6% mortgage rates; trouble a'ht Mill

[Twiglets1]

This is a new 6% mortgage rates thread as the last one is almost full.

Thanks to KievLoverTwo for suggesting the second part of the title to reflect all the squabbling these threads are causing. Which could be a thing of the past of course. But realistically, it won't be.

""Brokers" are quoted as basically saying it's only a blip, but the their livelihoods depend on getting people to take on mortgages, so they're hardly impartial"

So laughably obvious isn`t it, LOL.

No, the more debt you have the harder it will be in a higher rate environment.

BBC article today When will the Bank of England start to cut base rates?

The big question of 2024 for the Bank is: when exactly will it start to cut rates? The first decision is on Thursday, and few expect there will be any changes from the current rate of 5.25%.

The crux of the situation is that the headline rate of inflation - the rate at which prices rise - may fall very rapidly, even below the 2% target by spring, alongside actual falls in domestic energy prices. But interest rates are not expected to fall so fast.

The Bank will be watching other measures of underlying inflation, such as core inflation which strips out the impact of food and energy prices. It is yet to be convinced, in particular, that wages and prices have shaken off the period of above-average increases. Some economists argue that the Bank will wait until it gets firmer data on, for example, whether annual wage bargains remain well above 2% by the time of its May decision.

There will be a presentational difficulty in resisting rate cuts should inflation be well below 2%, and if the economy is not growing or even in a technical recession. There will be business pressure for cuts, and in an election year there could be political pressure, if not from the government itself.

https://www.bbc.co.uk/news/business-68106731

Middle East tension ramping up, U.S economy apparently still running "hot"? Cant really see the rate cuts that some are hoping for materialising TBH, certainly not the "6 rate cuts before Summer" that some "experts" were cheerleading. IMO if you already have mortgage debt, fix and start overpaying if possible, if you dont have mortgage debt, don`t help some over-borrowed seller to offload their losses on to you, their house will be cheaper in future.

Highly likely there will be rate cuts this year Crashy. The only question is: how many?

When interest rates will fall and how low they’ll go in 2024 according to experts:

The Bank of England is expected to keep interest rates at 5.25 per cent when its Monetary Policy Committee (MPC) meets on Thursday but cuts are expected later this year.
Although exact forecasts vary, most economists expect the rate to come down from its 15-year high either in May or in June. The International Monetary Fund (IMF) added on Monday that it did not expect cuts until the second half of the year.
Forecasters are also split as to how many cuts there will be this year – with the majority suggesting the base rate will be at 4.25 per cent or below by the end of December 2024.

So a bunch of banks with a vested interest in people borrowing want to reassure people that it is OK to keep borrowing? LOL, excuse me if I dont take them too seriously. They cant see the next inflation shock any better than anyone else, they are just in panic mode because lending is dropping, they are hardly going to come out and say "Get ready for mortgages at 8%!" are they?

Guardian article: Bank of England sticks with 5.25% interest rate but hints at coming cut

The Bank of England has dropped the broadest possible hint that the next move in interest rates will be downwards after forecasting inflation will fall below 2% within months, despite keeping borrowing costs unchanged for a fourth consecutive time.

Threadneedle Street stressed that more evidence was required that inflation would stick at the target set by the government before the Bank could deliver a first cut to borrowing costs since the start of the pandemic. It warned that risks from fast-rising prices remained amid the cost of living crisis.

The Bank issued a sharp downgrade in forecasts for inflation, pencilling in a fall below 2% in May for the first time since early 2021, although it warned it was likely to return above the target rate later this year amid robust pay growth in the British economy and the fading impact from lower energy prices.

Andrew Bailey, the Bank’s governor, said: “We have had good news on inflation over the past few months. It has fallen a long way, from 10% a year ago to 4%. But we need to see more evidence that inflation is set to fall all the way to the 2% target, and stay there, before we can lower interest rates.”

https://www.theguardian.com/business/2024/feb/01/bank-of-england-keeps-interest-rates-unchanged

Last month they voted
Hold 6
Raise 3

Today
Hold 6
Raise 2
Drop 1

Still a way away from moving in either direction

https://www.standard.co.uk/business/nationwide-raises-mortgage-prices-bank-of-england-holds-interest-rates-home-loan-property-house-b1136421.html

"inflation would likely remain above the Bank’s 2% target all the way until 2027."

This afternoon I though they were saying it would come down next month? I wouldn`t take any predictions too seriously at the moment, but I reckon if the U.S attack Iran credit markets are going to get spooked.

They still do expect inflation to come down next month and to reach 2% by April. Andrew Bailey "pointed to the fact that while the consumer price index measure of annual inflation is set to drop to 2% in April, it will later bounce back, mostly due to energy costs".

Regarding mortgage rates "The governor of the Bank of England has told Sky News he expects the next interest rate move to be a cut. Britain's central bank signalled that it was now edging closer to reducing the rate, as it dropped language about the potential need for further hikes from the minutes of its meeting and did not push back against widespread expectations that it will begin cutting later this year.

In response to the question how long interest rates should be at this level, Mr Bailey responded: "The decision, unless the world changes, and of course unfortunately the world does change and particularly at the moment, the next decision is more likely to be when do we cut."

https://news.sky.com/story/bank-of-england-holds-interest-rate-at-5-25-for-fourth-time-in-a-row-13061300#:~:text=UK%20inflation%20is%20forecast%20to%20fall%20to%202%25%20in%20April&text=We%20have%20had%20good%20news,we%20can%20lower%20interest%20rates.%22

I’ve said previously there would be a ‘window’ where the banks compete against each other lowering products, ideally below 4%. That window, signalled by Nationwide yesterday looks to be now tapping out.

Of course BoE held rates yesterday as that’s what the Fed did. It’s not difficult.

People go on about inflation dropping below 2%. Inflation will drop as major economies already are/and will be going through recession. This reduces demand in goods and services, people lose jobs and people lose businesses. The key however is prices will hardly drop/if any.

A second wave of inflation looks to now be rising again elsewhere (shipping, Middle East, war etc) combined onto already a wage/price spiral, will mean inflation remains sticky and will begin the second wave at the consumer end later this year or next year. This will then eventually have to send rates back up and beyond.

Also take into account that 60% of this country is reliant on government support which have been so far uplifted with inflation. That’s keeps inflation sticky and keeps a base under demand/supply chains which puts pressure again on prices (see covid, now Red Sea)

The above demographic then in turn puts increased pressure on the tax payer as the government can’t cut taxes (we already are at the highest rate in ratio since WW2) and business unions to keep negotiating for higher wages. Businesses just can’t afford it, think of all the pensions too that have to be uplifted, services go bankrupt (see councils currently)

I also read somewhere that Nationwide put rates up because of the influx of applications for the lower rates. They simply cannot cope with interest it generated in new applications.

I agree with @Lightscribe
As I've said several times before, we are probably already in recession, if not drifting into one soon, ditto Europe. China is in big trouble. The US is in debt up to its eyeballs which is the only reason GDP continues to increase. So global disinflation, although unlikely the central banks will allow actual deflation.
I also agree that the general headwinds are far more inflationary (not immediately, but maybe 25/26). Not just in relation to oil prices, as geopolitical devisions continue to be inflamed, but also the CB response, when things start to look really bad, will be more QE causing high inflation and currency devaluation.
If I were looking to re-mortgage now/ soon, I would personally fix for a long term. Admittedly, I am generally risk averse anyway but the next few years look hugely volatile, with much higher IRs being a v distinct possibility.

Wage inflation is 7%, interest rates are not falling anytime before Q3, or at all.
The current rates will be given time to work, to see if they are at a comfortable level.
I’d say these rates are the new normal and hopefully will stay at this steady, and relatively low, level for the foreseeable.

@OneForTheToad that sounds likely, I think house ownership is not going to happen for many, renting needs to evolve for this and is inadequate. The idea to me that house prices would drop significantly is very unrealistic but there are still a few hanging out for that. The fact it didn’t really happen when interest rates hit a record high is quite amazing. The gap between asset rich and poor is widening massively which is a concern. How will the elderly renters be housed?

I don't think they're going to cut the base rate at all this year. That's my prediction.

if you dont have mortgage debt, don`t help some over-borrowed seller to offload their losses on to you, their house will be cheaper in future.

This! This has been my thinking since the beginning of 2023. Sellers will try to push their financial losses onto buyers. Buyers know this now.

blind optimism from those without homes to expect cheaper ones in the future IMO. That would buck all trends. Unfortunately there have been lots of catastrophic events and economic uncertainty. House prices continue to rise in real terms and at worst stagnate or drop back to a level from 5 years ago and then go up again.

US Jobs; "Experts" prediction - 185k - Reality Number - 353k - LOL.!

Rate cuts are off the table folks, I genuinely hope everyone on the thread grabbed those cheap fixed rates because they won`t be around next week, never try to game the FED and the bond market!

Yes, but you are reading averages produced by vested interests and the stats are based on much reduced sales in historical terms, that skews everything, as rates stay high the price of property will come down.

Yes but real house prices have only generally increased (with a couple of significant exceptions) in recent decades. There is no reason why this recent trend is guaranteed to continue forever.
As you say 'lots of catastrophic events and economic uncertainty'. Things have changed and we are at a very risky juncture, in many ways, imo. It therefore doesn't make sense (to me) to expect all other trends to continue as before.

It might not make much difference anyway because it will depend on the swap rates (currently below the base rates).
I think people are hoping and praying for rate cuts but may find that their situation is no better anyway.

I'm not convinced by those stats. Lots of job losses feeding through and more to come for sure. The government keep putting NMW up a lot which will help the figures to look good but I'm not sure that this will be a positive thing in the slightly longer term.