What BOE interest rates will really cause financial disaster?

Really2

Graham_Devon wrote: »

1988 Interest rates 8%
1990 Interest rates 15%.

Never say never.

That was the top of inflationary boom not the middle of a bust. What did rates do from there onin that bust?

Or the next 20 years even?

chucky

Graham_Devon wrote: »

1988 Interest rates 8%
1990 Interest rates 15%.

Never say never.

one thing that you fail to factor in to your statement... Quantitative Easing. injecting the extra £200bn (or whatever it was) into the economy was basically another rate reduction on top of the 0.5% if you could understand that.

you have zero chance of rates hitting 8% in the next few years and you have even less than zero chance of them even getting near 15%...

edit - i've just seen Tomterm explain it even better than me

vivatifosi

10%+ would hurt us, 15%+ cause us difficulty, but that's at present. The longer rates are low and the more we can overpay, the more those numbers will go up and out to extremes. If people really are sitting back and enjoying lower rates without paying down debt or doing something else to improve their financial situation (providing they've not been made redundant etc), then they only have themselves to blame when they go back up as at some point in the future they no doubt will. I'm not under the impression that this is imminent btw.

mbga9pgf

chucky wrote: »

one thing that you fail to factor in to your statement... Quantitative Easing. injecting the extra £200bn (or whatever it was) into the economy was basically another rate reduction on top of the 0.5% if you could understand that.

you have zero chance of rates hitting 8% in the next few years and you have even less than zero chance of them even getting near 15%...

edit - i've just seen Tomterm explain it even better than me

We could "afford" on joint income, rates at 15%, but I think there would be other worries if rates hit that level for the UK.

On single salary (missus up the duff etc) we would start to struggle at 11%, and be in the positive !!!!!! at 12%.

That assumes we keep 2 cars, maintain our current quality of life etc and dont have any pay rises, unlikely with rates at that level.

Personally, I dont see rates much above 5% any time this decade, nor do I expect to see any significant growth in that timeframe.

Low rates are here to stay, it was definately one of the factors that encouraged me to buy, especially as we found the dream house at a bargain price.

sss555s

vivatifosi wrote: »

10%+ would hurt us, 15%+ cause us difficulty, but that's at present. The longer rates are low and the more we can overpay, the more those numbers will go up and out to extremes. If people really are sitting back and enjoying lower rates without paying down debt or doing something else to improve their financial situation (providing they've not been made redundant etc), then they only have themselves to blame when they go back up as at some point in the future they no doubt will. I'm not under the impression that this is imminent btw.

We learned that from the yuppies of the late 80-90s who lived the life and thought they were invincible.

Trouble is things can and do change quicker and more than you can imagine, which allegedly convinced a few of them to drive their 911's off the bridge

[Deleted User]

as far as mortgages go i think people miss one thing,go bck to the mid 90s and the difference between svrs and base rate was around 1.5% maybe a little higher,now many lenders have a differental of 4% or 4.5%,so if base rates increase and they will under this govt to say only 4% svrs could be 8.5% on a 100k mortgage thats £80 per week extra

marklv

The fact is that inflation has been increasing significantly and interest rates need to rise to contain it, but given the state of the economy the Bank of England does not dare to do this. It can't go on like this forever; the point will soon be reached at which a rise will be absolutely required.

vivatifosi

sss555s wrote: »

We learned that from the yuppies of the late 80-90s who lived the life and thought they were invincible.

I was a ftb in the late 1980s and early 90s when my mortgage went from 8% to 15.8%. Although I managed it was a hard couple of years, particularly as I lived by myself and couldn't get a second income into the house as it only had one bedroom. I don't think that 8-15% is likely currently, but everyone needs to work out their own sensitivities. I know a poster from Ireland posted elsewhere on the forum that banks there still raised the SVR even when the rate was low, so it is good to work out different eventualities and plan for them.

Thrugelmir

woodbine wrote: »

,now many lenders have a differental of 4% or 4.5%,

Lenders don't borrow at base rate.

Batchy

Well, just thought id add my two penny again...

Im currently about to buy as a FTB, mortgage offer from post office its was 85% LTV, witha 4.29%

Last week, they reduced the rates, from 4.29% to 3.94%, ok its only a £30 per month saving, but as its fixed for 2 years, thats around £700 for me to spend on the house, that I wouldn't otherwise have had.

Obviously, banks do not have crystal balls, but I think the expectation at the moment is STABILITY, I dont bank on rates rising anytime soon to be honest! When they do, it will be a slow process, long winded process...

in two years time, I think I will be fixing on a different product potentially for around 5-10 years. Should be on much better LTV, with over paying and property improvements. (hopefully no further dramatic falls in prices)

Estate agent just suggested things are hotting up in the property market, and people are now beggining to get on board while the going is good with low fixes at the moment, after saving a deposit for the last few years.