5% mortgage rates

[SaturdayGiraffe]

Just read this article saying to expect 5%+ rates shortly.

https://www.theguardian.com/business/2023/may/25/uk-homeowners-and-first-time-buyers-warned-to-brace-for-5-plus-mortgage-rates

UK homeowners and first-time buyers warned to brace for 5%-plus mortgage rates

I just don’t know how people are going to cope, and it could go even higher.

We have a huge problem bubbling in this country. The government has done two things in particular that will continue to detrimentally affect the UK in particular.

The first is frozen tax thresholds until 2028. Lots will be continually pushed into the higher tax brackets (and won’t know to offset tax in a pension). People are lobbying for higher pay rises, but some will actually be worse off, taking into account loss of government benefits and higher tax. You’re better off for example earning £99k than £130k.

The second is giving inflationary uplifts to the non-productive majority of the country (54% does not pay tax). Triple locks, heating allowances, index linked public sector pensions, universal credit inflationary uplifts all come out of the public purse. The government are desperately trying to reduce inflation and they can’t because it proving sticky. Just as many Uber Eats drivers are on the road and holidays are being booked out.

The monetary tool of raising interest rates is to lessen inflation by cooling demand. All that’s being achieved at the moment is stuffing up the tax paying younger generation families, they are the ones with big mortgages, high LTVs and most outgoings.

Others have said on here that inflation is a result of Covid, war and climate change?? Nope, they are just catalysts. It’s a direct result of printing trillions and injecting it into the economy, like ice repeatedly pointed out for years in my comments on here (even before Covid).

The US treasury 2 year yield is still rising. Interest rates are still going to have to rise from here and the UK is behind the US.

I appreciate watching someone talk about the ramifications and knock on series of events, rather than just reading an article that states a view with little to back it up, and very little history.

The guy's been in the tech business alongside EA's for about 25 years; he's an absolute anarchist with a 'don't give a shit attitude', he has nothing to lose nor anything to gain.

You can make your own mind up how you feel about his views. What I'm hearing makes quite a lot of sense.

What have you seen of his that you think is absolute shite?

• Boomers retiring on their houses will be the last generation for a very long time to come; people relying on their house price increases to massively boost pensions won't be a thing in the future

• The BTL who borrowed very cheap money and were slumlords are screwed; hopefully those homes will be snapped up by FTBs and professional landlords who are invested in looking after long-term tenants

Is Mumsnet sponsoring Charlie or something? This is about the third reference I’ve seen to his YouTube channel where he’s talking Absolute shite.

@3BSHKATS
He started predicting all this happening a year ago so he's talking more sense than you ever do.

And 3 mentions in a thread of nearly 600 posts about the property market is hardly sponsorship 😂

With respect, even a broken clock is right twice a day. After 23 years of hearing about how the property markets gonna crash, you forgive me, if I’m slightly cynical.

It's true it doesn't happen very often, but it's just part of the business cycle.. I do agree with Gary Stevenson that it would be a short term fall but then it will rise in the long term. Some areas will recover faster than others. The rich are still getting richer and they will continue to buy property (albeit with cash)..however they are not likely to buy a semi in Walthamstow so someone who wants to buy such a property should hang on and sit tight.

But if you could just tip me the wink as to when the short term fall is I’d be most grateful. Somehow, I suspect we will all miss it.

That window is now closing in which rates will have the opportunity to fall. The US 2 year is still rising even though inflation has dropped slightly over there and we’re behind the US on raising rates (and our inflation is proving more sticky, people are still spending)

Looks like central bank rates are increasingly going to stay around 5.5% (so about 6.5%+ mortgage rates) from here on. Inflation comes in waves and the second is starting at the supply end of the pipe. That will most likely hit the consumer end next year causing stagflation (inflation and recession).

From then on it’s a Vlocker moment (a repeat of the 70’s), rates would need to go higher still, but our indebted government can’t afford it.

Agreed. I wouldn't be surprised if we had a second wave of inflation and your charts seem to suggest it.
The UK is already in terrible trouble so, to me, it is just a question of what breaks first rather than anything else. I know lots of people don't like my opinions but they are playing out and will continue to so, I think.

Just seen the earlier post.
Exactly. Some people are feeling happy about their pay rises but seem to have forgotten the tax implications with the large rises that The Tories have imposed on working people.
As always, the policy is to pummel the mainly younger, working people and look after 'the grey vote'.
Agree that the high inflation is mainly the result of the massive QE spree plus the lockdowns at the same time which increased demand once they were lifted. There are underlying energy problems and then the sanctions imposed on Russia to top it all off.

All over the News today.
Average 2 year Fix now above 6%

Gosh. That is really worrying as I think a lot of people will be stretched at 6% who could have coped at 4.5%.
Worrying times.

If food inflation is running at 19% , and we all still need to buy food, how can and will it reduce ?

Radio 4 interview this morning with an economist - says he expects it to rise even further and stay high for a while.

Really, really tough times ahead for lots of people.

The costs involved with producing food have reduced. It won’t mean -% but it will mean food inflation will slow dramatically in the coming months. If a pack of Snickers cost £1 last year, now they cost £1.19. In 12 months time, it’s highly unlikely that the snickers will cost £1.41 (£1.19 * 19%), therefore inflation will have reduced (if snickers representative of all food). Ie if they are £1.25 in 12 months time (+6p) then inflation will be 5%.

You could buy less food, but I doubt it would have any material impact.

Halving food Inflation just means Food is still going up by 10% per year.

You could buy less food, but I doubt it would have any material impact.

I could eat less food and it would have a material impact on my waist line, but I doubt most people have stockpiled food around their bodies quite as efficiently as I have

I think food inflation is predicted to reduce to 16% towards the end of the year ?

It’ll be far lower than that. Or we’ll be in big trouble.

It’ll be far lower than that. Or we’ll be in big trouble.

Why would we be in big trouble ?

I don’t think anyone thought mortgage rates could reach 6% in this cycle, although within a 30 year mortgage, you perhaps should expect a rate of up to 10% at some point.
Its clear that the stress-testing of affordability is not fit for purpose and will require a major re-think.
I believe this worry has caused the BOE to take a softly softly approach, been caught napping and now needs to slam the brakes on hard unfortunately. Hoping for the best isn’t a strategy.

Why don’t we have 20-30 year fixes like America? It seems such a sensible option, and something that the govt could require lenders to offer.
Having to remortgage and pay fees every 2-5 years is a bonkers way to do it when you think about it.
Same for rental tenancies. If a massive corporate landlord wants to operate on the UK then they should be required to offer a set percentage of properties for lease over 10 years.
Everything is so short term here and we all suffer for it.

This is so tough on families but I can't help but wonder what people thought rates would do? They've been unusually low for years and could only ever go one way. This cannot have been a shock to people, surely???

Of course people knew rates would go up. I don’t think anyone could have anticipated events such as Brexit, a war in Europe and a global pandemic that would make them increase so much, so quickly though 🤷🏻‍♀️.

Last time rates were this high, I was in primary school. It is a shock to me to be honest.
I really hate the implication that buyers in recent years have been irresponsible for paying the going prices for ordinary houses without suggesting a viable alternative.