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?

I am lucky enough to know I can withstand a 2-6% rise in interest rates, maybe higher. Though the higher it goes the less money I'll have for other things, naturally - and the more I need to keep my current level of job, about which there are never any guarantees.

But that's not because I am especially canny any more that someone struggling with that means they have been especially silly.

When interest rates have been so low for so long and the cost of buying a house has rocketed, it's not surprising that people felt they had no choice but pay those prices and hope rates don't rise again. There will be people for whom that gamble paid off and all/most their mortgages were paid off during the 13 years of low interest.

Add to that the inevitable job losses we're facing in the UK and we're all in for a bumpy ride, I think. Of course, some people make money out of bumpy rides ("the time to buy is when there's blood in the streets") so, no doubt, some people will be happy to see it.

www.landc.co.uk/calculators/mortgage-interest-rate-calculator/ will show you what your mortgages might be if/when interest rates rise.

I don’t need any help, thank you @goshy ☺️

@Mumofnowgrownkids that's a pipe dream for both of us I think...but 🤞

@Blossomtoes why the question then?

Have no insight into interest rates though would be interested from someone who works in the markets to say what the markets are saying for medium term interest rates. Would say that transport fuel prices may become deflationary when the annuality hits given they're already 10%? off their peak. Energy and food may carry on increasing but again the inflation rates relate to changes rather than absolute pricing so it will depend on whether the bulk of increases have happened. Secondary price rises might fuel inflation though.

Yes, I'm another who remembers having an interest rate of 15%+ on my first mortgage in the late 80s.

But a house is only worth what anyone is willing, and able, to pay for it. My first flat was bought on 3x DH's salary. That same flat goes for much more than 3x DH's salary because mortgage lenders will lend more. The semi-detached houses in our street are bought up by young couples at eye-watering prices, and everyone needs a mortgage based on joint salaries (plus a whole lot of equity).

Whilst we had more affordable houses, they became a lot more affordable for others when negative equity hit.

@Zilla1 I think it's quite uncertain & the BOE have been on the back foot. I think they would prefer to not be increasing them but they have to protect the pound. Energy prices are predicted to remain high for a few yrs & there will be a lag from Chinese supply chains & the war. I guess it depends on how bad any recession is.

Speaking as someone who remembers paying 15% on their mortgage for several years in the past.

But its high on today's house prices that's the point.

but back in the days of higher interest rates
Electricity was around 7p kwh and gas under 2p with average bills of £600 pa or so.
so now, even for those who are relatively well off there is no spare money to cover an extra £500 a month or so in outgoings

What was the figure this morning? Was it around three quarters of households will hit fuel poverty in 2023. Interest rises won’t help with that, it’s not consumer spending driving it. It will just make things worse and lead to further job losses and repossessions. We can weather this but you’d have to be a bit dim not to see the wider issues here.

so now, even for those who are relatively well off there is no spare money to cover an extra £500 a month or so in outgoings

There wasn’t before. That’s why the market was flooded with repossessions with nobody to buy them. The government has run out of means to prop the market up so it wouldn’t surprise me to see a big correction in the housing market in which inevitably there will be big losers.

There won’t, the majority of homeowners have no mortgage. The issue you’re going to see is families and those of working age with houses get repossessed which will be catastrophic economy wise. Older people sat on loads in equity, probably getting extras like warm home too. Not paying student loans, taxes, childcare and not actively contributing. They will snap all the houses up.

This will just make the inequality worse. A big correction to allow families onto the ladder won’t happen. Have you seen most of the posts on this thread?

Quite a few of the older people I know have bigger houses but don't have the monthly income to heat them with the price rises. There are plenty of pensioners who have a lot of money tied up in their property, but live on modest pensions. I wonder if many will be tempted to free up some equity by downsizing.

the majority of homeowners have no mortgage

Only just and that’s set to fall.

www.ft.com/content/b69f0787-901c-4ef1-85f8-3201c06d1b91

There will be no snapping up of houses, nobody wants to catch a falling knife. The market will stagnate for a long time, just as it did 30 years ago.

Stagnate maybe - crash I doubt. Too much money floating around ( just not where it is needed).

@Whyareyouasking Indeed. My recollection is that repossessions happen at the margin with just a freeze on most activity because as you say most houses are owned without a mortgage. Banks tighten lending so first time buyers get frozen out of the slightly lower pricing so there is a further concentration of home ownership amongst the relatively wealthy and a net relative transfer of wealth to the richest. House moves for jobs reduce so a slight further negative impact on the economy but to labour market immobility.

100% There will be no crash it will exacerbate inequality.

Too much money floating around

Really? Who’s got all this money? And please don’t say boomers because most of that generation’s wealth is tied up in its homes. Like I said, no investor puts money in a falling asset.

Same! but then I'm one of those jammy bastards who got a mortgage last November at a rate of 0.99% for 5 yrs.

I feel for the poor buggers who are due to renew their mortgages in the next year or 2. Or have outstanding balances on variable rate credit cards.

100% There will be no crash it will exacerbate inequality

Economics doesn’t give a fig about inequality. That sort of statement has a habit of coming back to bite you.

The impact on disposable incomes means rates need to only get to 6/7% so have the same impact as double figs in the past. All relative

But people are so much more wasteful these days. That is why they have less disposable income.

Yes and house prices compared to the average wage we're nothing like what they are now. It doesn't affect me because I'm fortunate to live in a house bigger than I need in a northern town but I don't think it's unreasonable that people in the SE, with both parents working in a professional job, want to live in a 3 bed house with their family not a 1 bed flat and so stretched themselves to that. My parents bought a 5 bed house in the 90s on a single salary and paid off the mortgage in their 40s whilst bringing up 2 children.

That would be great for me but for most it would be tragic and could lead to losing everything.
My mortgage is on a 5 year very low fixed rate, I took it out when interest rates were rock bottom a couple of years ago and it has 3 years to run on that rate before I've paid it off.

I paid off everyone of my debts last year.
My savings have been sitting in the bank making nothing.
I'm retiring in 7 years time so I've been doing some planning.