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?

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

But all the other huge increases are relevant which was the posters point...

Here's my eye roll too

🙄

Another excellent contribution 👍🏼

Possible advantages of raising interest rates: Slowing inflation, helping people living on savings (particularly pensioners and those who have lost their jobs but have too much in savings to qualify for benefits) and slowing the exponential growth in property values (which is denying lots of younger people the opportunity to own their own home). So perhaps not all bad?

I agree, @ThroughThickAndThin01 . You only have to look at the history of UK interest rates to see that those rates were absurdly low, for a ridiculously long period, and only have to have a minimal grasp of economics to see that such low rates cannot be maintained indefinitely (unless you live in Switzerland).

Housing in this country is totally fucked, the combination of uncontrolled rents, hardly any social housing and no secure tenancies in the PRS, and unfeasibly low interest rates for far too long has created an unsustainable demand for homes and led to the obscene house price inflation we have seen in recent years.

My house has "made" far more money over the 30 years I've owned it than I could ever have earned by working. That's just bonkers.

It will be a shock to some as usual but it’s sure nice to have the savings go up

Rates have been unnaturally low for too long; 4% sounds about right.

DH and I will suffer as we’ve only just got a mortgage, so will miss out on the historic low rates our friends have enjoyed for 10+ years, but never mind- our fault for not getting our acts together, and at least we are on the ladder.

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

Some friends of mine were in exactly that position when interest rates went through the roof at the end of the 80s/early 90s. They had to put bunk beds in their bedroom, cram their bed into the corner, and rent out the other 2 bedrooms to lodgers.

They lived like that for 3 years, until they'd both had promotions and could afford to pay the mortgage without the rental income.

If property prices fall somewhat along with interest rates rising, then the youngest generations could be in similar position or even slightly better off if they're able to make overpayments (appreciate that probably only applies to high earners).

But I suspect that will never happen. Property prices are propped up by so many factors that I struggle to see an eventuality where they actually fall. And the youngest generations will be in an even worse position than we are now. Well, time will tell.

Indeed.

Although 7% was fine when we bought our first 3 bed for £80k. Nowadays it's worth £300k so 7% is a nightmare for those who have just bought or are buying.

I'm not sure anyone would buy a house today if they stress tested for 7%.

You can have relatively high interest rates when house prices are low and vice versa. To have both will cause trouble for a lot of people.

Interest rates are still very low on a historic basis. There were around 8% for my first mortgage.

Capital Economics are currently forecasting the base rate hitting 3.0% by Q2 2023 before falling to 2.5% in 2024. Even with a margin, most mortgages are likely to be well below 8%.

I understand it's tough with the cost of living squeeze but they've been artificially low for quite a while. They were unlikely to remain there based on history.

When we bought our first house, we were both working at Big Four firms and I had a notebook with all my outgoings and incomings (in my defence, I was studying to be an accountant) as there wasn't any extra money left after the mortgage and living expenses.

Taking on board the comment about property prices rising, our first home cost £250k in today's money and the second £800k (using the HL inflation rate calculator).

So we were still paying 8% interest on a fairly high property cost (granted that our equity went up between the first and second).

This gives some an idea why people are getting jumpy over interest rate rises because of the context of wages to house prices. 15% rates give only some of the picture.

One of the things to keep in mind on threads like this too is that mortgage holders have had it good for a long time regarding rates- people who rent privately have to budget for often large rises every year but no one ever shouts our about that.

I've seen lots of threads about people unable to afford or unable to find a house to rent. That's also a massive problem. As above rates have been low but on massive increase in house prices.

@Bumtum126 i saw the Irish president talking passionately about how you can’t let the ‘market’ decide things like shelter and heating etc. and it’s true. Ultimately you can trace it all back to Thatcher selling off council houses!

Government intervention is only going to take you so far against the market function of supply and demand. It also has to be paid for. Unless you're part of OPEC, global energy prices in particular are going to be hard to influence.

I gather the rental market in central London is mad, one estate agent said they usually have 90 odd rental properties available at any given time and it's currently two.

People will be spending all their money on food, fuel, and housing.

Businesses that sell non essentials will have a huge drop in demand and go bust.

Things like:
Cafes
Gyms
Subscription services
Leisure eg cinemas
Events eg weddings/gigs
Clothes
Toy shops
Jewellery shops
Delivery / takeaway food
DIY shops
Furniture shops
Car showrooms
Pubs
Hairdressers/ salons

We have a future of high streets with charity shops and not much else.

Unless you're part of OPEC, global energy prices in particular are going to be hard to influence.

They are hard to influence in the short term. But all previous governments for about the last 10-15 years should have been prioritising food and energy security. Investment in renewable UK-based energy supplies that reduce dependency on oil and gas for energy.

Global energy prices could also have been softened by not doing away with all the LPG storage in the UK, leaving us with reserves we could have called upon.

And while they're at it: water security also should have been a priotiy. Not letting the water companies sell off/cancel reservoirs and pump shit into the waterways.

But the last few governments haven't done that - because that would require doing what's best for the country, not their own bank accounts.

Yes, what recent governments could have done is ensured we were better prepared and protected when shocks like this did come along. They've failed hard.

They've failed hard.

This.

My new build has solar hot water and it's brilliant. They should be mandatory for all new builds afaic as they can reduce gas consumption by 60%. IME I don't use the boiler from March to October and only use the gas hob so way more than 60% for me.

Solar electric is harder to implement due to cost but they'd come down in price if they were more widely adopted.

And they are still failing on water.

Water supply and cost inflation will be a future challenge - and I don't suppose that'll be far away if climate change continues to increase UK heat while reducing UK rainfall.

Agreed and this has already been happening over the last decade already, lots of vacant shop premises and businesses failing. That will escalate.
People in other sectors will also be made redundant. I think the financial and banking sector is hugely at risk.

As @ShesNotTheMessiah says, successive governments have failed in terms of working of energy storage and energy supply in general plus water security and tough regulation of both things which are absolutely key to the economy and security of the UK.

Going back to @gracedentssketty's initial question, yes, some people's homes and businesses will certainly be at risk due to the rapid and significant rise in interest rates.
House prices have already started to fall and will continue to do so as affordability becomes increasingly challenged in the face of both interest rate rises and a huge increase in the cost of essentials. It isn't relevant that some people have lots of equity or money in general. The prices are set at the margins so if you have one or two sales in an area at a much lower price, the value of everyone's house comes down. Someone earlier commented that they won't sell their beloved family home at below market value. Well, the (theoretical) market value for that poster had clearly risen tremendously over time but it can also go down. The market value is whatever it is worth at the time of sale, not at the market peak nor a figure that the seller has in their head.

@MyNameIsAngelicaSchuyler

I think this is the problem. My first mortgage was 15.8% interest. It was affordable because house prices were low

Then interest rates came down, so people could afford to take out a higher mortgage, so house prices went up

Now, we still have the high prices, but mortgage rates will increase

Possible ways it could turn out might include house prices falling, multi generational living, more shared housing eg lodgers and (not popular, but would help some people) people cutting their cloth eg foregoing holidays, buying second hand furniture, living a more frugal lifestyle

For those who are certain recession and marginal reduction in prices will be good for first time buyers might want to think what traditionally happens to the supply of properties from sellers who don't need to sell together with what banks traditionally do to lending criteria and mortgage availability. Inflation can be the long term 'friend' to the mortgaged who can hold on as the debt can be reduced relative to incomes and prices but perhaps less so to first time buyers.