Why Mortgage Interest Rates Will Remain High

Thrugelmir

For those looking for the return of cheap mortgage rates. Yet more bad news.

The Nationwides contribution to the depositor protection scheme was £241 million last year. More than its pre tax profit.

Looks like borrowers will incur the brunt of these costs for the foreseeable future.

Customer-owned lender Nationwide Building Society reported a 50 percent drop in its full-year profits and warned on its outlook as impairments rise and competition for retail funds increases.
Britain's largest building society reported an underlying pretax profit of 393 million pounds in the year ended April 4, compared to 781 million in the same period last year.
"We expect the significantly reduced level of underlying profit in the second half of 2008/09 to continue throughout 2009/10," said the building society.
Its reported pretax profit, which includes an exceptional charge of 241 million pounds to cover its contributions to the depositor protection scheme, came in at 212 million pounds compared to 686 million last year.

http://uk.reuters.com/article/businessNews/idUKTRE54Q11L20090527

chucknorris

Damn so what you saying is that I'm stuck with these bloody 1.5% tracker mortgage rates for a long time then....yahooo!

Thrugelmir

chucknorris wrote: »

Damn so what you saying is that I'm stuck with these bloody 1.5% tracker mortgage rates for a long time then....yahooo!

Lifetime tracker ?

System

"Remain" high? They are eff all at the moment.

Thrugelmir

Joeskeppi wrote: »

"Remain" high? They are eff all at the moment.

Average SVR is 4.14% currently. Is that low?

kennyboy66_2

Thrugelmir wrote: »

For those looking for the return of cheap mortgage rates. Yet more bad news.

The Nationwides contribution to the depositor protection scheme was £241 million last year. More than its pre tax profit.

Looks like borrowers will incur the brunt of these costs for the foreseeable future.

Hmmmm,

For those looking for the return of high savings rates. Yet more bad news.

The Nationwides contribution to the depositor protection scheme was £241 million last year. More than its pre tax profit.

Looks like savers will incur the brunt of these costs for the foreseeable future.

Instant access accounts 0.1% before tax but if you are prepared to give 30 days notice then you will get a massive 0.2%.

chucky

Thrugelmir wrote: »

Average SVR is 4.14% currently. Is that low?

for 40% of mortgage holders - yes it is very low and many have it much lower.

historically yes interest rates are very low, over 50% cheaper - the average rate is somewhere just over 6% for the last 10 years and 25 years is somewhere 8%. so even if rates went up they would still be much lower than the 25 year average - don't let me do the 30 or 50 year average because todays and future rates will be an absolute bargain

Thrugelmir

chucky wrote: »

for 40% of mortgage holders - yes it is very low and many have it much lower.

historically yes interest rates are very low, over 50% cheaper - the average rate is somewhere just over 6% for the last 10 years and 25 years is somewhere 8%

When rates were higher so was wage inflation. So the value of debt quickly eroded.

The cost of debt will impact on all house owners as ultimately will act as a a drag on prices.

Thrugelmir

kennyboy66 wrote: »

Instant access accounts 0.1% before tax but if you are prepared to give 30 days notice then you will get a massive 0.2%.

Then you should spend more time looking after your money. :rolleyes:

chucky

Thrugelmir wrote: »

When rates were higher so was wage inflation. So the value of debt quickly eroded.

The cost of debt will impact on all house owners as ultimately will act as a a drag on prices.

but here's the thing - you don't know when inflation will kick in and what inflation will affect, we don't know if high rates will be affected or not affected by wage inflation or asset inflation and a few other factors out there.

all that we know is that historically rates are very low and will be lower on a long-term average than they've ever been. we can only make assumptions about wage inflation, house price inflation etc...

mbga9pgf

Lets face facts, its win win for the bears with big deposits.

If rates stay low, its because we are in a deflation scenario (my personal choice of what will happen for the next 12 months at least). If this is the case, high unemployment and uncertainty will push prices lower.

If inflation raises its ugly head, Rates will go up, better returns on cash is a bonus, plus, all those stupid or unable to fix at present will face massively rising rates. This is a serious risk as we look to recovery, once money starts to flow and money velocity recovers, we could scupper ourselves with inflation. Not that I think serious inflation is a risk, as massive government taxation is going to drag out this downturn for a fair while yet.

And if you think all those global gilt holders will tolerate inflation without massive rises in rates, you need to do your research. Worst case for the country would be a bond strike, as that would necessitate a huge increase in taxation, together with massive cuts in public expenditure.

Plus, if we get inflation, that will not push up house prices. Not in the slightest. we will experience soft commodity price rises (food, oil etc) wheras assets are going to be boogered.