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.

Worth remembering that the BOE base rate only went up a few days ago. It usually takes the banks a week or two to adjust their fixed mortgage rate offers accordingly. So I think the rates being offered today are unlikely to be the same rates available in a few weeks time.

In the 90s my mortgage went up to 75% of take home pay.

14.5%, I was 0% away from handing in the keys, then the rates dropped and dropped... thankfully. Could not believe how low they went.

I feel for those who are now facing increases, I remember the fear in the pit of my stomach every time the reviewed figure came out.

So I bought first house in 1990 when interest rates were at 15%. It took a long time for them to drop, and it wasn’t until -2008 that rates became exceptionally low and fell dramatically. Rates have been very low and stable for an exceptionally long period of time in last 14 years. These rates are unprecedented, lowest on record since it was measured this way in 1800

you can look at a chart of historical trends in interest rates on line - between 1800 and 1950s they averaged 4% with a few peaks and troughs, but relatively stable. They began to rise in 1960s , peaking in 1980s at 17% , and then beginning to descend in around 2000- during that period 1960 to 2000 they averaged ~7% but with big variability.

Bottom line you are talking 15-20 year trends. But based on historical performance it is unlikely that they be below 2% for many many years. .

if I was planning on paying mortgage for a long time then I’d be planning on dealing with rates going up to even 10% in next few years, but averaging 4-5% over mortgage lifetime if I’m lucky.

sorry, but we’ve been living through an exceptional period which I don’t think will happen again given impact on uk business and growth of covid, brexit and general supply chain and labour issues. I think I’d be locking in on a fixed deal mortgage for as long as possible just now and if I could get a rate of under 3% would be grabbing it with both hands- those fixes form5 years plus at that rate seem to me a very good gamble.

I planned for this a year or so ago. I had a house which was fully paid for but increasingly too small for my maturing family. My son was starting full time employment and my daughter had never slept in a full length bed.

So i looked at how the world was shaping up with covid, interest rates, housing market and decided that there was a HUGE chance of increased interest rates. Now that would probably be the point where you decide to sit tight and ride it out. Instead i looked at my kids and decided that there was no way we could manage as 4 x adults. Eventually i decided to move to a house double the size of my old house. I mortgaged at a term which finishes before retirement and on lower payments than i had finished on the old house. I also kept quite a chunk of equity for forthcoming issues which should now start to see some interest payments.

The big bonus has been that my adult son and daughter do not have the pressure to move out and join this madness. They can live here as long as they like and the extra 'keep' my son pays should help towards the increased utility bills etc.

In other countries there is much more multi genrational families living together and i think this will become much more normal in this country. You might not like it but kids will end up living at home for even longer than they do now, possibly bringing up next generations together.

I think the BoE is less bullish than the FED and would rather increase every meeting at 0.25% to 0.5%, so that we have gradual increases, rather than one big increase. Both are still heading up though.

Property prices are dropping in Aus, Can, NZ, they started increasing interest rates earlier than us. It will be interesting to watch here over the next few months, as lenders will be watching what is happening there and tightening up lending accordingly.

So the Tories have something positive to say as the party conference season gets under way?

Oh, and key here with mortgage deals you may go into now is ensure it is flexible, that allow you payment holiday or overpayments.

first, if rates go up massively you can keep your payments stable and in effect be paying more interest and less capital off. Or if the worse happens take a payment holiday for a month . And then if rates do drop then keep payments the same and overpay on capital owing. No also shove any money you can into overpaying as and when.

keep your deals flexible if at all possible.

@Floella22 pm me. I’ve read my copy and will post it to you free. Everyone should read it, or a sanitised version. It was also difficult to get a hold of.

@yaxe

In fact it could be a perfect storm for people coming of fixes in the next 6 months. Decreasing equity meaning higher LTV, higher interest rates and banks tightening up lending. Some borrowers may be forced on to their lenders SVR because they can't get anything else.

The go Erne Nr is no longer in charge of setting interest rates- not since Gordon Brown, it is the BOE that sets them.

🤣go Erne Nr i 😱🤦‍♀️ that should read government

I thought Ernie was your nickname for Boris 🤣

Perhaps it is because they have money from deposits and savings. And a safe return of 2% to 3% (after the loans are repackaged and re-insured into a mortgage backed security) on someone else's money, is to be sneezed at, particular when share prices are falling and bonds seem now to be more correlated to equities. It used to be bonds went up as shares went down as investors sought safety, but governments printing money and buying bonds to bail out the bankers has created a bubble in both the stock and band markets. I've paid off my mortgage, but if I had a mortgage and could get a 10 year fix at 3% then I'd grab it before rates rise.

Actually, not just the next 6 months, the foreseeable.

Anyone who has bought at peak with a small deposit could see their equity wiped out and higher interest rates. They could be trying to remortgage while in negative equity - their only option will be high interest SVRs or to sell up.

@Advert

It took me a year to get my head around investing.
That's because I had a mental block on it.
I think it's worth self investing and learning a little about it.
Podcast's , Google.
A very good place to start is simply learning about jack Bogle, vanguard and his fund's.

It may not be for you but I've got a little money in pb and stocks and shares ISA, and cash in the bank.
I've won 75 on pb over about 5 year's.
Cash ,zilch.
Stocks issa has been running at around 30%!! Even now stocks are v low it's well above 10%.

I have about 6/7 different funds within my.isa and they are large funds that include lots of companies, across different sectors, parts of the world etc.

Both are still heading up though.

I haven't said otherwise, I just don't agree they will be 7% in 6 months of double figures in a yr.

I think prices will stop increasing & then maybe drop a little with long stagnation which tbh we had in my part of London since Brexit. It was the SD pause that reduced things.

Soaring interest rates will mean losing all those huge equity gains. People won't be paying 1.2m for a terrace with a 10% mortgage

rate.

My S&S ISAs (variety of Vanguard funds) are tanking. But hopefully things will improve as I don't need the money now.

I think we are going to see a lot of repossessions in a year or 2 unfortunately,as it was in late 1980-early 1990s
when inter3t rates were at the 15% high value of mortgage debt vs salary was lower- the 3x joint salary rule was pretty strict and it kept house prices to that sort of level. So, with people borrowing 4x and more it’s only going to take rises to say 5-7% to absolutely cripple them.
i hope a lpt of people have flexible deals that allow over and under payments to provide some sort of temporary relief . Those sorts of flexible products weren’t readily available in early 1990s .

My feel is more gradual increases rather than a sudden big increase. So I think 0.25% to 0.5% at almost every meeting. Which would give us a base rate of around 3% in early 2023, so mortgage rates will be 4-5% depending on LTV. I don't think they'll go down again in the foreseeable though, although they may plateau for a few months before increasing slightly.

I remember that time well as I'd not long had my first mortgage. It was defnitely not just couple of days, google is your friend for the specifcs

Am i missunderstanding this question?

The way i see it is if the BOE interest rate is currently 1.5% (Example) then whichever mortgage provider can then offer it at say 2.5% over 5yrs or 3% over 10yrs. They pretty much go out and 'buy' the money at 1.5%. Their return is guarenteed.

If the BOE rate then increases to say 2.5%, the mortgage provider will then change their NEW mortgage offerings to 3.5% over 5 yrs and 5% over 10yrs.

The BOE rate is the rate money lenders can go and 'buy' money to then lend it out. Once they have bought the money for your particular 10yr fixed, it doesnt change rate.

@yaxe

Although I'd caveat that with a sudden shock to the economy may force the BoEs hand to raise interest rates more sharply.

It’s always a gamble - we fixed into a 5 year mortgage in 2007 when we bought our first house. The interest rate was 3% initially and was stepped up gradually to the then base rate of 8%. We were paying over £1000 a month interest only for a 2 up 2 down worth £125k. The economy crashed the same year we purchased and the interest rates plummeted. We were stuck paying more and more while the base rate went into free fall. When we were moved onto the tracker rate we went from payments of £1k to £150 a month. We are scared to fix for any length of time after this experience so we are at a loss of what to do I. The current climate.

Yaxe my vanguard FTSE 100 is 18% vanguard life strategy 20 % and the us one is 28%.

My whole sipp and isa is tanking.

But those are still very good %.