Interest Rates Watch

[Freetodowhatiwant]

Just posting to see if anyone else is keenly watching out for the interest rate announcement. My mortgage is fixed for almost another two years anyway so I don’t have any personal skin in the game in that sense, but I have work involvement in the property market so I have a keen interest.

What I don’t understand is if the government are using interest rates as a tool to bring down inflation but are also encouraging the banks to be lenient and do things like extend mortgage terms surely the latter counteracts the desired effect on spending? Not that anyone is out spending on luxuries but instead the rising cost of living is having this effect on inflation. Although I guess it is the only real tool they have and it has in the past been proven to work.

Apologies for any sloppy wording with this, I am on my phone on the bus. Anyway, just thought I would start an interest rate watch thread. What with that and the rain.

I wouldn't fix now either. I got 'lucky' and fixed for 5 years at 4.2 in the spring. I think until things level off tracker is probably the best way to go. But then there runs the risk of long term issues if rates carry on rising. It's such a guessing game isn't it!

It is. Martin Lewis's advice re: trackers is don't go on a tracker if you're at the top of your affordability. We're looking at around 100-150k under what banks will lend us (smaller houses and/or different areas).

Not sure those at the top of their affordability would pass the stress tests with trackers anyway.

Yes all a big guessing game. I remember the last time rates were this high in 2008 I fixed in a hurry as they were ‘definitely going to continue to rise’. Then I got stuck on somewhere around 5% when everyone else I knew it was paying virtually nothing. That was painful. I chose a 2 year hoping things will be better by April 2025. I don’t expect (again, putting my guessing game hat on) that they will be at 1 or 2 percent but hopefully somewhere in the lower 4% for bank rates.

It is, the building society I’m with have agreed in their charter to also not start repossession until at least 12 months after the first missed mortgage payment. In the interim they have options such as those you’ve mentioned.

I am pedantic enough to have already made a note of the last two times interest rates reached 6% or close and then dropped to get a view on whether a tracker's worth it. Here's the history:

Years - 2007 to 08

5.75 July, August, September, October, November
5.50 December, January
5.25 February, March
5.00 April, May, June, July, August, September
4.50 October
3.00 November

Years - 2000 to 01

6.00 February for a year through to Feb 2001
5.50 April
5.25 May, June, July
5.00 August
4.75 September
4.50 October
4.00 November

Love it! I guess it’s still hard to guess what will happen next but it’s quite interesting looking at what’s gone before.

It would appear they’re actually sticking to the plan it is fully expected. The rates will be at 4% by spring next year. However, even that is going to have an impact on house prices, they should increase at the same rate of inflation they haven’t, but if it just levels off and steadily rise is it 5% per year, everyone’s happy. Basically normal service will resume in time for the general election.

That's really not going to happen.
The BOE has been signalling high rates for longer (5%+) today. That doesn't mean it will necessarily happen, of course, but equally there is nothing to suggest 4% in 9 months when rates are still rising both here and across the pond until the end of the year. What is likely to happen and has already started is rising unemployment and insolvencies and falling GDP for a long time. The Tories know things are a mess and may well try to/ successfully persuade the BOE to lower rates but it won't be 4% in a few months. The chances of 5% house prices rises in 2024 are close to zero unless the £ is trash by then already which is unlikely in that time frame.

I have it on authority from greater minds that that is the plan. Obviously I can’t guarantee that they’ll achieve it but it is the plan.

We are due a monumental financial crash imminently - wall street in the 20s level. I'm not being a doom merchant with that statement either.

Who is this 'authority' exactly?!
They are in cloud cuckoo land if they think that will work and nothing will go wrong.

Unfortunately, this is far more likely imo.

Yawn. Yawn. They’ve been predicting that for the last 50 years. The consequences of the 20s level crash when you look at what happened next, will be avoided at all costs.
and if we end up with world war three house prices will be at the very least of our worries

Your 'yawn, yawn' is not persuasive.
I agree with your last sentence though.

You haven't answered the question about who your 'authority' is.

Those who forget history are doomed to repeat it.
With all that is going on in the world, whether you like it or not, a financial crash is inevitable and will be the very least of our worries

I completely agree with you, which is why the crash/ demise simply cannot be allowed to happen.

I wonder who will be at the brunt of it this time

It's inevitable and probably no bad thing. Just make sure your debts and borrowing are as minimal as possible.

Big crashes hit those in debt first, then those with most money in investments/limited cash, then those who panic.

It is far from inevitable and the consequences that would come with it are a bad thing, unless you’re a psychopath.

They don’t just hit people in Debt. What about all the people that have worked their whole life for their pensions? Do you think the Tories are going to explain to them that they’re not worth the pay for the written on?

I think you're reading what you want to read not what I'm actually writing

Interesting thoughts. Crashes of course don't just hit people in debt, they hit people's jobs and incomes (and naturally their ability to pay any debt). But a crash might also mean a reduction in interest rates a la 2008/2009. I have no real strong predictions for it. An almighty crash like the 1920s sounds terrifying but we are in a completely different world now. The crash of 2008 was briefly painful but in terms of mortgages then meant many people were paying practically nothing (except those of us who were unfortunate enough to be stuck on high rates. I am still bitter about this). It would be hard to imagine how the government would let an almighty crash happen without some sort of back up support. It certainly wouldn't be good for whomever was in power at the time.

The problem is the more you prop up and support the more money needs spending and the less reserves there are meaning any crash that does happen has even more diabolical consequences.

The pensions situation is a nightmare waiting to happen.

All you can do is service your debts, reduce them as much as you possibly can, make sure your investments can be accessed so you have cash flow (not all in property) and hold on tight for a few years until it passes.

Can I ask when you would think they might drop rates? I reckon they’ll stay as is, or rise one more time before the end of the year. Then drop back next summer? I know this is literally a guess but it looks like this could be long enough to have some impact, and does marry up to the 2 times this has happened previously, which a pp listed.

Thank God I paid my mortgage off last year. I was thinking of moving but I'm so glad I didn't.

As far as mortgages go the rates that drive mortgages are the swap rates. See here. They'll rise if the markets are not impressed with the BoE's actions.

https://www.chathamfinancial.com/technology/european-market-rates