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?

When I bought in 1991 the market was flooded with repossessions and lenders were offering 100% mortgages. There’s no reason to believe forced sales will never happen again.

I'm not sure who this is aimed at. I said that I think house prices will come down but nothing about FTBs.
I think it is quite possible that more properties will come to market for various reasons (lots more have come on in my area compared to 6 months ago already) but I also think that the banks will tighten lending criteria so it may benefit FTB with good incomes and secure jobs but be very hard for others. Having said that, it's always hard for that group.

This will be terrible for first time buyers struggling to get onto the market. I’m of the age that a lot of people I know are in their first time buyer houses that they bought 5 or so years ago. Many were planning on upgrading in the next couple of years, but are now thinking they won’t and will ride out this period on the cheaper mortgage fixes that they have.

We’re on our second house, and will do the same. We can ride this out as have 5 year cheap fixes and no desperate need to move so we will stay out and not think of moving for years now.

I don't agree house prices were low. We were middle income and needed two incomes for a mortgage in the 1990s. Everyone used to moan about it, especially if you had young children. They were low in the 1970s, not in the 90s and onwards.

Come on, of course they were low! I bought a two bed terrace in a very nice Berkshire commuter town in 1991 for £69k. It sold last year for £385k.

When I bought my 1st house you could only get a 25 year mortgage. Now you can get 40 year mortgages and I wonder if we will move to lifetime mortgages which some countries already have.

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.

yes, all short term thinking.

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.

I think it will likely help FTBs because FTBs today are not necessarily the same as the ones in the past. FTBs are the lucky ones who don't have to pay rents, they tend to have good incomes, low debt, savings for deposit & often help from family.

They were low in the 1970s, not in the 90s and onwards.

they defo were where I am.

The rates are too low as it stands. They need to get back to 3 or 4% and people need to plan with this in mind

This ^^

It's going to mean difficulties for those who've planned in the blithe hope that "it'll never happen", but reality doesn't bend because people hope something

I hope buyers now requiring mortgages are not falling into the trap of bidding wars. People really need to have a hard think about their purchases.

There seems to be more murmurings coming from financial corners that they won’t go much higher. I would think they are probably right. Historic interest lows were to restore confidence after the crash. Yet, we have a really weak economy (service industry based still struggling from Covid). Look at Cineworld going bust, that will be others too, food, entertainment, retail, beauty. These industries supply a lot of jobs. High interest rates only work when there is excessive spending. There isn’t - it’s fuel driving it with many job losses to come.

I think the lack of difference between short term and long term fixes is more aligned with the prospect of them staying lowish.

This is true @goshy

whst I earnt in a week I now earn in a day

20yrs + later

Me too. I lost out when rates plummeted because I had a fixed rate; then I lost out when my mortgage was paid off because I get rubbish interest on savings. As DH approaches retirement, we need interest rates as high as reasonably possible so we get a decent income in retirement. 5% is reasonable - also it might encourage people to live within their means and not live on their credit cards to keep up with the neighbours (that said, they were higher than 5% when the financial crash came, so maybe interest rates don't help diffuse aspirational middle class ambition).

When I was 11 we bought a house and my parents were paying 14% interest on their mortgage.

(although you could buy a decent house for much less money proportional to earnings back then)

also it might encourage people to live within their means and not live on their credit cards to keep up with the neighbours

how do you know all your neighbours live on their credit cards?

Why is everyone saying the rates are too low? What does that even mean in the context of the reasons for today’s high inflation? Inflation is not being driven up by demand - it’s being driven up by fuel prices and everything that is affected by fuel prices. The last thing we need at the moment is even less demand for non-essentials (which will happen if mortgage and rent costs increase as well as fuel prices) otherwise even more businesses will fail.

But I’m not an economist so I’m probably missing something.

No you’re not. Which is why economists are are saying the BoE is wrong and it’s approach will make things worse and they will be forced into reverse. The crash of Cineworld which is the 2nd biggest company in its field is the warning shot. Our service and retail industry which is still weak from Covid will not survive and they are the some of the biggest supplier of jobs. In turn the social bill will rise. Interest rates rises when companies are still recovering and inflation is not driven by spending has economic car crash written all over it.

But I’m not an economist so I’m probably missing something.

In the nicest possible way, you are. Global energy prices are a function of demand and supply, like most products. Demand has risen post lockdowns as travel and manufacturing has resumed, add in OPEC management and war in Ukraine and prices have risen as demand exceeds supply.

Same for other goods and services in theory. If demand rises, prices rise.
You can't keep going with a 10% inflation rate, it will cause major economic issues, along with problems for people with a net cash position (like pensioners).

So you have to raise interest rates, demand falls and inflation drops. It's a necessary evil.

Global commodity prices will be influenced by UK interest rates and demand by broadly 0%.

Heard a Bank of England representative or governor refuse to say that raising interest rates couldn't make things worse. Wise not to leave a hostage to fortune but if your only tool is a hammer, you might see everything as a nail but the decision perhaps is whether to hit the hammer.

Indeed which is why economists are questioning the process of the BoE now. If spending is out of control, then yeah it’s the traditional hammer. Problem is, it’s not mad spending. It’s out of control ESSENTIAL costs to live and function. It’s not people spending the cost of living payments on flat screen TVS. When even the “middle” are predicted to be in fuel poverty, there are serious economic issues brewing, hiking interest rates in this case won’t stop inflation, it will just decimate the economy.

The UK are alone in just how much this is being allowed to destroy the standard of living and the economy, one has to ask why that is. Essential public service will struggle to survive (think schools). People can’t spend as they can’t afford to. Hence Cineworld going bust and they are huge, it’s not just them, it’s all the other businesses and little trades as detailed in this article.

www.theguardian.com/money/2022/aug/19/uk-small-businesses-forced-to-close-by-soaring-energy-bills

Raising interest rates will do fuck all to help.

Which is why I think economists are calling it out and banks are keeping long term and short term pretty much the same fix wise as they know there is no flex. People can’t pay and it can’t go much higher.

The bottom line is that our economy’s fucked and nobody has a clue as to how to deal with it. Truss will make it worse with tax cuts, the BoE will make it worse with interest rises, inflation’s out of control and none of the economists heckling from the sidelines have any bright ideas either.

hiking interest rates in this case won’t stop inflation, it will just decimate the economy.

Genuine question, why would it not stop inflation? Appreciate the bankruptcy point but it surely reduces spending and, therefore, inflation? Ignoring the other consequences for one moment (as unsavoury as this might be).

Because inflation is being driven by fuel costs which are running at 77% inflation. People need gas and electric. Just cutting down won’t stop that run away train. Even the director of Ofgem has left because it’s being allowed to go like that in this country at the expense of the population.

People aren’t spending because they can’t. Economists know this, heck even the banks can see the writing on the wall which is why their long term fixes aren’t ridiculous. There is a good link in this thread explaining why interest rates will be forced down.

A lot of posters on here are missing the point.. if they dont raise rates the pound gets thrashed and things get more expensive