are in the already over-valued top-end and the least desirable bottom-end of the market and these skew the overall average.

But if interest rates rise and house prices do drop significantly, things are even worse. The cost of living rises as the interest rate rises lifting mortgage repayments, and falling house value increase rates of negative equity at the higher LTV. Those that are most vulnerable to mortgage rate stress become those also least able to do anything about it.

This is absolutely crazy. The Tories wil do anything to prop up the housing bubble. Bloody hell. Just when affordability tests are needed more than ever they scrap them?!

Because house prices are not going to drop they literally do not care if you have to spend all of your wages on saving for or servicing a mortgage because the more people that are doing that the less people are claiming housing benefit to support private rentals, literally the only logical conclusion Or else they have something else up their sleeve which the back to you already leave dictate whereby universal credits will pay mortgage is again reducing the need for housing benefit because there’s an end date to clearing a mortgage.

I spoke with my mortgage advisor this morning he suggested that i hold my nerve, they are acting quickly to ensure that the things don’t get out of control and he is confident normality will return shortly.

obviously that’s only one opinion but it is the message seems to be coming through amongst people that do this for a living.

I spoke with my mortgage advisor this morning he suggested that i hold my nerve, they are acting quickly to ensure that the things don’t get out of control and he is confident normality will return shortly.

@Nothappyatwork - is your mortgage adviser authorised to provide financial advice? And was he advising you to wait to take out a new purchase mortgage or to remortgage (as per the OP).

millions went into negative equity

This is always painted as the worst thing that can possibly happen, but if you are in negative equity, unless you need to sell in the short term, you are still better off than anyone who is renting.

But inflation is being driven mainly by the cost of imported essentials (i.e. food and energy). You can't really cut demand much for these things.

Other business are having to increase prices due to increasing energy costs. If people stop buying, then they'll simply go bust.

I think that we're heading for a huge recession and high unemployment. High interest rates will not be maintainable.

I'm really sorry but this makes no sense at all.
House prices are very likely to drop for all the reasons already listed.
You seem to think that the powers that be have some special magic tricks up their sleeve to prevent this. They don't. They will try as they have been doing already but there are no further tricks that will make a significant difference.
The conversation you relay with your mortgage advisor also makes no sense. Who is 'they' that are apparently acting quickly to ensure things don't get out of control? Why is confident that 'normality' will return soon. Is he trying to sell you a mortgage product by any chance?

@DogInATent 'as affordability is not the most significant driver of property value.' What would you say is the most significant driver of property value if not affordability?

@MidnightMeltdown - I think the BOE (and politicians) are stuck between a rock and a hard place, all of their own making. They don't want to raise interest rates because they know there will be huge defaults causing the failure of the banks but they cannot completely ignore the rising inflation either. I think they will only raise rates significantly if they are forced to by the pound really tanking later in the year.

They won't go much higher, then they'll come down again.
GDP debt of the UK is around 200%. The UK Government would not be able to service the debt at an interest level of 5%.
Long-term comparisons are useless as we had gold standard until 1971 and since then (notably 2008 and 2020) Quantitive Easing has skewed the ´value´ of money.
QE bought around the current inflation (helped by Brexit, supply chain crisis and Ukraine war).
House prices have increased in terms of fiat currency, but remained stable in relation to the price of gold.
Unless a (brutal) tapering campaign is undertaken house prices won't come down (significantly) nor will rates rise (significantly).
@rainingsnoring the main factor for house prices is demand and supply. Demand massively outstrips demand which dictates that prices will continue to rise.

Is he trying to sell you a mortgage product by any chance?

A tracker or variable possibly?

https://www.bloomberg.com/opinion/articles/2022-06-21/property-is-the-crisis-risk-to-watch-as-stocks-enter-bear-market

"Meanwhile, in the UK, where housing has always been more central to the economy and to animal spirits, there are also reasons for concern. House prices in London, although not the country as a whole, are now higher in real terms than they were at the top of the last boom, according to the Nationwide Building Society house price index. London housing has benefited from the perception that it offers a haven for Russian or Middle Eastern fortunes, so the downward pressure from here could be severe:

Capital Economics Ltd. also points out that new sales instructions to property agents now exceed new expressions of interest by potential buyers. This has been a great leading indicator of falling house prices in the past."

There are some comments on here which display a shocking degree of economic literacy. @PetuniaT if you are waiting for a bank account to pay you a healthy interest you'll be waiting a long time. When interest rates were at 16% was the time to save. With interest rates at less than 2% and inflation at 11% it is the perfect time to leverage debt.

We have no debt. We haven't had any debt for years now and when we were paying mortgage interest rates well into double figures we didn't have any spare cash to save as we were just starting out on family life. The 1% increase we are now getting on our savings represents over £3.5k additional income. We're not expecting 16% again (we've got kids and grandkids to worry about) but the 6% we were getting, before Gordon Brown ruined the economy and pension schemes, would suffice!

@PetuniaT it wasn't Gordon Brown, it was Nixon 1971 (read about the end of gold standard). Gordon Brown is generally recognised as someone who saved the world economy (Bush didn't have a clue what he was doing).
Honestly you shouldn't be keeping your money in the bank. Low interest rates and inflation basically mean your money is diminishing in real terms. Have a chat with a qualified financial advisor, you return should be considerably higher. The days of 6% (or even 4%) are long gone, and won't return!
Best of luck!

@SauceGirl 'the main factor for house prices is demand and supply. Demand massively outstrips demand which dictates that prices will continue to rise'

I'm sorry but that's not correct. Demand is influenced by affordability and affordability has been very influenced in recent years by the availability of cheap credit and banks who are prepared to lend. If interest rates rise (which they are) and banks become more cautious about lending (which they are), the 'demand' will reduce as prices become unaffordable. The BOK is being reckless in reducing affordability checks at this time. It makes one think they are desperate to keep pumping the debt bubble (and housing bubble).

@IcecreamForAlcohol - I would imagine the sanctions will alter perceptions of the super rich the Londongrad is a safe place to keep (dirty) money which could well impact the high end market.

Agree, I think they are only going up from here. You can secure a mortgage 3-4 months in advance - I would do so before September when they will likely go up again

Capital Economics Ltd. also points out that new sales instructions to property agents now exceed new expressions of interest by potential buyers. This has been a great leading indicator of falling house prices in the past.

This is interesting. Wonder if it just relates to London, it isn't quite clear from the article.

@Pinklady245612

The next BoE meeting is at the end of July. Most people are expecting (but could be wrong) a base rate increase of 0.25 to 0.5%. This will filter through to mortgage rates by early August.

Interest rates in the late 80s/early 90 at mid teen % rates was not just 'a matter of days', the info is very easy to verify, not least directly from the Bank of England itself...

www.theguardian.com/technology/2022/jun/21/elon-musk-says-a-us-recession-is-inevitable?CMP=ShareiOSAppOther

Laurence Summers and Jamie Dimon are backing Elon Musk @Nothappyatwork

Are you going to give them a call and set them straight too?