Get ready for rates to rocket

apt

It's absolute nonsense to claim that the prudent are being punished and suffering. Many prudent savers will still be getting 6% or 7% on fixed rates they took out last year. And even those that don't can still get around 4% for their money. Those are fair rates and it's selfish stupidity to expect more at the cost of screwing the economy even further into the ground.

ruggedtoast

Dan: wrote: »

Oh dear. We really are scrapping the bottom to find 'doom' news these days.

Interest rates will not shoot up rapidy - this will undo the work achieved so far, so nice steady increases starting sometime next year would be my bet. And mervs come to that.

Which is what?

Additionally why wont interest rates shoot up; do you have any substantive theory to back your assertion?

If you disagree with something say why.

dopester

ruggedtoast wrote: »

Which is what?

Additionally why wont interest rates shoot up; do you have any substantive theory to back your assertion?

If you disagree with something say why.

Because the economy is only being held together by very low rates. Already one economist has floated the idea of making banks charge savers to look after their money. They'd love negative rates.

What's more, in a deflationary environment the size of that debt will begin to inflate relative to earnings. One of the reasons interest rates are so low is that assets such as houses are depreciating in value. If house prices are rising, you are forced to pay a price for your gains. When they are falling, banks are grateful just for the repayment of principal. What you gain on the cost of your mortgage you more than lose on the size of your debt, which is inflating relative to your equity and income.

Rates and qualifications for new borrowers may become significantly higher, but in many instances lenders just grateful for repayment of existing debts, even at low rates. The possibility exists the BoE could be forced to raise interest rates it by the market.

wymondham

apt wrote: »

It's absolute nonsense to claim that the prudent are being punished and suffering. Many prudent savers will still be getting 6% or 7% on fixed rates they took out last year. And even those that don't can still get around 4% for their money. Those are fair rates and it's selfish stupidity to expect more at the cost of screwing the economy even further into the ground.

What rate could a new saver get now?

Interest rates are a balancing act, and at present it's swayed too far in favour of house buyers. I think we'll agree to differ as 4% is not a great return given the savings house buyers are currently getting.

confused31_2

ad44downey wrote: »

When interest rates go up to a proper level is the time when the house price crash will really begin. What we've had so far is merely an appetiser.

I agree with that, people who have scraped by with low trackers and variable rates will be in a right mess.

Ive notice a lot of properties have been took of the market as people have managed to make payments on their mortgages, even though they have lost incomes, but when they do go up, there will be a glut of cheap properties, as all these people will start to try and sell again.

dopester

confused31 wrote: »

I agree with that, people who have scraped by with low trackers and variable rates will be in a right mess.

Forget about waiting for cripplingly high rates to break them.

The mess they will be in is for not selling up. The value of their homes are going to plummet... even with very low rates. That is why they are so low. They are going to keep crashing in value.

confused31_2

dopester wrote: »

Forget about waiting for cripplingly high rates to break them.

The mess they will be in is for not selling up. The value of their homes are going to plummet... even with very low rates. That is why they are so low. They are going to keep crashing in value.

thats why if you are one of those people who have just scraped through, i would sell now asap, because when the rates go up, they will go up for everyone, and everybody will be trying to sell pushing the prices further down.

Really2

So if they go up that means infaltion will be up (which means HPI in reality). Which in turn means wages go up.

So now the new mantra is a V shaped recovery. lol.

If the bears are now turning in to bulls about the recovery surley it would be time to buy as inflation would erode your debt (like the 70s)

But personal I would say don't get your hopes up unless you think this is all over.

socrates

dopester wrote: »

Forget about waiting for cripplingly high rates to break them.

The mess they will be in is for not selling up. The value of their homes are going to plummet... even with very low rates. That is why they are so low. They are going to keep crashing in value.

So in your opinion is the best thing to do - if you have a good LTV:

remortgage your house on a fix for the next 5 years on a decent rate - and stick the excess funds in the bank? The interest on that being lower than the rate you are paying for these excess funds to the lender.

Then when prices drop (as the rates have gone up) - use the excess funds to upsize and rent the original property out?

Is that a good plan?

julieq

Why will "everyone" be trying to sell?

Not many people bought with 120% mortgages at the peak. Most homeowners have lots of equity in their houses. The overwhelming majority of the workforce are in employment. There's no earthly reason why "everyone" would sell.

This is wishful thinking from the STR brigade I'm afraid, and is based on the notion that everyone who owns a house is mortgaged up to the hilt to peak prices with massive credit card bills, i.e. it's a media stereotype. I know very few people like that personally.

There's also this peculiar idea that interest rates should be higher to reward the prudent. Well apart from the problem that interest rates don't follow rules of morality, why should anyone have the right to a safe income without doing anything at all to earn it?