So when do interest rates shoot back up

Cat695

The drop in interest rates for mortgage holders is a good thing (for those that have had it passed on)

However at some point in the not to distance future interest rates will rise

is it likely we're going to see double figures like in the early 90's?

If so when do you THINK this may happen??

When i look at the history of interest rates it seems the low ones only last for a couple of years at most (since 1991 they have always stayed below 10)

The reason i ask is it seems people only get a fixed rate for a couple of years then have a big shock.....they could have a bigger shock when interest rates do go up again

Hectors_House

Bumping this cus I'm interested in any responses also seeing as the financial advisers seem to be pushing tracker mortgages at the moment as fixed rate ones seem to be disappearing.

Are fixed rates disappearing cus the lenders suspect interest rates might be hiked up into double figures in the years to come if the govt./BOE can get inflation under control?

opinions4u

The answer is, nobody knows.

Advice to take short term tracker mortgages at the moment makes sense, but I've had a mortgage for 18 years now and seen the rate vary from 5% up to 15.4% and seen BofE rate vary between 3.5% and 15% (albeit for one day).

Longer term fixed rates do offer a genuine stability for a borrower and if you know you are going to stay in the same place for longer than the fix there is a lot of sense to fixing it.

For anybody taking out a mortgage in a low interest environment like today, ask what the payments would be if interest rates doubled or even trebled. And work out a plan of what you would do without if this happened.

monkeymaster

Cat695 wrote: »

The drop in interest rates for mortgage holders is a good thing (for those that have had it passed on)

However at some point in the not to distance future interest rates will rise

is it likely we're going to see double figures like in the early 90's?

If so when do you THINK this may happen??

When i look at the history of interest rates it seems the low ones only last for a couple of years at most (since 1991 they have always stayed below 10)

The reason i ask is it seems people only get a fixed rate for a couple of years then have a big shock.....they could have a bigger shock when interest rates do go up again

I think the short-term trend for interest rates is down, in the medium term I think it depends on two things;

1) Whether you think the current bailouts are inflationary, and whether too much money is being pumped into the system (in effect the authorities are over-compensating) which will have the effect of pushing up inflation in the medium term, and

2) Whether there is a run on sterling and interest rates have to be raised to protect the currency.

Unless number 2 happens in a big way I think interest rates will be falling for at least the next 12 months. After that who knows, there are too many uncertainties at the moment. I think people have got too used to very low interest rates which are NOT the norm. Personally I wouldn't go for a tracker mortgage or short-term fixed - I'd opt for security every time.

Cat695

I agree on the people getting use to low rates....imagine getting a 2 year fixed now and at the end of that you come out of it and interest rates are at 9...10% then we will see some people in real trouble..

if i could get it i would take a fixed rate for the whole life of my mortgage....I would rather know exactly what i pay all the time than having to worry about rates going up or down

Sooler

Cat695 wrote: »

imagine getting a 2 year fixed now and at the end of that you come out of it and interest rates are at 9...10%

This should be taken into consideration, and allowances made for, before taking on any mortgage, fixed or tracker.

I'd rather not worry about rates going up and down by only borrowing an affordable amount in the first place.

Cat695

Sooler wrote: »

This should be taken into consideration, and allowances made for, before taking on any mortgage, fixed or tracker.

well as the current crisis has proved very few people take this into consideration sadly and are now in the sh*t

guess it pays to do your homework.

Wutang_2

Cat695 wrote: »

well as the current crisis has proved very few people take this into consideration sadly and are now in the sh*t

guess it pays to do your homework.

I assume your homework wasn't poetry?

mr_jetlag

monkeymaster wrote: »

2) Whether there is a run on sterling and interest rates have to be raised to protect the currency.

Unless number 2 happens in a big way I think interest rates will be falling for at least the next 12 months. After that who knows, there are too many uncertainties at the moment. I think people have got too used to very low interest rates which are NOT the norm. Personally I wouldn't go for a tracker mortgage or short-term fixed - I'd opt for security every time.

Well, BOE thinking at the moment seems to favor a weak sterling (down to levels not seen this century - think $1.30!) to raise exports. The only bright spot is that the Euro is also weakening against the dollar so any short term currency pain will be shared:

http://www.bloomberg.com/apps/news?pid=20601085&sid=aHRlZlVmQm_w&refer=europe

So that said, I expect another cut in November to 4% which will definitely help SWMBO and I on our tracker mortgage. Since we took it out last year the costs of payment have gone down by about £120/month so far.

Even though it was an interest-only mortgage we did not break the bank (it was 3.5x salary) and so are in a good position to overpay and bring down our mortgage little by little.

Kez100

We've not seen the dollar this low this century but I'm not very old and remember $1.54 when we went on our first USA holiday in the early 90's -not that long ago. It's the volatility I don't like.

Why has the dollar suddenly gained so much strength?

mr_jetlag

Kez100 wrote: »

We've not seen the dollar this low this century but I'm not very old and remember $1.54 when we went on our first USA holiday in the early 90's -not that long ago. It's the volatility I don't like.

Why has the dollar suddenly gained so much strength?

If you believe the mainstream thinking, it's the perception that since the US was first into recession, it will be the first out of recession - it's essentially a bet that growth in the UK/EU will be negative for many, many quarters more than the US.

It's more herd mentality from the same class of jokers who have brought the FTSE below 4000 and are now spreading the panic to the wider economy. Nice job, eggheads. :rolleyes: