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?

@Hbh17

So, when you bought your first home, how much more than your interest rate did you stress test, how much did you save?

In which case you should have stressed tested above 7%

Interesting to see that many on here see this as a return - poorly timed and managed perhaps - to what rates ‘should’ be. This was always the received wisdom as I understood it. But having just moved from a lifetime tracker to a five-year fix, I noticed that the highest rates were on three-year deals while two- and five-years didn’t have much in them, suggesting that people see the present climate of higher rates as temporary. Recent articles I read around the subject all discussed when rates might go down again too. Quite a change from the previous commentary.

Interesting article here on a similar theme...

www.bloomberg.com/news/articles/2022-08-18/uk-recession-will-force-next-pm-into-u-turn-blanchflower-says

In which case you should have stressed tested above 7%

how high should people have stress tested to allow for a future pandemic or a war?

For mortgage interest 7% has always been the ball park.

To assume all other prices would stay stagnant is naive.

I'm not trying to be an arse, honestly.

I’ve always said they are so low and I expect them . To go back to 6/7 % to what I was paying when first brought my house in 1999

This is because we have a weak, low wage economy. The inflation is not being driven by excess money or spending. It’s being driven by essential fuel and food. What was the latest figure? I think 77% inflation for fuel. Raising interest rates only works if people are spending high, splashing the cash everywhere. They aren’t and it will lead to serious economic disaster. Many financiers and businesses are calling the BoE out, predicting the same.

Not assuming stagnancy is one thing. Preparing for increases of this magnitude following a very specific sequence of events is quite another. There's also the fact that most people's alternative to buying would have been private renting, which has hardly worked out as a bargain option in recent years.

There's a valid argument to be made about prudence, but it's being stretched beyond that here.

So people should have stress tested above 7% even though it's the ball park?

To assume all other prices would stay stagnant is naive.

No one said prices would stay stagnant but no one predicted double figure inflation except you of course.

To go back to 6/7 % to what I was paying when first brought my house in 1999

you can have high interest rates & high house prices & low wages.

cant have

I don’t know one financial advisor who would have stress tested fuel (an essential) at 77% inflation landing two thirds of the country in fuel poverty.

😁

well if they had they liked would be retired now 😆

You're an actual joker. If everybody stress tested to today's inflation levels nobody would ever buy a house 🤪🤪🤪

Does the house you want to buy fulfil your requirements? Is it in the right place? Can you afford it, even if the mortgage rate increases 3%? DO YOU LIKE THE AREA? Are the schools okay for you?

Only then do you push the buy button.

My mortgage offer told me what my payments would be if rates rose to 9.24%
I don't know if this counts as them stress-testing me

Not a joker, a realist I didn't suggest stress tests to today's inflation because that will be temporary. I did suggest mortgage stress tests to 7% though.

You put

"In which case you should have stressed tested above 7%"

That’s irrelevant though. That’s what people are telling you. Stress tests account for rate rises alongside inflation of essential living costs and outgoings. Inflation is at its highest in 41 years with fuel inflation which is essential, running towards 100%. There is no way any stress test would be relevant.

And, as a late baby boomer, there is no way I would be selling my lovely family house for anything under the market rate. I might need to fund years of care for me, DH and my DMIL. The money to pay those bills will be coming straight friom the proceeds of selling the family house. Don't waste time making an offer.

Because that poster I replied to was talking about mortgage rates plus all other increases.

Honestly, stress tests your finances or don't, it makes no difference to me. This thread was about interest rates.

Plus most mortgages are something above base rate.

Nope. 74% of mortgages are fixed rate deals and over 90% have chosen fixed deals since 2019.

Anyway - I actually agree that rates will go down again. I suspect this is why I was able to remo onto a 10 year fix at the same rate as a 5 year fix in March this year. We were due to remortgage next year so we paid the Early Repayment Charge to do it.

And, as a late baby boomer, there is no way I would be selling my lovely family house for anything under the market rate. I might need to fund years of care for me, DH and my DMIL. The money to pay those bills will be coming straight friom the proceeds of selling the family house. Don't waste time making an offer.

What's the market rate though?

There is also a lot of people who expect their mortgage free house to fund care or retirement or deposits for dc or all of the above. If property is impacted those people won't be immune.