BoE announce interest rate rise

[Darkandstormynite]

Just seen BoE has confirmed interest rate to rise to 4.5%

AIBU to think we haven't reached the top yet and there's more to come?

One positive I guess is that the predicted recession probably won’t happen

I know it sucks if you’re hit by higher rate though

Im a bit limited to my current mortgage provider, well I could try elsewhere but broker reckons I might not pass affordability as I’m a single parent. I’m fine and can afford stuff, but he said the affordability stuff has really ramped up so might be harder to get through.

Nationwide offered me 3.84% last week as due in August for 5 years, its locked in but was hoping for a slight decrease beforehand.

I recently learnt that home values are linked to GDP, even paid off ones. This is interesting because interest rate increases impact disposable income in the economy and affordability for FTB's or movers who are also dealing with inflation. If people don't have money to spend in the economy inflation might come down, but I doubt it, I think the effect will be job losses. This in turn creates a higher possibility of defaults.

It's a proper mess! No easy solution, but i can only see house prices decrease (they are already) and people getting miffed that their home is decreasing in value but they are paying more interest on it. This in turn decreases GDP.

It is a right mess. I think it would have happened whoever was in government, but I think the Tories saw the country was going to burn, so just spent all of the remaining money on fire extinguishers for their own homes. That hasn't helped.

Interesting analysis in this article, Goldman Sachs is predicting 5% by August.

https://www.theguardian.com/business/2023/may/08/bank-of-england-may-have-to-raise-interest-rates-this-summer-says-goldman-sachs-inflation

Interesting analysis in this article, Goldman Sachs is predicting 5% by August.

That hints at .25% in June and .25% in July. It's shy about the next .25% in September.

If I were a betting person, beyond my weekly lottery flutter, I would expect 5.5% by next year.

Every interest rate rise brings out a load of (presumably) old and well off people rubbing their hands with glee at the prospect of "savers finally be rewarded." Anyone who will struggle to afford higher interest rates deserves it, as they were overextending themselves, and have had years of low interest rates during which they should have sorted themselves out financially. Apparently.

Except that's not the case, is it? For people of my generation, we haven't had the disposable income to amass large savings over the past decade of low interest rates. We left school/university to a enter a dead labour market where wages haven't grown for 15 years. Any of us who have managed to buy a house (except those with family help) did it after years and years of saving, while paying extortionate rent out of our pathetic salaries, and we had to take out fairly large mortgage as housing prices are obscene. Of course, the old people who rub their hands with glee at interest rate raises have actually managed to benefit from this, too.

What should we have done? Not bought a house because the housing market would crash at some point? When? How long should I put off having children because a sensible person should sort themselves out financially first? I'm in my early 30s now, so mid 30s maybe? 40s? Oops, too late. You know if I decided to have children in rental accommodation and claim housing benefit (because rent is more expensive than a mortgage, so I'd have to!) those same people would criticise me.

It's all well and good saying interest rates need to keep rising/should be at 15%/have been too low for far too long, but people of a certain age have been forced to build their lives around these low interest rates and their knock on effect on things like the housing market. Acting like it's our fault that we have large mortgages etc. is very unfair.

Appreciate its a bit older of an article but I read this that some former boe economist or something said 4.5% would likely be the max

https://amp.theguardian.com/business/2023/apr/20/bank-of-england-predicted-to-raise-interests-rates-one-more-time-in-may

Liz Truss?

Have a look how good the BOE are at inflation forecasting.

Then let me know if you would have any confidence in their predictions whatsoever.

Also bear in mind their remit is to keep inflation at around 2%. It's now at around 10%.

I’m hoping it doesn’t go higher tbh as most likely I’ll lose my home if it does, so potentially wishful thinking on my part

Sorry to hear that.

I suppose the good news at the moment is that they do not seem to be showing much appetite for raises greater than 0.25% per meeting. So it should give you some time to prepare.

So far they have pretty much followed the Fed, so you should be able to get a rough advance warning from that on what might happen next. The next FOMC meeting is on June 14th.

It's really really worrying

My mortgage has gone up from £1137 a month to £1987

Much more and we're going to have to sell

Are you on a tracker?

problem is we can’t really downsize because a smaller house goes for what we bought our current one for and we hardly live in a palace

All of the forecasts I've seen are predicting the base rate to hit a high of around 5% and then slightly lower in the autumn. I hope for all those struggling and worry about losing their homes that this is the case.

We were incredibly lucky, we locked into a 5 year rate but only because I was stressed about Brexit. No clue of what else was coming.

I don't think you're BU at all and hope that there's plenty more to come. It's been a number of years since we enjoyed decent interest rates on our savings.

All of this needs to be dovetailed with the rise in pension ages that will be coming down the track too.

No offense is intended, but it has been obvious the only way for interest rates to go was up. We are entering a phase of realistic interest rates and this was always going to be the case.

Is it possible for you to fix for a couple of years at a lower rate?

Millions of people had their ability to earn their living removed from them in an instant, often on multiple occasions, and you think they should've had to pay for that privilege?! I'm not sure what would be more damaging if you tried to retrospectively make furlough repayable now, the riots or the millions of legal claims.

I'm very much of the verdict's still pending school of thought on lockdown. But once our government had decided to do it, substantial financial support for people who were going to be denied their ability to do their jobs was an absolute necessity.

I do worry we will look back on this as the better times, and that we really will as a country just have to accept a much much lower standard of living as the norm with higher bills all around.

We're middle ish earners, had been planning on replacing our 2009 plate car and having a good holiday this year, I've brought a mountain bike instead (so don't have to rely solely on the car to commute) and having a holiday in family members house (seaside town!) just so we don't cause ourselves any money stresses!

Could you be more tone deaf, this will cost so many people their homes

"This" isn't some strange phenomenon or catastrophe.

If someone sets up "home" in a property they don't own and have financed unrealistically cheaply for a limited period of time, and suddenly finds it unaffordable when the interest rates slowly start to head back towards normal sustainability then they're victims of nothing other than their own naivety, stupidity or compulsion to try and keep up with the Jones's.

Not true. No one could’ve predicted this cost of living crisis compounded by high interest rates, and energy bills, that alone will cost me £1000 extra per month combined with wage stagnantion. A pp summed it up perfectly on the thread, our generation haven’t had a choice.

@TorviShieldMaiden I've been researching current rates for my remortgage and the best 5 year fixes are around 3.9/4% so I would look at moving to a different provider if I were you. Lloyds and Halifax are offering good rates.