Another Interest Rate Prediction

tbourner

julieq wrote: »

Overpaying (reducing mortgage) is certainly not a "should do", because once overpaid, the cash disappears into bricks and mortar, quite possibly a declining real term asset. It's actually a very poor strategy, the only reason people seem to do for emotional reasons, to get the debt monkey off their back.

SimbaK2K wrote: »

That depends entirely on the mortgage agreement. I can currently overpay as much as I like and get it back just by filling in a form. If I need access its still available and in the meantime its saving me money.

Both these comments suggest maybe my 'should do' part of the suggestion should be removed but the general suggestion remain, and maybe add an extra disclaimer that it heavily depends on your particular situation.

RenovationMan

tbourner wrote: »

Both these comments suggest maybe my 'should do' part of the suggestion should be removed but the general suggestion remain, and maybe add an extra disclaimer that it heavily depends on your particular situation.

It's all dependant on an individual's mortgage rate and risk profile. Often it's not easy for a tax payer, especially a higher rate taxpayer, to beat his mortgage rate unless he put cash into investments whose risk may be outside his comfort zone.

I would never state that one investment strategy is better than another because everyone is different and has different goals, different starting points and different circumstances. However, I do know my starting point and my circumstances and my best strategy is to be highly leveraged in a low interest rate economy in order to attain my goals.

StevieJ

julieq wrote: »

Overpaying (reducing mortgage) is certainly not a "should do", because once overpaid, the cash disappears into bricks and mortar, quite possibly a declining real term asset. It's actually a very poor strategy, the only reason people seem to do for emotional reasons, to get the debt monkey off their back.

Saving or investing an offsetting fund is far more sensible. You get the benefits of being mortgage free while still having easy access to the money if you need it.

I think the interest rate you re paying will have some impact on this decision, at the moment it is no brainer.

Batchy

StevieJ wrote: »

But think about the poor Tory voters with large cash balances, not only will they be suffering from vastly reduced services but they will be paying through their interest rates :eek: Then again Georgie did say we are all in it together.

Think you will find most tory voters will have cash balances, but these will not be for investing purposes, this is just for liduidity purposes, to spend. Long term concerns will be limited. As they may also have a mortgage, and investments.

Well balanced portfolio is the way it goes.

michaels

I have always been wary of Zopa because of the lack of immediate access to funds. I kept suggesting they set up a secondary market (twin benefits of giving investors an exit route and also allowing new investors a quicker way in to the market) - did they ever set something up?

Gorgeous_George wrote: »

My mortgages are low (1.24% and 1.39%) so saving more than ever.

Also earning around 6.3% in Zopa before tax. I would have added some more funds to the NS&I RPI Trackers but as the ConDems have decided that they don't want my money I'll add more funs into Zopa. I won't be adding to the bank's unreasonable profits.

GG

StevieJ

Batchy wrote: »

Think you will find most tory voters will have cash balances, but these will not be for investing purposes, this is just for liduidity purposes, to spend. Long term concerns will be limited. As they may also have a mortgage, and investments.

Well balanced portfolio is the way it goes.

Ah so those moaning gits who raised a petition (before the election) to increase interest rates won't be Tory voters OK.

Graham_Devon

How screwed would we have to be to have interest rates at 0.5% for six years?

It's often said those who want house price drops wish for people to lose jobs etc.

Howcome it's different this way? if the economy was that bad, it needed interest rates at 0.5% for 6 years, people will be losing their jobs and having a damn hard time of it.

RenovationMan

Graham_Devon wrote: »

How screwed would we have to be to have interest rates at 0.5% for six years?

It's often said those who want house price drops wish for people to lose jobs etc.

Howcome it's different this way? if the economy was that bad, it needed interest rates at 0.5% for 6 years, people will be losing their jobs and having a damn hard time of it.

I dont think anyone wanted a recession and interest rates at 0.5%, but now that their here, we can either moan and btch about it or make the best of it. I did the former for quite a while until I gave up and went with the flow.

Thrugelmir

If you accept the E&Y Items Club stance of low interest rates to the end of 2013. Then you have to consider their extremely down beat assessment of the economy.

“It is time for businesses to take advantage of the tax incentives presented in the Budget. This time the consumer is in no position to pull us out of recession, indeed the outlook for households continues to be bleak – what with pressures from the labour market, pay pauses and higher taxes there will be a major strain on real disposable incomes in the short-term. The impetus for the economy has to come from business spending, private sector employment and entrepreneurial initiative. Without that response, it will certainly be very hard for the government to pull off the trick of retrenchment and recovery.”

In essence you can't have it both ways. You'll clear your mortgage quickly but what effect will there be on the wider property market.

Those with income can clear debt, or invest. Whether the value of those leveraged assets will grow or investments provide sufficent return to warrant the risk is questionable.

Even the Basle accord requiring the banks to hold more capital has been pushed back to 2018 ( was 2012 at the time of the credit crunch). As there is general agreement that the demand from Governments in the form of debt issuance and reduced bank lending/capital raising running concurrently was not feasible. The markets could not have coped.

There's an enormous deleveraging exercise to be played out over the next 10 years at least. Not a bearish sentiment. Actually bullish as getting on board now may prove extremely profitable. Though the returns won't be seen for some years.

Procrastinator333

chucky wrote: »

but surely pre-2007 lending... the best rates and deals were "more" available to those borrowers that had higher deposits and higher earners = less risk

why should it be any different now or are you saying there is more of a difference now between these two groups?

Very different rates available to the 2 groups.

Last time I looked, I couldn't find anything under 5% for the FTB with a 10% deposit.

Where as it was quite easy to find sub 3% for a decent deposit.

I never really followed mortgage products pre 2007 as I had no means to buy, so no interest, but I don't believe there was such a difference in rates.