Any guesses where interest rates are going

[rosieposiedrops]

Wow I have been looking to buy a house for a year it's been a struggle stock is so bad in our area.
With the interest rates going up it's made me realise my budget for a house just got smaller because the repayments have gone up so much now since i first started looking.

Not sure if to try to balance this by getting a tracker but even then the interest rates are so high. Sigh. So difficult at the moment. Anyone know anything more about these things than I do?! I'm feeling like if I can't afford the repayments then surely others won't and something has to change with these extraordinary house prices that are happening right now!

as Yazz sang, the only way is up
The money market swaps indicate 2 year 75% fixed will be 3.2% by July. It was 2.5% in May. That is a huge increase in 2 months of almost 30%.

Thanks so it's a case of her borrowing pronto then!

Up, and probably quite quickly. The .25% increase by the Bank of England this month reportedly really needed to be .5%, so yes, get your skates on!

Thanks. So depressing!

My guess is they will settle around 6% which is the long term average. Let’s hope that’s as high as they get since lots of people have over extended based on the extremely low rates we’ve seen recently.

Well I've managed to avoid that scenario @User79865765 due to not buying in good time. Will house prices have any changes if everyone's mortgage repayments change for the worse?
I can't believe the repayment figures I'm now looking at!

Up. It's realistically the only way that they can go.
remembering 13% interest rates in the early 90's

I will give up @MrsMoastyToasty if interest rates get 90's high !

I'm having the exact same problem. The budget I bad back in January has massively decreased due to interest rate rises... yet prices don't seem to have fallen!

Can you get a mortgage offer in place asap? We started our application weeks ago and it's finally been underwritten last week but our interest rate is fixed at the rate it was when we started our application. If you can get an offer in principle before you find a property you'll cap the interest at whatever it is now.

there is a time limit on that.

@oiltrader 6 months I believe

we are moving, I want for a 5 yr fixed at 2.5%

I can't see how it can't hit house prices but it will be a few yrs till it does. Likely they will stagnate but then in 5-10 yrs time I'm not sure what will happen. Most people move up the ladder using equity but a lot of flats haven't gone anywhere.

I'm beating myself for not moving last yr, cheaper prices, better rates & lower SD 🤬

It depends. It may not be the wisest plan but it depends on your individual circumstances.
Imagine you borrow the max that you can afford now. You say that the repayments are rather eye watering on that sort of sum now. You fix for 5 years at the lowest rate you can say 2.5 or 2.75%. I'm going to assume that your LTV isn't particularly favourable as a first time buyer but appreciate that might not be the case if you have had family help/ inheritance which would obviously make a difference.
In 5 years time when you need to remortgage, the value of the house has fallen significantly owing to the significant rise in interest rates, recession, job losses, etc and you may be in negative equity and looking at rates that are double or more than they are now. During this time, the cost of essentials such as fuel and food have also risen considerably so your expendable income has fallen. You will be in trouble. A lot of these things I have mentioned are likely to happen though no one knows the severity/ timeframe, etc.
Interest rates are rising and will continue to do so at present but again no one knows the exact amount or timeframe (if the pound crashes, they may have to be raised much more quickly). This will inevitably have a knock on effect on the housing market and prices. If you are having to lower your budget, so will many, many other people across the country. This may well make buyers lower their budgets or hold off purchasing which will lead to price falls. This is also on a background of very high inflation particularly in essentials which it is impossible to avoid purchasing altogether and this will impact on affordability and make the banks less willing to lend huge sums.
I think the poor supply in many areas and people rushing out to borrow before the rates increase is what is causing the market to still be brisk in some areas (not all, mine has slowed a lot, for example) but it won't last.

Obviously, it you have a great LTV, a very secure job with a very high chance of big salary increases, a wealthy family who will help out if needed, etc, you may choose to go ahead now but just beware of the potential risks too.
Good luck!

I think they'll stay roughly the rate they are now for another couple of years. The only thing keeping the tories in power are high house prices and low interest rates. Once those go the tories are out and they know it, thats why they do everything in their power to avoid it.

Thanks for your opinion @rainingsnoring we don't have any family help but have managed a 80/85% ltv. Rates aren't great and I wish so much we'd already bought as it's utterly depressing what we can now buy based on monthly repayments. We do have secure jobs and are both professionals that are unlikely to become totally unemployed in the long run. We are renting and that's expensive so we have to think about everything put together .

We are aiming to get somewhere that needs at least some TLC to counter any potential price drops. We're in the SE so I really don't see any drastic falls in prices because it's so overpopulated and also a consistently growing population.

Just in case it's any interest to anyone, I just phoned the bank to check, we already have a mortgage in principle but the rate is only fixed once we actually apply for the mortgage rather than just having a MIP.

That's unlikely. Also, the banks are (theoretically) independent of the Tories.
The Fed have been making noises about more aggressive rate rises and they are also starting QT. The BOE are being much more cautious, although still raising, but this will have to change if the pound continues to slide or worse, falls significantly.
The general market expectation is that they will raise the rates on their 4 meetings left this year so perhaps 2% by the end of the year and 2.5-3.5% by end of 2023. This will obviously mean an additional 1% approx on mortgage interest payments. That's a very big jump from a rate of <1% last Summer to 2.5% this June and say 3% by the end of the year. That's a trebling of interest in 18 months.

@rosieposiedrops - absolutely, you have to weigh everything up carefully. As you say, renting costs a lot of money. Just do consider the potential downsides as well. The Brits seem to be absolutely sold on this idea that house prices can only ever rise massively relative to income because that it what has happened in the last 25 years but that is illogical.

I'd say property prices in the SE at least will rise based on supply and demand. The population is growing, house numbers aren't.

Rents have also gone through the roof forcing those that can to buy. We have already been asked to leave one rental in the last year which meant higher rent payments as the markets moved up for rentals, plus costs of moving.

The rights for tenants are still rubbish, especially for those like us who because our 'professional' jobs cant do anything like staying put regardless of eviction notice, we have to move and it feels totally insecure that we may not have a home based on whether or not our landlord allows us to stay or not.
Oh well! Will have to stop moaning and get on with it I suppose. Seems no matter how hard we work our salaries and savings are eroded by this mess either way!

The population is growing, house numbers aren't.

Because people are living longer & historic immigration. We actually don't have enough young people which is going to be a major demographic shift.

Just in case it's any interest to anyone, I just phoned the bank to check, we already have a mortgage in principle but the rate is only fixed once we actually apply for the mortgage rather than just having a MIP.

yes we ended up borrowing less then our aip as rates had gone up.

They'll continue to increase.

I think they'll settle around 5%

They've been very low for so long.

I read someone that 7% today is the equivalent of the huge double figures in the past because of high prices. Plus most people have had at least a decade of wage stagnation.
I think 5% will have a huge impact personally.