MSE Ness: Home owners told to prepare for 5% base rate

JimmyTheWig

iblametheparents wrote: »

A welcome return to "normal" times.

True, were it not for the fact that we don't have a "normal" starting point.

For example, Santander are currently offering a tracker at base-rate + 4.49. Which is currently a reasonable 4.99%. Not a bad rate for a 90% loan.
But when rates go up to 5% these people would be left paying a criplling 9.49%. Ouch.


[We've just started a 4-year fix, so it suits us for rates to go up!]

de1amo

my mortgage has been costing me 92 quid - my acrued savings interest 60 quid so a total of 30 pounds for 3 years -i wonder how much rent i would have spent in that time if i had jumped out of the market!
When i first came into this forum people were telling me that i had to fix -i was on a svr of 2pc and the bank was offering nearly 5pc plus a fee of 500(5 month payments)--2 year or 3 years deals. that was 8 months ago so i have saved quite a bit by not jumping--i might contemplate a new deal but sense tells me to keep my savings and get the better rates and pay the new rates--i am sure lots of people have been prudent and saved in this period of low interest rates-like me.

standinman2009

woooooo hoooooooo the best christmas news yet i say!!!!!!!

MoneySavingNovice

Good news for me as well.

However there is still a question of when. My guess is that they will do this in stages at 1/2% at a time, and it will be at least a year before we reach 5%

SandC

Anyway, as I recall, most lenders did not add on as high a percentage to the BoE base rate as they are currently doing when it was 5% or higher before. So while people are getting trackers etc. for 3-4% above BoE now they might be able to get them for 1-2% or even less when rates have risen.

I would like to see some interest worth having on my ISA this year anyway.

dasilva_2

Perhaps we could return to a 'normal' relationship between BOE base rate and actual mortgage rates as well.
It is also mentioned in the original article that inflation is high, presumably inferring that increasing the BOE rate would stabilise the inflation rate. However inflation is soaring on the essential things like food, heating, fuel and clothes. The only thing that would stabilise inflation would be having regulatory bodies that had some power they were prepared to use and not being on the payroll of the companies they regulate.

JimmyTheWig

SandC wrote: »

Anyway, as I recall, most lenders did not add on as high a percentage to the BoE base rate as they are currently doing when it was 5% or higher before. So while people are getting trackers etc. for 3-4% above BoE now they might be able to get them for 1-2% or even less when rates have risen.

I agree. But it's the people tied in to existing trackers who will have problems.

de1amo

so what your gleeful about is gaining about 3pc a year on your isa's and inflation being twice that--net loss 3pc-that makes perfect sense!

Paulgonnabedebtfree

If base rate were at 5% today, I would be struggling. Two or three years time I would live with it a bit more easily. Been nibbling away at my other debts as best I can but I'm concerned they may not be low enough by the time the rates go up. I have been doing my best to lower them and have had a reasonable degree of success.
If the base rate were 5% today, I would be paying about £320 a month more for my mortgage - assuming LIBOR was reasonably settled in comparison to base rate.
I do have contingency plans if it all gets too much but it won't be pretty. I like my privacy and wouldn't want to rent out the second bedroom but, if that's what it takes, then so be it.
If it hits 5% in gentle stages, say over three years, I would be able to carry it a bit better.
I wouldn't want to end up on a DMP (or worse) but I'm not prepared to sleep rough.
And no, before the usual firing squad starts up on here, I haven't been living the life of Riley. I just had several big changes happen at once (including a long illness), and got financially shafted by someone who was pretending to be a human being.
I'm sure I'll adapt.

de1amo

Somewhere in this cloudy world is a huge amount of debt that people have accrued due to buying highly priced property - loaning against equity or just unsecured debt--any base rises will shake the tree because those who are struggling on their now fixed rates will see their assest bases ie homes depreciating and any unsecured debt dragging heavier with the pc rises
-inflation is not as easy to quell as it used to be because we import nearly everything we use and short of going without things like fuel and gas our government cant stop it with just interest rates.--add in the affect of job losses due to interest rate hikes and its a real FCUK plc