What do you think will happen to mortgage interest rates? Wth the

[PeepsAndSheeps]

What do you think will happen to mortgage interest rates? This is my first time having a mortgage during any type of a financial crisis. They've been going up recently, I assume that's set to continue?
Is there a point at which they can't go any higher? I know there were interest rates of 14/15% in my folks day.

[Gazelda]

I think they'll continue to rise steadily.

When I was single and feared massive interest rates, I calculated the most I could afford each month and as that became nearer to reality I got a fixed rate. This allowed me to feel secure that (barring job loss) I could always meet payments, no matter how high they rise.

[PeepsAndSheeps]

I agree, I think they'll rise steadily for some time. There must be a cut of point though, or too many people would be losing houses....(hopefully)?

[PeepsAndSheeps]

I know interest rates have been at a record low though, so a few percent higher still isn't "high" in terms of what they've reached historically. It will make a big difference on peoples payments though.

[Chaoslatte]

I think the Bank of England will raise base rates to no more than 2-3% over the next 2 years. Raising rates too much risks pushing the economy into recession so Andrew Bailey has said they are not going to be aggressive for that reason.

[AnotherTroyforHertoBurn]

We always went for fixed rate mortgages when we had one.

[Franklin12]

Definitely explore a fixed rate. You might well be able to do it with your current provider. Unless your mortgage is small it will hit people and I think a lot have their heads in the sand. If they cannot afford the repayments they will destroy their credit score, and ultimately be removed from their house (which is really the mortgage companies).

I have always had a fixed rate and although sometimes people have had better rates on a flexible rate I wouldnt change my decision with hindsight. You know how much your payments will be for say 5 years. Check the mortgage is portable too should you choose to move during the 5 years.

[BuanoKubiamVej]

Everyone should be overpaying on their mortgage. If you can't afford to overpay you have overstretched yourself and should downsize. Just paying the official amount and no more is like just paying the minimum amount on a credit card bill and credit card companies are legally obliged to warn customers that that's poor financial management - it's high time mortgage companies started doing the same. We've been overpaying about £75 per month for years. In the event that interest rates shoot up we will have plenty of time to decide what to do, and they may plateau off before our new minimum payment even gets as high as the amount that we've already been paying.

They can't rise forever, no. The market forces of supply and demand kick in because at a certain level the banks are no longer able to acquire customers, and no one can afford to buy property, and the market breaks. So interest rates will settle at a little bit below the point at which that happens.

[Mia85]

@BuanoKubiamVej

Everyone should be overpaying on their mortgage. If you can't afford to overpay you have overstretched yourself and should downsize. Just paying the official amount and no more is like just paying the minimum amount on a credit card bill and credit card companies are legally obliged to warn customers that that's poor financial management - it's high time mortgage companies started doing the same. We've been overpaying about £75 per month for years. In the event that interest rates shoot up we will have plenty of time to decide what to do, and they may plateau off before our new minimum payment even gets as high as the amount that we've already been paying.

They can't rise forever, no. The market forces of supply and demand kick in because at a certain level the banks are no longer able to acquire customers, and no one can afford to buy property, and the market breaks. So interest rates will settle at a little bit below the point at which that happens.

I don't think this has been great financial advice over the last few years. Mortgage rates have been incredibly low and there has been a long bull run on the stock market. People have made much more by investing rather than overpaying. Of course it might well be the right thing for some people and it might well be the best course of action for more people in the future but it has certainly not been poor financial management to pay the minimum and invest elsewhere.

[Scorchedterf]

Remember that if you are paying 4% interest on a mortgage and the rate goes up by 2%. The effect will be to increase your payments by 50%.
so a monthly mortgage payment of 1000 would increase to 1500.

[Wheretheskyisblue]

@Scorchedterf

Remember that if you are paying 4% interest on a mortgage and the rate goes up by 2%. The effect will be to increase your payments by 50%.
so a monthly mortgage payment of 1000 would increase to 1500.

That is not true if you have a repayment mortgage, only for interest only mortgages. On our mortgage only 30% of what we pay each month is interest (the rest is capital) so any increase in the interest rate is more muted.

[PeepsAndSheeps]

This is very reassuring in the medium term.

[PeepsAndSheeps]

Oops, reply fail. That was meant for Chaoslatte.

If the base rate is 2/3% then even good deals are likely to be about 3.5%? Which is still a lot higher than what we are paying now.

We have a good deal and are fixed. I agree that I feel a lot of people have their heads in the sand over this. I am going to try to pay as much of mine as possible. So tricky with everything else rising and when trying to put aside for a pension, but I am trying.

[ivykaty44]

If inflation continues to rise as it has been, then interest rates will also rise. Inflation going up to much can also be detrimental for the economy

[FourTeaFallOut]

www.poundsterlinglive.com/economics/16881-bank-of-england-to-hike-to-3-0-says-capital-economics

Looks like base rates might hit 3% in 2023.

[WoodenClock]

I don't think they'll go back to 15% but I can easily see 5%, which would be huge for a population used to 1% mortgages.

[gitbag]

it's a bit of unknown tbh. they will defo go up & expect May will see a rise but can't see the likes of 15%.

[MiniatureHotdog]

It's nonsense that everyone should be overpaying on their mortgages 😂 That's rubbish blanket advice.

Our mortgage is just over 1%. We've been able to earn far far more than that via other investments, so why on earth would it have made sense to have paid that money off the mortgage instead 🤔

Of course if you're talking specifically about interest only mortgages then that's different, but that caveat wasn't given.

[nearlyspringyay]

I think they'll rise. I remember we were on holiday and the rates were rising almost daily, to 14% I think. My parents Were shitting themselves. We lost our home.

We were planning to upsize and now I'm really glad we didn't.

[gitbag]

14% interest rates on the house prices we have today would be carnage. Even for those who don't have mortgages, many want to use their home to fund things eg retirement. And what about all the BTLs?

In terms of overpaying. If I was buying today particularly with a small deposit I would overpay if I could. I think the real impact wont be felt till a few years.

[tomatoandherbs]

@PeepsAndSheeps

I agree, I think they'll rise steadily for some time. There must be a cut of point though, or too many people would be losing houses....(hopefully)?

No cut off

many wouldnt lose homes
why?
many own outright
many parents will support children
many close to paying off and can withstand even a huge increase if only 3 years left to go for example abs have enormous equity anyway
many renting


wealthy buy to let will buy up any foreclosures

Some will lose their home. Those with huge mortgages relative to income and tiny equity (should not have been approved in first place)
those that lose jobs and don’t have income protection (given job market very bouyant, unlikely) or those that simply live very close to the wire, have tiny equity

[gitbag]

Although the BOE are in a bind. Don't do anything, inflation keeps going up. Increase rates damage the property market (which our economy is based on).

[gitbag]

many own outright, many parents will support children, many close to paying off and can withstand even a huge increase if only 3 years left to go for example abs have enormous equity anyway

many do own & have lots of equity but for the vast majority all that wealth is based on their house value. Plenty dont have much in savings & investments. I mean yes housing should not have become an asset but we are where we are.

[Horcruxe]

@Scorchedterf

Remember that if you are paying 4% interest on a mortgage and the rate goes up by 2%. The effect will be to increase your payments by 50%.
so a monthly mortgage payment of 1000 would increase to 1500.

This is completely wrong. Your interest will double so it depends on your LTV and how much of what you are paying back is interest vs capital repayments.

[gitbag]

Those with huge mortgages relative to income and tiny equity (should not have been approved in first place)those that lose jobs and don’t have income protection (given job market very bouyant, unlikely) or those that simply live very close to the wire, have tiny equity

as with most things it will be the younger generations who are hit the hardest.

[tomatoandherbs]

@gitbag

many own outright, many parents will support children, many close to paying off and can withstand even a huge increase if only 3 years left to go for example abs have enormous equity anyway

many do own & have lots of equity but for the vast majority all that wealth is based on their house value. Plenty dont have much in savings & investments. I mean yes housing should not have become an asset but we are where we are.

No but the point is

ifyou have paid off your mortgage or very close, then mortgage rates are pretty irrelevant to you irrespective of your home value