Anyone worried about interest rates rising after brexit?

[DianneWhatcock]

Hope this is not a silly question, its just something I have been worried about as I have a mortgage and it would be very tough if our payments went up.

We took out a 10 year fix last year so we were worried. Is fixing an option for you now?

I don't have a mortgage or loans so no. I would love to see interest rate rises, I get virtually no interest on my savings. I don't want to see a return to the days of 15% mortgage rates but a bit more than 0.5% savings rate would be nice!

Oh and take care before you fix. We fixed for 5 years when everyone was saying rates would go up, and then the 2007 crash happened and we were stuck paying 5% when everyone else had gone down to 2%! We had that for two years. The only upside is that we paid it off early so ended up paying less interest overall. Maybe fix for two years?

Well, rates are quite low right now (we just fixed for 2yrs at 1.8%) so it would be worth investigating and making a comparison between staying whatever rate you have or pay a penalty but switch to something with a longer fixed rate.

ours is fixed but we only have about years left :/

2 years left ffs posted too quick

Yes we were worried and got a 5 year fixed last autumn.

It is a bit of a worry for us, but not too much. Currently have a tracker so would be effected but only have 6.5 years left and it is relatively very small. Trouble will be if it is in the context of everything else going up too.

I wouldn't worry too much if you have 2 years fix left. It gives you time to prepare if things go really tits up.

Mark Carney has said that he can't predict if interest rates will need to rise, particularly in the event of a no deal brexit because the affect on the economy will be unlike any financial shock we've previously encountered.

We fixed our mortgage at the historic lows for 5 years, 1.89% because we were concerned about the rise in rates, although not because of Brexit but just because the Bank of England was making all sorts of noises about raising rates.

That said Brexit uncertainty has now dragged on so long we’ll probably have a new mortgage before we actually leave the EU! I think that Brexit is likely to push interest rates lower- possibly into negative interest. While that’s good for me in a secure job with a big mortgage, I can appreciate (esp for PP above with savings) that it might not be great for others, esp if in the long term it leads to deflation.

hiddenmnetter can you explain “negative interest” in this context, please?

I fixed for 5 years last year because I was worried what might happen. Its fixed at 2.09% so I figured the rates could only go one way from there

I thought that was when the interest rates you get are lower than inflation?

My worry is negative equity, which is a real prospect because where I live properties are just not selling, the valuations are going down by 10% every time we look, and we are quite exposed.
But there’s really nothing we can do about it, we surely can’t sell now. We missed the boat just before the referendum, we really were not expecting it. Only consolation: small flat. We’re not like the people in the street opposite with the semi detached that were expecting to sell at 1.7m and just don’t get viewings. For 6 months....

Rates are more likely to fall than rise
and they cannot fall much further

they will not rise above 2% for years and years and years

My favourite interest rate predictor rate says no higher than 1.5% for 30 years

Negative interest rates are interest rates below 0%. Yours and my mortgage is the Bank of England Base Rate (BOEBR) + your banks profit margin. The BORBR is currently at 0.75% and so I’m paying 1.79%, my banks profit margin on my mortgage payments is 1.04%.

If the Bank of England lowers the base rate by 100 points, then the BOEBR will be -0.25% (as it has been in Finland for the last several years for instance). You and I will still pay around 0.75% because of the banks profit margin, but the BOEBR is below 0%. Now that’s great for people with a mortgage. If you have savings though, the bank also takes a profit margin. So if the BOEBR is 0.75%, the banks give their customers with savings 0.5% (as a PP mentioned above). If BOEBR goes below 0%, then anyone with savings will start to lose money each month.

Additionally if you have the prospect that negative interest rates lead to a loss of confidence and then credit begins to slow, it can lead to deflation (where the economy shrinks year on year, rather than grows). This has disastrous wider economic implications.

The huge problem with low interest rates is that no one saves. People on decent pensions which rise with inflation are ok, but the elderly with savings are in a difficult position and why would anyone save with such low returns? We need a balance and Brexit won’t provide it because, for the foreseeable future, the government will be firefighting and trying to avoid a recession.

Inflation is a big problem if prices go up due to less supply and no diminution in demand. Usually this triggers interest rate rises but this may not be palatable if industry and commerce are on their knees. Interesting times ahead and I don’t think anyone can call it.

Interest rates could go either way in a no deal Brexit.

Bubbles people save in other ways rather than classic bank account eg stock's and shares.

How do people save effectively in other ways? On a regular basis. We always have commentary from economists that we need to save as a society. We know millions of people have not saved for pensions for example. This makes the state have to pay out more and that isn’t sustainable. Of course some people own a rented out house but these are not in a pension fund.

No vehicle for saving is paying savers much and many older people do have conventional savings. With zero hours contracts and the low wage economy, saving is off the agenda for many.