Active discussions

Meet the Other Phone. Child-safe in minutes.

Meet the Other Phone.
Child-safe in minutes.

Buy now

Please or to access all these features

Talk
Property/DIY

Join our Property forum for renovation, DIY, and house selling advice.

See all MNHQ comments on this thread

Thread gallery
66
6strings1song · 03/08/2023 16:15

It is interesting that the bank is putting out messaging around 5% being the "new normal" and that rates won't drop even if inflation hits 2%. This wouldn't be in line with historical trends...inflation falls and so do rates. Unless the bank is trying to force a reset of the rates/inflation relationship which has been backwards since 2008, which would be a bold move. The BBC news reports that "the Bank had picked up that some households and some in the financial markets were assuming that once inflation had tumbled to more normal levels, that interest rates too would fall" and so has put out this messaging.

The cynic in me thinks the bank want to ensure their monetary policy is being taken seriously by the markets and to flatten any speculation about future rate drops. If people/markets think that rates will drop in the near future, then they spend and save less cautiously and keep inflation higher.

Looking at graphs of CPI inflation vs rates since 2006 it seems that interest rates have very little effect on inflation. Rates remained flat and inflation just "did its thing". So many external influences and factors to inflation that hiking and lowering interest rates are a very blunt tool in this day and age.

Personally I think rates will drop quite steadily once inflation naturally drops down to 2% and the bank is "off the hook" in terms of trying to look capable.

wutheringkites · 03/08/2023 16:20

Lastwhisper · 03/08/2023 16:12

I do think we will see interest rates fall in Q1 2024, probably to 5.5%, as long as there is a drop in wage claims and awards.

How would that be a drop if interest rates are currently 5.25%

3BSHKATS · 03/08/2023 16:22

5-6% is fair to savers and borrowers, IF wages increase with inflation and catch up from 2008 which is not currently happening

Lastwhisper · 03/08/2023 16:26

The problem is that we are not seeing any productivity gains in the economy - so if we have wages increasing by 6% for no gain, then it’s inflationary.

Twiglets1 · 03/08/2023 16:29

wutheringkites · 03/08/2023 16:20

How would that be a drop if interest rates are currently 5.25%

Show quote history

Because the BOE base rate still has a little way to climb and will likely rise to 5.75-6% (the peak) before it starts to fall again in early 2024.

rosetintedmemories2023 · 03/08/2023 17:29

Angrymum22 · 03/08/2023 15:53

Bought my first house in 1989 for 53k mortgage rate was 15.5% and my monthly mortgage payment was £515. I was earning around 25k a year so mortgage was around 25% of my gross earnings.
Based on the same property recently valued at 160k and with same deposit, current mortgage rates and updated earnings ( can accurately estimate this at 70-80k)
my mortgage would be 15-17% of gross earnings.
Defo would have more residual income in 2023.
I lost money on my first house when the market crashed in the early 90s Sold it for 45k in 1996. But of course our next house was less as a result. We also sold two houses to move in together and had a deposit of 50%. We never moved up the property ladder, big houses cost big money and cost more to maintain and run. If you don’t need 6 bedrooms why bother. As a result we now have a house worth 300k and are almost mortgage free.
We shouldn’t have to defend our personal choices or be constantly berated for having not overextended ourselves. Having lived through sky high mortgage rates followed by a total collapse of the housing market most Gen X and boomers are understandably cautious. We’ve definitely benefited from the years of almost zero interest rates but have also lost out on being able to benefit from savings interest rates.
In the last few months I have seen monthly interest on our savings go from a few pounds a month to enough to cover my monthly food bill.
My advice to anyone starting out. Buy small, live big. Buy a flat, low maintenance, no garden, fixed costs. Spend as little as possible on your home and start saving as soon as you start earning. With the recent reduction in capital gains allowance and buying to let becoming less ands less appealing why put your money into the property market short term.
If you buy big, convert to flats and draw an income from your own property. Particularly if you buy rurally and can convert outbuildings. Rentals in rural areas are like hens teeth and you’ll never be short of tenants.

I bought a flat but the advice to my generation was to future proof for any children you may have. hence the area who has suffered the most in terms of house price falls (telegraph article today) isn't London but the SE commuter belt. Apparently the homes that sellers are most desperate to sell are the family homes bought by exiting Londoners.

I think in a sense, they have the worst of both worlds. House prices are very high (Londonesque but you get a bit more space and a garden) yet you have to run a car and also pay rail fares (as many commuter towns are mostly residential and have few local jobs). Less wriggle room. At least for someone like me who bought in London, DH cycles to work and i take the tube, we have no car, council tax is affordable, service charges have been the same for 4 years as the residents own the freehold. So our only expense is the mortgage which is why we could overpay £1000 per month to reduce the balance.

3BSHKATS · 03/08/2023 17:50

I would never buy a flat these days and actually it’s terrible advice. If there’s any way you can avoid it and go straight to a house. I would buy a one bedroom house before I would buy a three bedroom flat due to the service charges. Section 20 is when it comes to repairs. You could literally be asked to find 20 grand within a matter of months. 50% of which will be going in the management companies mates pocket.

Lastwhisper · 03/08/2023 18:05

Ross is well respected and his thoughts will be considered carefully by the other major financial institutions. Tough talking by the BOE ( but just one more rate rise) might be enough to keep the pound steady.

Twiglets1 · 03/08/2023 18:10

Lastwhisper · 03/08/2023 18:05

Ross is well respected and his thoughts will be considered carefully by the other major financial institutions. Tough talking by the BOE ( but just one more rate rise) might be enough to keep the pound steady.

Yes I agree.

Would be good for borrowers if the peak was "only" 5.5%.

XVGN · 03/08/2023 18:10

3BSHKATS · 03/08/2023 17:50

I would never buy a flat these days and actually it’s terrible advice. If there’s any way you can avoid it and go straight to a house. I would buy a one bedroom house before I would buy a three bedroom flat due to the service charges. Section 20 is when it comes to repairs. You could literally be asked to find 20 grand within a matter of months. 50% of which will be going in the management companies mates pocket.

Agreed, and especially watch out for ex-council flats. I have heard that the council can and will mandate a complete change of windows, say, or roof and will choose contractors with no regard to your budget.

rosetintedmemories2023 · 03/08/2023 20:25

3BSHKATS · 03/08/2023 17:50

I would never buy a flat these days and actually it’s terrible advice. If there’s any way you can avoid it and go straight to a house. I would buy a one bedroom house before I would buy a three bedroom flat due to the service charges. Section 20 is when it comes to repairs. You could literally be asked to find 20 grand within a matter of months. 50% of which will be going in the management companies mates pocket.

You can buy a share of freehold flat.

mortgagequandary · 03/08/2023 20:43

Lastwhisper · 03/08/2023 16:12

I do think we will see interest rates fall in Q1 2024, probably to 5.5%, as long as there is a drop in wage claims and awards.

What are wage claims and awards? I'm sorry if this is a stupid question 😳

3BSHKATS · 03/08/2023 20:48

rosetintedmemories2023 · 03/08/2023 20:25

You can buy a share of freehold flat.

Show quote history

That’s literally like buying a bag of magic beans

rosetintedmemories2023 · 03/08/2023 22:25

3BSHKATS · 03/08/2023 20:48

That’s literally like buying a bag of magic beans

Show quote history

Our service charges have stayed the same, in fact my DH who is director of our residents management company is trying to persuade the rest to increase it in line with inflation. We crucially don't pay much to commute (DH's commute is free as he cycles the 8 miles to the office); i think it's one reason why the SE commuter belt has larger price falls than London..even with hybrid work, the rail companies have adjusted their fares to match this so it's more than £4k per year per person to go to work..

And most people I know who live outside London have to go into the office 2-3 times a week as a minimum .

Fooksticks · 04/08/2023 07:47

@Angrymum22 Have I read your post right? You bought a house in 1996 with a 50% deposit and still haven't paid it off?

Twiglets1 · 04/08/2023 08:16

Hungrycaterpillarsmummy · 03/08/2023 15:24

So we fixed for 2yrs (actually it kicks in in December) and then once the two years is up our child will be getting free hours if nursery so we will have Alot more expendable income. We will Laos be ok the 60% loan to value so when rlwr remortgage we should get better rates and also reduce our term to 14years )so reducing down as if we never increased the term in the first place). If that makes sense.

Show quote history

Extending the term for a couple of years to reduce mortgage payments during particularly expensive times in your private life does make sense.

What costs people a lot more money in interest payments if they take out a mortgage over a longer period (35 years instead of 25 for example), and stay on that term for the whole 35 year life of the mortgage.

Original poster
spring33 · 04/08/2023 08:52

Hungrycaterpillarsmummy · 03/08/2023 15:04

I'm interested in it because we just extended our term from 16 years to 25 to help keep our repayment down with the new rates.
So is this telling me that actually we've just signed up to paying more for no real gain?!

Show quote history

What is the difference between your 16 year and 25 year repayments? Is it possible to find an smaller amount to overpay that you can manage? For example, if it's £200 more, could you overpay £100 or £50 a month instead? That would help lower the extra interest you would pay. I get it if you can't afford to do that, everything else has gone up.

OP posts:
Original poster
spring33 · 04/08/2023 08:58

I didn't see your other posts @Hungrycaterpillarsmummy, it does make sense to extend in the nursery years, try and switch it back as soon as you can.

OP posts:
XVGN · 04/08/2023 09:11

Twiglets1 · 04/08/2023 08:16

Extending the term for a couple of years to reduce mortgage payments during particularly expensive times in your private life does make sense.

What costs people a lot more money in interest payments if they take out a mortgage over a longer period (35 years instead of 25 for example), and stay on that term for the whole 35 year life of the mortgage.

Show quote history

Yes. I would have banned mortgage terms greater than 25 years. It's in no one's interests - apart from builders' - and only causes house prices to increase beyond sustainability.

I'd have also stopped HTB. It was never intended to help buyers - only to help builders extract as much money from buyers as possible. I fear for many of those suckered in by this scheme.

ifyougochasingrabbits · 04/08/2023 15:34

Agree @XVGN

It just causes more house price inflation

UnknownDecisions · 04/08/2023 15:56

DH and I have been talking about this a lot because we could reduce the term and pay it off quickly or keep it and put all the money into fixed savers. At current rates: remortgage at 5.6% or savings account at 6.06%. It actually doesn’t make sense for us to pay off the mortgage or even overpay by making overpayments or reducing the term.

LadyTemperance · 04/08/2023 16:04

@UnknownDecisions where can you get that rate?

Xenia · 04/08/2023 16:14

I get 1% so the 6.06% of unknown sounds quite a find!

UnknownDecisions · 04/08/2023 16:17

For savings tor mortgage?

Mortgage- Yorkshire Building Society 5year fix

savings: Cynergy at 2 year fix.

@Xenia 1% on savings now is very low. Even on easy access for main stream names you can get at least 3%