Get ready for rates to rocket

Thrugelmir

Capital markets will determine the interest rates at which investors are happy to buy gilts to fund the UKs budget deficit. In order to service mortgage requirements, banks and other financial institutions will need to offer competitive rates to attract the funds they require. This will be passed onto the consumer in the form of high rates. BOE base rate may take a back seat to an extent. As the Government is interested in inflation control not house prices.

In the past week both the interest rate of the issuance of new US Treasuries and UK gilts hit a six month high. The UK gilt issue was only for £2 billion with another £218 billion expected to be issued this tax year.

We are standing at the bottom of a mountain but have no idea where the peak is going to be. There's no cable car to take us up, its by foot all the way.

Its a pity that this issue is not being discussed more widely on the news. As its impact will have far wider implications than the worry of if property prices are going to rise or fall over the next month.

StevieJ

Fella wrote: »

House prices will fall a lot further & faster once the election is out of the way. Brown is deparate to do anything he can to prop them up until then, hence 0.5% interest rates. Regardless of who wins, don't expect low interest rates post-election.

UK is not the only one with low interest rates :rolleyes:

Really2

Fella wrote: »

Regardless of who wins, don't expect low interest rates post-election.

Why are you predicting the recovery or for savers to be trashed by hyper-inflation?

treliac

dopester wrote: »

I don't want my savings to be diluted at the sake of debtors and homeowners, who've already had so many years of a brilliant run and gains.

The value of my house has gone up, several times over. But it's utterly irrelevant. I need it to live in, am attached to where I am for all sorts of reasons - family, location, job, the sweat and toil that's gone into renovating it, etc., let alone the money I've ploughed into it over the years to make those improvements to a once neglected property. It's my piece of security and something I'm not willing to let go of for lots of reasons.

I would have to be at the point of life and death desperation. Anyway, if I sold it, under those sort of circumstances, I would have to live on the proceeds and that wouldn't last me long. So I'd end up spending my 'pot'.

House value gains are on paper only, so they mean nothing to me. If and when the time is right to move, I shall have to buy another home and the value of this one will be relative to the cost of the next.

I just don't understand this point on making gains. I still have a large mortgage, with a bank who has barely reduced its mortgage rate. I really don't feel better off. At least I hope not to end up as badly off as someone who faces repossession, but I am certainly not sitting on a pile of real or imaginary increased wealth.
.

socrates

mewbie wrote: »

8

Y'see Julie, the HPI was kept going by artficially low rates. Then when it all went t1ts up, the only reponse from a desperate financial community was to lower (yes lower - lol!!!) the already low rates. In the hope that "something would turn up". Well the lowest rates in history (300 years I believe - lol) have so far had no effect in preventing 20% drops.

I put it to you, and your fellow dwellers in cloud cuckoo land, that when rates go up then the only way for house prices is down. Plummet I'd call it.

Plummet and rocket - has a nice balance to it don't you think. _party_

Rates my have gone down to their lowest level ever BUT have 'new' mortgage deals or a lot of SVR's gone down to their lowest level ever - the answer 'NO' they have been kept artificially high. Most cases around 3-5% above the 0.5% BR - unheard of a few years ago other than sub-prime lending.

I think what you will find is when rates do rise and IF prices drop dramatically there will be a narrowing of the difference between BoE BR and mortgage deals available.

The tightening of lender criteria will also play a part - so if BTL LL's do jump in to snap up good deals they will be individuals whose figures 'stack up' - remember there are a lot of property funds who will have millions waiting to snap up portfolios of property at good yields.

Plus there will be FTB's who have played the waiting game if they have kept their nerve.

The whole thing is a cycle this is the 3rd one I am going through - there are always winners and always losers - its just at which point you decide to get on and off the merry go round!

ad9898_3

socrates wrote: »

I think what you will find is when rates do rise and IF prices drop dramatically there will be a narrowing of the difference between BoE BR and mortgage deals available.

I don't think there will be much chance of this, they are enjoying their gains at the moment, they are not going to want to 'cut' these gains at all. The only thing that can 'cut' their gains is competition in the market, and who is going to compete to lend people money who may lose their jobs, to buy a falling priced asset (house). Not many I would suggest.

confused31_2

ad9898 wrote: »

I don't think there will be much chance of this, they are enjoying their gains at the moment, they are not going to want to 'cut' these gains at all. The only thing that can 'cut' their gains is competition in the market, and who is going to compete to lend people money who may lose their jobs, to buy a falling priced asset (house). Not many I would suggest.

the btl mortgage rates are really rubbish at the moment and the fees are massive, if rates go up, btl landlords who need to jump off trackers are going to be in just as much a mess as the sellers who have managed to keep hold of their houses scraping through, because of the low interest rates.

You will always find people say things that they want to happen, that will benefit themselves, and if i was a buy to let landlord, i would want the rates to go lower as prices come down, but i think we all know they wont.

Theres only one way they are going and that is up, i just hope rates dont go up as quick as what they came down.:eek:

dopester

treliac wrote: »

I am certainly not sitting on a pile of real or imaginary increased wealth..

Sorry treliac but you do have an asset which has risen in value several times. The fact the increase in value means little to you doesn't mean a lot of those gains aren't convertible to cash value. You have an asset you could realise to cash, before values plummet much further.

(However I'm not going to push you that hard.. as if you're not really bothered it will lose value.. like some family members I have.. and aren't going to be under pressure to pay rest of mortgage - then fair enough)

It might have been your own sweat and toil which went in to the impovements, or you paid for assistance... but that won't count for that much in protecting high values. Labour rates are going down if you needed to have people come in and do the same jobs for you.

I only spent 15 mins on MSE yesterday, during a coffee-break, because had studied up on know-how to do a DIY job to help close family - which otherwise would have cost circa £110 (probably cheapest) in labour + I'd sourced the materials at trade prices. That is because they can't really afford to be spending money (just like many others - including pensioners, those who've taken pay-cuts, or lost jobs). More people will have extra free time, and even more trade experts willing to quote ever cheaper for the work as there is increasing labour overcapacity for so many types of work, and less money and credit to pay old boom-time rates.

Also improvements.. even if you've kitted out your home with lots of expensive designer name furniture or expensive antique stuff for your home.. those values will fall a lot further too. People will bring stuff to market to sell in order to raise cash, and accept lower prices... which lowers the market value for all other owners too.

You are an excellent STR candidate, even now, but I won't push it.

Fella

Really2 wrote: »

Why are you predicting the recovery or for savers to be trashed by hyper-inflation?

Don't really understand your post but I thought mine was pretty clear - i.e. that rates will rise & house prices will fall a lot faster when they do.

StevieJ

ad9898 wrote: »

I don't think there will be much chance of this, they are enjoying their gains at the moment, they are not going to want to 'cut' these gains at all. The only thing that can 'cut' their gains is competition in the market, and who is going to compete to lend people money who may lose their jobs, to buy a falling priced asset (house). Not many I would suggest.

I think you are so wrong there, I can't see the lenders being allowed to charge base rate + 6% to first time buyers when IR's are up to 5% Especially when the main lenders are influenced by the govt.