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.

The markets are currently betting on the BoE raising rates to 6% and traders are getting on an emergency rate rise in coming days (not weeks or months).

The thinking is that there could be a base rate increase of 1.5% or more before the next monetary policy committee meeting. So that would put it at 2%+ within weeks.

Bond yields are rocketing today, from what I can see.

(Anyone else considering buying bonds whilst the return is so incredible?)

So that would put it at 2%+ within weeks.

Apologies - meant to say "put it up by 2% in weeks" - i.e. the 0.5% we've just had and another 1.5% or more on top in less than a month, if it happens.

I thought this was interesting from Peston.

www.spectator.co.uk/article/the-bank-of-england-has-no-good-options

@SofiaSoFar

I guess the rates look attractive compared to some other/recent returns. But remember that is what the market currently thinks they are worth - the challenge is to find whether or not the market is mispricing them.

I think the mini budget has been the trigger for the recent turmoil, but I don't think it is the cause. The cause is the UK economy being over reliant on debt (primarily mortgage debt) and the BOE's failure to rise rates to curb inflation as fast as the Fed (probably because they are scared that if they do they will trash the economy because of its over reliance on debt). If this goes on for much longer my guess is they will forget about trashing the economy and get back to their primary remit (inflation), which is the same noise the Fed is currently making. I'd expect if they do an interest rate rise they will make a strong statement about inflation along with it to get themselves aligned with the Americans.

It is certainly interesting. The theme being that there's no good course of action for the BoE right now.

Just looking at some of the market news, the Telegraph are reporting that the BoE are preparing to make a statement about action they're going to take as early as today.

Thank you all for 27 pages of your thoughts and ideas. Read it all but had not much to say though at the time.

Going back to my initial post - we are remortgaging now with an additional borrowing, 10 years fixed. Additional money will cover debt which we have with family, some bigger bills in few months and remaining £4k will be on a saving account for “what if”, as we were completely broke, any unexpected expense would kill us so i have a little peace of mind.

we have decided to extend the mortgage length but will be overpaying every month so we are where we should be after 10 years. If something happens we can cancel the overpayment and have couple of hundreds for us if needed.

i feel it was the right thing to do for us. We just have to go through a year or two until we can get 30 hrs free childcare which will help finances a lot.

I’m fed up of hearing people saying on the likes of the Jeremy Vine show , that we had years of higher interest rates , we should just get in with it etc etc.

Propert prices are much higher than they were even 20 years ago, in the 80s and 90s you could still buy houses for less than 60k.

Obviously people who’ve paid of their mortgages ( older people) want higher interest rates so they can earn more on their savings.

But penalising the working age people surely has no advantage?

You can’t have interest rates at less than 1% for a decade and then shoot them up to 6% within 18 months and expect people to be able to afford it.

And blaming people for taking out bigger mortgages. Well people can’t exactly help how much house prices have gone up can they ? They can’t all necessary move to cheaper parts of the country and in any case that pushes prices up too in those areas.

But salaries are a lot higher.

My mortgage shot up to 22% at one point. I earned £350 per month and was paying £2700 in mortgage payments. Dh had been made redundant.

My job now would be about £1500 per month and my mortgage was £450 for around 3 times the amount.

The last few years have been the only time we were able to save but that all went on an operation to save dhs life, no income for 20 months whilst Dh recovered then us all losing work because of Covid.

@Dave20

You are right. The problem is always the delta - the rate of change. Large delta people cannot adjust to.

It's the same with energy prices.

There may have been some other economic reason to hold rates low. If this was the case, then you need targetted policy to make sure specific market areas don't get out of control. For example they could have put a formal limit on mortgages for 2x wages. Which would have helped cool the market. But all governments since Major have been too enamoured with the high of rising house prices to want to curb the ever increasing debt levels and risk.

They have all desperately tried to avoid the market blowing up by goosing it further and employing tactics like help to buy and shared ownership. Essentially making the unaffordable affordable and increasing the susceptibility of the population to large changes in the rates. I think they even suspended some of the affordability criteria recently to try and pump the market that little bit further.

And of course a significant proportion public have bought into this for years, celebrating at the altar of ever increasing prices.

Now it's beginning to go t*ts up everyone is looking for someone to blame and of course calling the whole situation stupid, whereas for years they were buying into it.

I agree salaries are much higher

in 1999 when I got my first mortgage what I earns in a week I earn in a day now

and yes was on 6%

I said previously .thst I think rates will go up to least 5/6%

I think the mini budget has been the trigger for the recent turmoil, but I don't think it is the cause. The cause is the UK economy being over reliant on debt (primarily mortgage debt) and the BOE's failure to rise rates to curb inflation as fast as the Fed (probably because they are scared that if they do they will trash the economy because of its over reliance on debt). If this goes on for much longer my guess is they will forget about trashing the economy and get back to their primary remit (inflation), which is the same noise the Fed is currently making. I'd expect if they do an interest rate rise they will make a strong statement about inflation along with it to get themselves aligned with the Americans

The current turmoil is in the UK and in value of yield to worth of UK Gilts, yes other currencies have fallen against the $, not just because of IR's but that the $ is the currency investors run too.

Kwasi has wrecked the worth of bonds, hence Yields rise (its not a good thing at all) and the BoE is now buying 30 yr debt no one else wants, this is what South American economies used to do.

Too quick and high an increase in UK rates will scare the markets into thinking the crisis is getting worse and they (BoE) are very worried.....

This is all a self made disaster, as George Osbourne pointed out (with incredulity) "you don't increase borrowing to cut taxes"

Rates will go to 8% or higher still unless they both go, why? because just 2 months ago, they were predicted to be 3/4%

Because house prices have ballooned (because years of nearly-nothing interest rates made borrowing cheap), going up to 7 or 8% is going to see people's mortgage payments soar as much as they did when rates were 17% under Thatcher.

Salaries haven’t caught up with house prices though. My mums neighbour brought their house in 1999 for 70k. It’s now worth over £650k. 3 bedroom semi in London borough.

Wages haven’t gone up ten times in 20 years have they?

What was the average wage in 2000? Maybe 23k per year? It’s only about 32k now.

Salaries are a lot lower relative to house prices.

It is the percentage rise in interest rates that is particularly significant.

Many older people who had to endure high rates but on small mortgages can't seem to grasp the difference.

Exactly. The older generations had much lower house prices. Much lower.

5% is historic average-just have to live with it

I agree that interest rates at around 5 % is about right , that’s what is was before the financial crash.

My point is putting them up that high too soon is too big a shock for people.

Also, some people miss the point about raising interest rates. Property prices have gone up a lot in the last 5 years. So although ingests rates have been historically low for some time now, people have massive mortgages .

5% interest rates was ok when house prices were at an affordable level. Houses in my area are around 100k more dearer than they were 5-7 years ago. Wages haven’t gone up
enough to keep up and never will do.

I think they’ll peak at a max of around 4% give or take 25 base points next year then fall to around 3% and stay there for a while (unless inflation falls back really quickly then they may try to stimulate the economy). Eventually I predict them to stay between 2-3% until the next big financial shock forces them either up or down.

I’m not an economist so this is just my view. 5-6% rates are not impossible of course but they are not sustainable or desirable in the near future for all the reasons the news have been catastrophizing this week. The BOfE knows this. Unless something forces their hand they won’t raise them that high that quickly.

They’ve been historically low for 10 years, I think they will not be so low for so long again in our lifetimes. You can book a new rate 6 months before you want to start it, so with 5 months to go book anytime now. If you see better you can withdraw this and try again.

20andnever

It's going to be a while. They haven't even gone up fully yet!

@AnxietyLevelMax what did you do in the end

sorry if missed it

and as I said previously please don’t cancel life insurance - that’s the one guaranteed thing - you or dh will die one day / just hopefully not for years

@Blondeshavemorefun thank you for asking! My post is couple of pages back :-) here what i said:
Thank you all for 27 pages of your thoughts and ideas. Read it all but had not much to say though at the time.

Going back to my initial post - we are remortgaging now with an additional borrowing, 10 years fixed. Additional money will cover debt which we have with family, some bigger bills in few months and remaining £4k will be on a saving account for “what if”, as we were completely broke, any unexpected expense would kill us so i have a little peace of mind.

we have decided to extend the mortgage length but will be overpaying every month so we are where we should be after 10 years. If something happens we can cancel the overpayment and have couple of hundreds for us if needed.

i feel it was the right thing to do for us. We just have to go through a year or two until we can get 30 hrs free childcare which will help finances a lot