Uk interest rates expected to double by feb

[gracedentssketty]

Read in telegraph and Bloomberg this morning that the markets are betting on this with one analyst saying they are likely to hit 4%

are we all screwed?

...and STILL no fucking sign of any government.

Damn them all.

Yeah, how dare we burst your "poor us" bubble. Early 90s was multiple redundancy time for us, but hey,who cares right?
🙄😔🙄🙄🙄

I doubt it will hit those levels, at least by the official statistics (which under measure inflation) but who knows at this point. If rates go up to 7% a lot of people and businesses will be in serious trouble. It's a very frightening thought.
I can see the pound falling and house prices falling a great deal too.

Oh please. I know people who lived with repossessions and redundancies born in the 50s and 60s and they openly speak about how they have never known anything like it.

I was born in 1956, and thus have "enjoyed" a ringside seat on the roller coaster. Without over-egging it, the 70s, 80s and early 90s were extremely uncertain times for most, and after 1995 it calmed for many years, interrupted by the GFC of 2008/9 and all the pain of UK austerity under George Osborne. But the end-result is that we are looking back and lamenting a somewhat charmed period. Only a few people got everything they wanted, and some had to row damned hard to stay afloat, but most people saw their standard of living increase, science/medicine begin to make real progress against AIDS and cancer. And humanity is still getting better at understanding the world. It's not going to preserve my DM87 or DMIL93 with dementia, but they are already on the exit route. I may change my username to PollyAnna, but optimism and curiosity about what might happen next really mattters.

I’m glad you can muster optimism and curiosity @XingMing. I’m three years older than you and frankly I’m scared shitless. Not for us - we’ll be OK - but for our kids and their generation. I had optimism and curiosity in the 70s, now I’m old and jaded - and terrified. This is going to be bad.

@Blossomtoes I agree, the next years are going to be bloody. And like you I fear for our children. But I still think there will be important science/tech progress and that there will be a future.

I want to see the development of tidal power generation FFS. It comes in and goes out on a totally predictable timetable... it's so predictable that it's possible to know now within minutes when high tide will be and how high it will be on 23-08-2378.

At this point they may as well employ me to make predictions

The reality is that Businesses and Homeowners will go onto “interest only” and extend the mortgage for a couple of years, it’s in nobody interest to have repossessions and forced sales. Banks are going to be flexible unless the situation is hopeless, but that does not mean there won’t be extra charges.

With luck normality will return in a couple of years, that is dependant on the Ukraine war being settled, no guarantees on that.

I am sick of the older generation going on about how they paid 15%. It was for a short time and in very small amounts. It’s comparable to paying 7% now.
Most people haven’t chosen to overstretch. They’ve had no choice. Previous period of high interest rates have had wage growth too

Not true on all counts. I remember my parents paying 15% on their mortgage and it wasn't for a short time (admittedly the house cost buttons compared with today). My husband paid 15% on the mortgage on his first flat in the 1990s. He was also in negative equity for several years and sold at a loss, he was just lucky he'd been able to save a decent deposit through living at home. I had a colleague who'd just given the keys back to the lender. The early 90s were not fun for a lot of people.

As for overstretching, people do have a choice. They decide they "must" have four bedrooms when three would do; they buy expensive cars on credit and take out loans for home improvements that they don't "need", but want. That's all fine, but don't dress it up as having no choice. You do have a choice. I have no mortgage now, but that's only because I bought (and stayed in) a smaller house than I'd ideally like.

Anyway if we get hyperinflation you'll be laughing as mortgage debt will be wiped out and those of us who've saved will be stuffed.

The reality is that Businesses and Homeowners will go onto “interest only” and extend the mortgage for a couple of years, it’s in nobody interest to have repossessions and forced sales

That’s a hell of an assumption. Allowing huge swathes of people to pay interest only is just kicking the can down the road. And for people in the first few years of their mortgages almost all the payments are interest anyway. It was definitely in lots of people’s interest to have repossessions in the 90s. The housing market has been artificially inflated by government manipulation for years, it’s naive to think it can continue indefinitely.

With luck normality will return in a couple of years

7% interest rates are normality, it’s the last 14 years that have been abnormal.

I don't know whether banks will be willing to go as far as interest only, but I do envisage more people extending mortgage terms as a way to keep payments affordable. Obviously banks can enforce but that's an expensive option, and they may prefer alternatives.

Higher interest rates were historically more 'normal' but PPs might want to remind us what the value/income multiples were in the 70s/80s compared with now? It is location dependent but when I looked, the price to median income seemed to tootle along c 4x in the 70s and 80s and is 8-11 now? For PPs reminding everyone that higher interest rates should have been planned for might want to think whether buyers might have liked that deal if they could have bought their homes at buyer-friendly historical multiples.

It’s not a question of whether or not people would like it. Ridiculously low interest rates have allowed house prices to rocket. Adjustment works both ways. It’s completely naive to think that the economic forces that operated in the past no longer apply. They do.

I'm not sure that will happen.
For starters, we are going to return to 'normality' in a couple of years whatever messages the government and media keeping giving us.

@Zilla1 - I think any sensible person would rather buy a house at an affordable price with a higher rate of interest.
@gatehouseoffleet - I disagree that people have had much choice. There may be some who chose to over stretch when they had no actual need for a larger house but most simply want to house their family in a convenient location for their work. Younger people have been forced to take on high levels of debt to be able to house themselves and their families.

@rainingsnoring I agree. I find the 'anticipate the unexpected apparently justifiable but a little odd as chatting with acquaintances whose job it it in the City to 'predict' this hadn't anticipated this otherwise they'd have filled their pockets with generational wealth instead of just making obscene money off the volatility. Perhaps we all should have anticipated COVID and saved. And Ukraine and bought energy futures too. Though timing the energy futures which crashed in 2020 and spiked in 2022 might take someone with real intelligence, more than me.

Really?

Me and DH both worked when we got our first mortgage. We could not afford anything in London (where we both lived and worked) and had to move about 40 miles out into Kent to afford to buy.

I had a pretty well paid job at the time, DH not so well paid but both our wages was not enough to get a mortgage on just about the cheapest property we could find and we had to get a top up loan.

Lots of our friends and family bought within a few years either side of us buying and in every case both partners were working.

My parents both worked and could not afford to buy and the same was true of DH's parents. They were certainly much worse off than most people today despite both working.

Within a few months of us buying the interest rate went up and up and up. We had to take in a lodger, eat beans on toast most nights, literally never go out, no holidays etc.

My DH worked shifts and to save on my train fares I would go with him which meant leaving at around 5.30am when he was on early shift. I would go and sit at his parents' house for a couple of hours before going to my office.

Interest-only generally maxes out at 25 year terms. Not massively going to help anyone who has 38 years to go. Lenders are also strict on their criteria. NatWest require an income of £75k and max 75% loan to value. They're not just going to do the equivalent of a capital mortgage holiday.

Brutal, but true @Dashboard. Banks are in business.

That said, I liked the ancient version of banking model. 3-6-3. Personal account banks (and building societies) take deposits at 3%, lend money at 6%, and are out playing golf by 3 pm. Move the figures around but keep the ratios very similar; everyone knows and understands, and leave investment banking and risk to the merchant banking sector, who are paid squillions to evaluate geo-political risk capital.

The reality is that Businesses and Homeowners will go onto “interest only” and extend the mortgage for a couple of years

I've always had interest only mortgages but the terms are like chalk and cheese from my first to my current.

The last time I remortgaged (even with a 25% loan to value), I had to cover the full mortgage amount with liquid assets. I have equity investments in an ISA and they would only count 80% of their value, and zero growth.

Luckily I have sufficient cash reserves to cover the mortgage amount but this wasn't the case for my first mortgage. Back then, all I had to show was a plan to make regular contributions to some kind of savings or investment product.

I'm sure they'd take sale of house to cover an interest only mortgage if there was sufficient headroom but they're a lot harder to get than they used to be (from my experience).

Pound decoupled from Euro and at 40 year low against the dollar. Of course its only interest rates and not a view of economic policy and expected comparative economic prospects said how many in the markets?

Now a 49? year low against the Dollar. Must be those differential interest rate changes in the last couple of days and not expectations of comparative economic prospects.