What do you think interest rates will do?

[Moonbun]

Just bought a house that’s fixed for 5 years but everything about interest rates is scaring me. If rates went to 15% like they did in the 90s my mortgage would jump from £700 to over £2000 per month. How would people be able to afford that? It’s terrifying.

I read an article a couple of days ago about B of E rate setters who said they are determined to get inflation down to about 2 percent. It is currently at about 9.1. They said we have had 5 rate increases but to expect many more and they thought public could tolerate up to 7 percent interest rates as according to article people saved money during pandemic as they could not go on holiday. I can't find article now or I would like it. I think it will go up 0.25 per month for many months until inflation starts to slow.

I read somewhere that Hew Pill said he is willing to adopt a ‘faster pace’ of monetary policy tightening. So I’d expect those 0.25% rises to become 0.5% at the very least with 0.75% or 1% more probable.

my understanding is 3% by the end of the year is what they’re aiming for, whether it will stop there is anyone’s guess.

It’s difficult to predict I know - but does anyone think we will see 10-15% rates?

What would a 10% rise actually mean? I'm not sure on the maths.

Is it 10% of your outstanding balance every year? So if you had a £240,000 mortgage you'd pay an extra £2000 per month??! Or is it 10% of the outstanding balance divided up over the whole term?

A 240k mortgage doesn't seem particularly high but £2k extra a month seems incredible?!

no one knows how quickly nor how fast they will rise.
We do know that they will rise in the short term at least and that the rate of increase looks likely to speed up.

As others have said, Huw Pill has just been talking about doing 'whatever is necessary' and 'acting forcefully' and Cuncliffe was talking about Britain being able to manage 5% rises the other day.

www.ft.com/content/00e1a629-c792-4abd-99f0-5ea4c5655a3f

I do not believe rates will get to15%

5% yes so save & overpay for the next 5 yrs.

How does overpaying affect rate of interest payable if that makes sense?

At the end of your fixed rate your outstanding balance will be lower because you overpaid, so you'll have a smaller amount left to pay back and pay interest on at that point.

That's hilarious. I had no income during pandemic so def didn't save money!!

'no one knows how quickly nor how fast they will rise'.
Sorry, I meant how much nor how fast.

If I had to guess, I would say the rate of increase may go up to 0.5% or match the Fed. They would only raise them very high/ quickly if sterling tanks in which case everyone is in real trouble!
@1moreyear - I know, it's total nonsense.

As per PP it’s hard to predict how far or fast they will rise, but I am certain that they will, and if the rate of inflation continues to rise I think that they will go up fast. I have a nasty suspicion that we’re about to enter a very difficult period.

We had intended to refix our mortgage a couple of
months ago but life got in the way and we did it this week. I’ve opted for a 10 year fix at 3%, we have 15.2 years to run but we’re aiming to pay it off within the 10 years. This way, regardless of what happens it’s fixed, and whilst I am but gutted we missed rates from last year, I probably wouldn’t have fixed for so long then.

That's hilarious. I had no income during pandemic so def didn't save money!!

But on a statistical level people did save. The BOE wants us to spend those savings, the issue those that have them are most likely more insulated from inflation & interest rate rises.

"British households built up their savings to the second highest level on record at the start of the year as the Covid-19 lockdown limited opportunities to spend, according to official figures.
In a development economists said could pave the way for a boom in spending as pandemic restrictions are relaxed, the Office for National Statistics said household savings rose sharply in the three months to the end of March as the third national lockdown constrained spending.
The saving ratio – which estimates the amount of money households have available to save as a percentage of their total disposable income – rose to 19.9% from 16.1% in the three months to the end of December, reaching the second highest level since records began in 1963.
The previous record of 25.9% was set in the second quarter of 2020 during the first Covid lockdown as the British economy plunged into recession."

I think inflation will rise and keep rising, and interest rates will rise too. Because of increased and increasing costs regarding just about everything, I think now is really not a good time to extend oneself financially. There are hard times coming.

My mortgage rate is up in December. Does anyone know how early I can fix it again? Is it 6 months?
I was going to borrow more and extend. I just can't take that risk anymore. Even with current rates, my mortgage will be £100 a month more according to the calculators! I'm horrified and already struggling with price hikes so I want to try and be savvy and get it sorted asap.

Job for the weekend!

@plugee - I think that quote is from last year, not a recent one. I suspect that the most savings will have been spent already, other people will be using them to pay their bills due to rising costs. They were always more concentrated amongst well off people who are less likely to spend additional amounts.

Either the BOE don't have a handle on the population's financial situation and think people are better off than they are (in general) or this statement is some kind of signal/ warning. It's just not true that most people/ businesses (even the government) can manage 5% rate rises.

@user1471530109 - I think it's usually 6 months but you had better check with your lender.

Is anyone's fix due to end early next year? Our 2 year fix ends next May and I honestly have no idea what to do. Pay exit fees now and fix or wait until next May. I'm started to get quite worried at the way things are going 😔

@rainingsnoring yes it was, i'm not sure if there is data to say it's all spent. Lots of people have pushed it into the housing market which has contributed to the soaring prices & renovations.

I've no idea about businesses but expect it will be tough for small businesses. In terms of households I think the majority could withstand 5%. Plenty don't have mortgages, plenty have small mortgages, of those that have mortgages the majority are fixed & lots of people are fixing early to lock in a better longer deal. It will be painful but I think most probably could handle 5%, people tend to service their mortgage debt above anything else.

How long do interest rates tend to be up for when they go high?

Google "historic interest rates UK" to get an idea of past interest rates.

But the reality is, no one can tell you what interest rates will be, although interest rate rises are one of the mechanisms to control inflation. I don't think it'll be in anyone's interest to have interest rates so high that millions of people lose their homes, but they are definitely on an upward trend.

Is that you chancellor? Work it out for yourself!

Interest rates have been incredibly low for such a long time that everyone has got used to cheap money. I remember the 15% mortgage rates in the 80s/90s and expect they will settle around 5-7% for the foreseeable

Go up, stay up, and never return to the historic lows of the last decade

I remember the 15% mortgage rates in the 80s/90s and expect they will settle around 5-7% for the foreseeable

I read that 7% on todays price is equivalent to 15% in the past in terms of impact on disposable income. But you certainly can't have ever increasing house prices & high interest rates