Yet another BOE warning shot across over debted homeownerss heads

The_Fox_3

http://uk.finance.yahoo.com/news/Homeowners-Beware-Rate-Rise-skynews-2288976234.html?x=0

Yet another warning shot!

Homeowners are now being prepared for rises, how did anyone think this temp measure was going to last forever.

chucknorris

The_Fox wrote: »

http://uk.finance.yahoo.com/news/Homeowners-Beware-Rate-Rise-skynews-2288976234.html?x=0

Yet another warning shot!

Homeowners are now being prepared for rises, how did anyone think this temp measure was going to last forever.

You don't seem to realise that 5% is still low (but I am grateful for this period of super low rates). It isn't that rates are going to be high, it's that they are super low and will eventually return to a level that is still quite low.

HAMISH_MCTAVISH

The_Fox wrote: »

http://uk.finance.yahoo.com/news/Homeowners-Beware-Rate-Rise-skynews-2288976234.html?x=0

Yet another warning shot!

Homeowners are now being prepared for rises, how did anyone think this temp measure was going to last forever.

Nobody thinks this will last forever.

But we do think rate rises, when they come, will be slow and incremental, unless the economy is so strong it can absorb bigger rises. And if it is that strong, nobody cares if rates rise.

As indeed the article points out.

Paul Fisher, a member of the Bank's rate-setting Monetary Policy Committee, said officials would like the current 0.5% base rate to rise to a "normalised" level 10 times as big.

But, in an interview with The Daily Telegraph, he said "the speed at which that happens is another thing entirely".

Mr Fisher told the paper: "We hope people are aware that interest rates at some point will go up again and that they will head back to a normalised position.

"There's no reason why the pace should be more precipitative. We would only tighten quickly if the strength of the economy did demand it.

"So obviously we would not be putting up rates so quickly as to cause that sort of negative reaction.

That's something we can try to anticipate and build in.

HAMISH_MCTAVISH

chucknorris wrote: »

You don't seem to realise that 5% is still low (but I am grateful for this period of super low rates). It isn't that rates are going to be high, it's that they are super low and will eventually return to a level that is still quite low.

Exactly.

This is a once in a lifetime opportunity to take advantage of the lowest rates in history.

Euphoria1z

I predict an average of 0.75% increase a year starting from 2012.

chucknorris

Euphoria1z wrote: »

I predict an average of 0.75% increase a year starting from 2012.

I hope that you are right, but I can't see it taking until 2018 to get back to 5%

The_Fox_3

chucknorris wrote: »

You don't seem to realise that 5% is still low (but I am grateful for this period of super low rates). It isn't that rates are going to be high, it's that they are super low and will eventually return to a level that is still quite low.

Agree!

But many have over leveraged or borrowed to their limit that this will have a massive impact.
This rise should not hurt anyone, but it will, why do you think rates have been kept this low in the first place.

chucknorris

The_Fox wrote: »

Agree!

But many have over leveraged or borrowed to their limit that this will have a massive impact.
This rise should not hurt anyone, but it will, why do you think rates have been kept this low in the first place.

Who are these people who have over borrowed? Are you talking about those who bought in 2007? If so by the time the base rate gets back up to 5% something like 6-8 years would have passed, so inflation will have assisted them. Also of course they would have had around 5-7 years of lower rates where they could have paid off some debt.

If you talking about those who bought 2008 onwards then I would suggest that these people will be far fewer in numbers and would also have exercised some caution when buying during arguably the worst part of this recession.

wotsthat

The_Fox wrote: »

This rise should not hurt anyone, but it will, why do you think rates have been kept this low in the first place.

To help the lenders.

RenovationMan

The_Fox wrote: »

Agree!

But many have over leveraged or borrowed to their limit that this will have a massive impact.
This rise should not hurt anyone, but it will, why do you think rates have been kept this low in the first place.

Because the banks almost went bust. The fact that low rates are helping home owners is just a side effect of having to bail out the banks and sort out a financial meltdown.

I'm over leveraged and have borrowed to my limit (5 times my salary, to the tune of £300k in May 2010 to buy a 5 bed farm house), but time will tell if the rises will hurt me. Stay tuned, I intend keeping my blog up to date through good times and bad.

https://forums.moneysavingexpert.com/discussion/2480747

chucknorris

RenovationMan wrote: »

Because the banks almost went bust. The fact that low rates are helping home owners is just a side effect of having to bail out the banks and sort out a financial meltdown.

I'm over leveraged and have borrowed to my limit (5 times my salary, to the tune of £300k in May 2010 to buy a 5 bed farm house), but time will tell if the rises will hurt me. Stay tuned, I intend keeping my blog up to date through good times and bad.

https://forums.moneysavingexpert.com/discussion/2480747

Just had a quick look at your blog, good luck if you pay off 10% per annum you should have it well under control in no time.

You see Fox, Renovation man is doing exactly what I suggested might ocurr.