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.

How so, useless @TuftyMarmoset?

I'm not disagreeing with you, just keen to understand better.

@BooksAndChooks the longer inflation goes on for, the harder it is to combat - it becomes entrenched and affects the psychology of how people and businesses choose to spend their money and their expectations of the economy. I mentioned Volker in my comment, he was head of the Fed in the 70s and 80s and was very aggressive in raising rates to combat inflation. It worked but it did also cause a recession, so it’s a bit of a tightrope walk for central banks.

@TuftyMarmoset I see. Thank you for explaining.

Mortgage rates were put up to that level by the government. Governments used to manipulate rates to attract voters amongst other things.

But when Labour came to power in the 90’s, Gordon Broen ( then chancellor) moved the decision on interest rates to the BoE.to make it an independent decision and severed the ties with the government.

So l don’t think they will get to that point again.

They won't go that high again in my opinion but I can see them being 5 to 7%.

We paid £2k to fix for 10 years at 2.1%, in March. They're offering 3.5% now.

@TuftyMarmoset - they are definitely walking a tightrope. I think they have decided to raise more firmly and cause a recession in the hope it reduces demand. They have backed themselves into a corner with an economy built on ever increasing debt and low interest rates and now very high and rising inflation.

I agree, I suspect that there will a sharp rise this time to try and stop inflation from increasing further before it becomes entrenched.

3% base rate means 5% plus mortgage rates, depending on LYV. I feel for those coming off low fixed rates early next year.

@GreenLunchBox

I locked in a 2.49% 10 year fix in early June.

Can't see anything less than 3.5% now. On a 150k mortgage that's about an extra £130 a month. Add in the increasing cost of fuel, food and utilities then that extra £130 is a lot out of a monthly budget. No wonder buyers are being cautious.

Our 5 yr fix comes up at the end of the year, but we jumped on the newest one as soon as we were able to earlier this month. Still a rate rise from 2.1 to 3.1 but that's 'only' around a £60 per month which is manageable. I didn't want to loiter.