6% mortgage rates

[spring33]

Old thread https://www.mumsnet.com/talk/property/4813815-5-mortgage-rates?page=1

New thread, let's hope the next one won't be 7% interest rates or higher.

@CrashyTime pretty much all economists now predict that we are very close to the peak in terms of interest rates. So why would someone want to take a 5 year fix close to the peak?

Pretty much all economists dont predict that, a famous one (who called the last property crash when loads of other economists missed it coming a mile off) is today saying that if the BOE dont keep hiking rates we will have "stagflation", now THAT would be interesting for the housing market! Mainstream economists are paid to draw clicks to websites/content, not to predict things (like inflation NOT being "transitory" and interest rates rising at the fastest pace in history) that help ordinary folks out financially

I called the bank they said I can get the better rate one month before the fixed rate ends. So I will take up the rate as a provision. However if by March next year, the fixed rate I can get isn't below 5.25%, I will take a tracker mortgage until fixed rate drops below 5%. (actually tracker rate is lower than 2 years fixed at the moment).

Sounds a good plan @theholidaymum

What are you basing your predictions for the fixed rate dropping on?

Fixed rates are already dropping — though that’s not to say it’s a trend — because banks make their money by lending to people. Obviously they’ll want to keep a margin between the BoE rate and their own, but they want people to take out mortgages so they will price them as competitively as they can.

"So why would someone want to take a 5 year fix close to the peak?"

1. Because we can`t predict the "peak", I think they will go higher, plenty of others disagree, but no one knows, personally at around 5% I would try for a ten year fix.

2. Even if we hit a "peak" why would rates need to be cut (unless we are in a very serious recession) why not just hold rates at around 5-6% (base rate) for years?

3. Fixing means you know how much you will be paying for years to come, you are not at the mercy of "inflation shocks" (which for the most part are out of the control of the BOE, the main lever they have is "interest rates", not much else to control inflation?)

4. Taking the fix means you are insulated from future rate rises, if rates fall you won`t lose much if you make the focus - Paying down the debt quicker, not - Trying to make interest rate predictions that highly paid professionals often get wrong.

5. Most mainstream media (and internet forums) got it badly wrong on inflation and interest rates, always always DYOR before making big financial moves.

"They want people to take out mortgages so they will price them as competitively as they can."

Yes, mortgage applications are down about 40%, mortgage lenders are bricking it, but they are still at the mercy of the "10 year yield"or what the BOJ does or what the trends in global bond markets are more than their need to be competitive.

You think they will go higher than what, 6%? All but a tiny minority think they will peak at 5.5% or 5.75%.

You're just out of touch with mainstream thinking, Crashy! I know you take pride in being different but we’ve yet to see the house price crash that people like you predicted. Just because you may wish certain things to happen like house prices crashing and interest rates rocketing to 7%/8% or higher doesn’t mean it will happen.

How disappointing that after all those dire predictions from doomsters like you, interest rates will end up peaking at under 6% and once they start to fall, the property market will start to stabilise.

I wished for 5% on my savings accounts, that happened, why shouldnt 6% happen? Can you give your economic reasoning for why base rate cant reach 6%, and also your economic thinking on why rates would need to be cut as opposed to paused any time soon?

I can always tell when you’re getting agitated Crashy when the dodgy keyboard comes out!
I don’t say base rates can’t reach 6% but it is a tiny minority of economists who are predicting that base rates will exceed 6%. Haven’t you heard? We’re very close to the peak now.
What they are forecasting is that they will probably peak at 5.5% or 5.75% and then come down a bit in 2024 then stay at between 4-5% for a while.
My feeling on the matter which is only a guess of course is that people will feel a lot more inclined to buy property once they know we have passed the peak. That is what a lot of people are waiting for.

@theholidaymum I agree with the majority that you should take the rate and then keep looking until Feb/ March. Rates may go down a bit in the v short term (few months). I would say that things are v unpredictable after that. There is a strong risk that they continue to rise. As @Lightscribe says, we have more inflation in the pipeline. If it were me personally, I would pay the certainty premium and take a long term fix. I understand that other people prefer to 'gamble'.

I really wouldn't take all the main stream economist predictions too seriously. They are so often wrong and say what they are expected to say. They also don't want to upset markets because they are part of the establishment system.
If we end up with a severe recession/ depression, sure rates could come down somewhat, although v unlikely to zero again. But some forget what else will happen in a recession/ severe stagnation. It will involve much higher unemployment and lower earnings for starters and people won't be rushing out to buy houses in those circumstances. Anyone who believes the 'everything will be fine' narrative is naive imo.

Not sure that anyone on this thread is saying "everything will be fine" @rainingsnoring

My comments relate to interest rates/mortgage rates (thread title) and my belief that there is pent up demand from people who are waiting for interest rates to start to fall before buying.

I don't say "everthing will be fine" with the country. I would like to think things will improve under a Labour government but I wouldn't put money on it.

Whether there is or isn't pent up demand is a separate issue from whether people are coming off very low fixed onto much higher interest rates and into financial dire straits though.

It isn't just about whether new buyers can afford the rates to keep the property market ticking along, it's whether current home owners can afford the new rates.

Ultimately, whichever way you look at it, affordability has dropped due to the interest rates being where they are. They aren't going back to the (almost 15 year!) emergency level, so people are / will be in a position that they can borrow less than they would've been able to at 1-2% rates. Which means some adjustment in the market re pricing in many places.

Agree it is a seperate issue.

I don't disagree there will be a lot of hardship for current home owners moving from a low fixed mortgage rate to a higher one, we have already seen that. Though I don't foresee many repossessions as the banks have a different attitude this time round.

I'm not saying the property market will suddently "take off" rapidly as soon as interest rates fall. People who are financially struggling will not be able to trade up that's true, so that will continue to suppress the market. However, I do think we will see a shift in the mindset of the many people who haven't bought yet because they don't want to buy at the top of the curve with regard to interest rates. Thus I believe that the property market will start to stabilise.

They cant predict the "peak", you can see that from past "predictions" - They missed the 2007 property crash, they said inflation was "transitory", they said interest rates wouldnt rise (The MSE guy was om telly saying no higher than 3% not that long ago?) They missed that Ukraine/Russia was going to flare up, now they can`t predict what some of the oil producing nations will do (they seem to want oil at $100 a barrel, do you think that will lead to lower rates?)

They might pause rates, but the UK can`t control what global inflation/oil price does, and they have to follow what the FED does on interest rates anyway.

Who are some of these economists that you are following so we can have a look?

Your second paragraph is very good advice and should be read by everyone thinking about how much mortgage debt they should be taking on.

The market may stabilise at much lower prices, but housing markets tend to crash first and then recover, that seems to be the historical norm, and remember they can`t cut rates to help the "recovery" like they did last time. As the poster above said, unless rates go back to 1-2% we are looking at a very different housing market from the one experienced over the last 15 or so years, but that is good, cheaper property is a MASSIVE positive for society.

Well they didn’t exactly miss the Ukraine/Russia war, Crashy. I don’t think anyone could have known that Putin was going to go that far in his madness.

Im not following any particular Economists, I just read the news. I read what papers like the Telegraph, Times, Independent & Guardian are reporting. They report what the top Economists are forecasting. The experts often don’t agree and of course they don’t always get it right. But if you read from more than a couple of sources you get a general view of what is likely to happen with interest rates. A general opinion from financially literate people is that they are very likely to peak soon and then fall slightly and then stay at between 4-5% for a long time.

As the poster above said, unless rates go back to 1-2% we are looking at a very different housing market from the one experienced over the last 15 or so years, but that is good, cheaper property is a MASSIVE positive for society.

Wrong. Cheaper property is a massive positive for investors with large sums of cash. Young people who need a mortgage will struggle with higher rates.

So we should keep property expensive to keep "investors" out of the market? We are constantly being told that BTL landlords are exiting the market in droves so who are these investors that you mention? Mortgage applications are down about 40% and everyone now deciding not to apply for a mortgage already lives somewhere so if rates are a struggle for people then prices will need to fall by a lot for the market to function, a few investors snapping up bargains won`t make much difference. The BIG difference came from cheap debt, that allowed people to pile into residential, BTL AND AirBnB, investors with "large sums of cash" are a tiny pool by comparison.

So we should keep property expensive to keep "investors" out of the market?

That's not what I said is it? The point is that even if property prices fall, it's not going to benefit anyone needing a mortgage if rates are high.

What buyers aren't spending on the house price, they will be spending on interest instead, so where is the MASSIVE benefit to society?

You are assuming that prices stay the same, with rates at these levels that wont happen, people will be paying higher rates on much less debt and be exposed to interest rate risk for a much shorter time, the interest rate risk involved in a 30 year mortgage now at really stupid prices just isnt a sensible risk to take for most people. If rates stay Higher for Longer I could see houses back at three times joint income TBH.

@CrashyTime

No I'm not. As I said, even if prices fall, it will not benefit anyone needing a mortgage if interest rates are high.

Low house prices and high interest rates are the same as high house prices and low interest rates as far as monthly payments and affordability is concerned.

If anything, a house price crash is bad news for FTB because it will strangle supply. House builders have already massively cut back.

@CrashyTime

I think you miss the point that it is supply, not price, that prevents people from getting on the ladder.

If there are 4 houses and 10 buyers, then 6 people must be priced out. This is the case regardless of whether the house costs £50k or £500k.

A housing crash won't increase supply, it will strangle it.