After Nationwide's increase yesterday.... the rest follow today.

Gorgeous_George

Lenders should increase their borrowing rates in order to be able to raise savings rates to attract savers.

Raising rates now will lessen the blow when BofE rates start to rise.

A FTBer fixing for ten years and buying a home that will suit their needs for much of that ten years should see their mortgage costs fall as a percentage of income - especially if higher inflation is accompanied by higher pay rises. Whether or not this will offset future falls in house prices remains to be seen. I think if I was a FTBer I would be considering buying even though prices may fall further. Life goes on.

Why wait for prices to fall another 10% if rates could be 20% higher? Add on rental costs while you are waiting and buying now could be (wait for it)... prudent (haven't heard that much this year).

GG

mbga9pgf

George, because prices are going to drop a hell of a lot more than 10% once rates start going up severely...

Rates are going to be much higher than 20% increased. Thing to remember is, for my personal situation, mortgage rates would have to hit 10% in 12 months to counteract the effect of my saving. I have a 25% deposit for 300K this month, each month I save 3K more and thus even rapidly rising rates do not bother me, as if rates hit 10% we are going to see a wholesale rout in house prices.

Gorgeous_George

You might be right.

A FTBer should ask the following questions

1. What do you think the average mortgage interest rate will be over the next ten years?

2. How much will a house cost in 2019?

3. How much will you spend on rent over the next ten years?

4. How much (money-wise) is owning your own home rather than renting worth to you?

Once these questions are answered it will be possible to make an informed decision regarding whether to buy or not to buy.

GG

Thrugelmir

Reaper wrote: »

Shouldn't savings interest rates be going up too for the same reasons? Not much sign of that yet.

They are going up. Though it seems savers don't want to tie their money up of fixed periods. They want flexibility in case interest rates rise.

So its costing the lenders more to raise the funds to lend on fixed term rates as savers are in effect demanding better rates for their money.

Short term, instant access accounts very rarely offer competitive interest rates.

For the past 20 years those that have leveraged by borrowing have gained at the expense of others. The tide is turning back to savers getting decent returns for investing their money.

If nothing else good has come out this financial crisis. The return to people saving can only be good for us all.