Anyone know how much mortgage interest rates might likely go up by over the next year?

[FreeBritnee]

We’re trying to move. Have accepted an offer on our house but cannot find a house to buy. We moved onto a variable mortgage rate (mortgage currently around 170k) so of course we’re moving into a situation where ideally we’d like to fix a mortgage before we get caught in the trap of increasing monthly payment but can’t find a house so may be in a situation where we have to stay put.

Anyone in the industry where they have any idea of what might happen. I know we need to try and control inflation but I know the economy can’t withstand interest rates that go too high. I lived through the crazy interest rates in the 1980s and am just so frustrated we might be forced to stay in an area we don’t want because of it.

These are certainly considerations that the MPC bear in mind, @MidnightMeltdown. Most central banks target very similar inflation rates (2-3%) so are likely to take similar actions if they also see inflation rising above their tolerance. There are always certain factors unique to a country though, such as the state of the labour market for example - other countries are not suffering such bad labour shortages as us.

@Pokhora that’s not stagflation, that’s just a feature of a market economy. Stagflation is when inflation and unemployment are both high and growth is low. That isn’t the case at the moment.

One thing is for sure they can only go up

In these circumstances yes the options are keep them the same or increase. But in general 0 is not the lowest you can go, negative rates are possible.

@TufyMarmoset I realise that this is not the current case but it is a possible future outcome of raising interest rates as businesses will go under and unemployment will increase as a result.

Inflation will remain high as many of the factors propelling it (energy prices, import costs) cannot be controlled by raising interest rates.

@Sleeplessem

Dick comment *@Palavah* but yeah I actually have, 5 years, and savings rates are going to be low for the next year at least

You don't know that at all, though. If the BoE rate increases then all BoE-linked variable rates will increase too, and the bank will review the fixed rates it offers too.

Even pre Covid savings rates were low, so even if there is an increase in interest rates ite v unlikely to be substantial. Good thing about mortgages is that customers have no loyalty like they do with general banking so banks and building societies so it will always be a v competitive landscape.

Savings rates will Obvs be lower than mortgage rates but do I think mortgage rates will go up to 4/5% for a 90% ltv… no. Incredibly unlikely

What, never? You sure?

It is possible @Pokhora and high interest rates also make it less likely that people will start new businesses. That said, I think it’s important to recognise that businesses going under may be a bad thing for the individual owner but it is not a bad thing for the economy.

In terms of preventing stagflation the BoE and HMT work together a lot, for example there is a representative from HMT at MPC meetings so using other economic tools which are more in the remit of the government will be considered. For example to tackle stagflation you can also use initiatives to cut unemployment like schemes for young people, retraining schemes etc.

We bought when interest rates were 4.75 and they were 5.75 within a year.

@Sleeplessem why? I know a guy paying 3% on his mortgage, probably has 90% LTV. 4% /5% is just 1-2 % higher. I can imagine it going up to 5-8%. Probably not 13%.

[quote onlychildhamster]@Sleeplessem why? I know a guy paying 3% on his mortgage, probably has 90% LTV. 4% /5% is just 1-2 % higher. I can imagine it going up to 5-8%. Probably not 13%.[/quote]
Sure he doesn’t have a 95% ltv? Affordability would drastically change, mortgage lending will go down. It’s a v. Different time to when my parents got their mortgage and the interest rate was 10% As I said I’d be surprised if it happens, really surprised if we saw anything above 5% surprised and disappointed as I can say with a strong measure of confidence that savings rates won’t come anywhere close.

[quote onlychildhamster]@Sleeplessem why? I know a guy paying 3% on his mortgage, probably has 90% LTV. 4% /5% is just 1-2 % higher. I can imagine it going up to 5-8%. Probably not 13%.[/quote]
lets suppose (for simplicity) that at 3%, he is paying £30 thou a year interest on his mortgage, which he can just afford

And that it increases to 5% which means he has to pay £50 thou a year.

pretty big and unaffordable, I'd say.

If it went up to 8% and £80 thou he'd soon be bankrupt.

[quote TuftyMarmoset]@Starseeking it’s in the affordability rules that mortgage providers have to assess whether you would be able to afford it on their expectations of interest rises over the following 5 years, with 1% being set as the minimum expected rise during that period. As most lenders’ follow on rates after you finish the fixed rate period are currently around 3.5-5% it seems sensible for them to look at 6%.[/quote]

Thank you so much for explaining that, it makes sense now. When going through my application, I discussed it with the mortgage team in some detail, trying to reduce it, and I pretty much got a "computer says no" response. Had they set out what you just have, that would have been much more helpful!

Uergh this thread gives me the heebie-jeebies. We're currently hoping to secure a fixed-rate mortgage on a property over a 5-year period as we're scared of interest rates rising in the short-term. Current rates are £2,112 which is fine but not as 'cheap' as we would have hoped. A 2% rise would make our repayments just shy of £3,000, which then makes it almost unworkable for us. Hopefully by the time we come to remortgage in 5 years time things will have evened out or be more predictable, we would be earning more and overpaid on our mortgage so our rate wouldn't go up heaps afterwards...

The other thing to remember is if interest rates go up usually it’s there’s also inflation and salaries will also go up. My dad was telling me as they lived through the v high interest rates that it was tough but their salaries increased significantly through that time also compared to these days and so the mortgage itself stayed the same but the salary increased, if that’s makes sense? Not sure if higher interest rate would automatically mean inflation though.

My parents bought their house in the 80s for £26,000 I think. No high income or big deposit. Yes rates were high but the house value relative to their annual income (about £12,000) still wasn’t overwhelming. The same house would now sell for £750,000 (around 33 times the average income) and still climbing.

While I understand we need to learn the lessons of the past, most people who remember interest of 15% had loans a tiny fraction of what people have to take now to have the same house. And most didn’t lose their houses - those around me made a fortune. It’s SO unlikely rates will go to 15% or higher. I understand the doomsaying but people still need to move on with their lives and buy family homes, and the likely reality is much less extreme.

We've decided to pay ourselves out of our mortgage for this reason

Current mortgage is 2.4%, new top up would be just under that whereas a completely new one is 1.94%

Didn't like the idea of the current one ending up huge when it's up for renewal in 2024

Plus I'd rather just 1 mortgage rather than faff with 2 being totally out of sync!

My personal opinion is that interest rates will go up over the next year as they will need to tackle inflation. I'm not sure by how much though,, a big rise would be very tough for people as we have got used to really low interest rates over the last decade. If I had a mortgage I'd try and fix the rate for the next five years.
I was a teen when there were horrendous interest rates in the early 90s so I had no direct experience of it. When I bought my first house my neighbour said he almost lost his property in the early 90s due to the interest rate rises.

People have been spoiled for years now with very cheap loans.....i would have loved to have paid 0.50

I bet your house didn't cost anything like what they do now. Wages have not gone up so much!

I bought a flat in the London outer suburbs in 1988 for £65k. Sold it 7 years layer for £38k. I still remember the day my mortgage rate went from 12.5% to 17.5%.
Interest rates will rise in the short to medium term (although not like in the 80s and 90s!)
OP - I would strongly recommemd a fixed rate mortgage as soon as you find your new house.

As of today, interest rates on mortgages are going up in the market, as I think the figures released yesterday for the budget has signalled that rates will rise this year/ early next.

Yes . I checked rates for our remortgage just a week ago and the best ones on the list were gone today! Thinking maybe waiting for the info pack from the bank to come through might be a bad idea now...

Do you know what happens if you are currently sitting with a mortgage offer in hand @Chronicallymothering? My mortgage offer is valid until February, so I'm worried whether this news means they'll say it's not valid anymore, as I think it'll be a good few weeks before I complete.

The current yield curve suggests that people are expecting Bank of England will raise their benchmark rate by about 1% by end of next year. It is not exact science - these predictions change all the time. But if interests raise anywhere near the 1980s level, the UK government will be the first one that goes bankrupt, given the mountain of debt they currently sit on. The economy will be in trouble too as we are so used to cheap debt. So probably central bank will try not to be that dramatic.

People with savings are getting a nil return on their money. About time interest rates went up to a sensible level.

Hey @Starseeking when this happened to us, as we’d booked the rate and done all the paperwork with the bank the rate was honoured. Depends how far on in the process you are. We got exceptionally lucky as we got a base + 0.1 tracker back in 2008, just as it was withdrawn.