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

Uncle_Rico

de1amo wrote: »

Hunni---i thought i was the only one feeling your way!--i could be mortgage free if i chose to be and also i have a pension but i feel for the new generation of home owners--they will get frightened off and then no one will want to buy homes and thus adding another reason for the collapse of prices and any chains ever building!

You say that as if it's a bad thing.

Reactor_2

I personally don't think interest rate rises will cause a crash in the housing market, as the majority of the people that have mortgages now, got them during the peak of the housing boom when interest rates were higher. Now that they are in NE, they will unlikely sell for a loss, keeping the supply short and keeping prices at current levels.

Requirements now to get a mortgage are also higher, which will mute demand and price appreciation for at least a decade if not two.

It's an over simplification, but investors get killed on the way down in markets, hence lower interest rates, not on the way up.

The real risk is then employment where technology or outsourcing will be your enemy as either could terminate your income and ability to pay the mortgage and ride the storm.

I have mentioned in another thread that it will take a serious innovation that gives the UK a massive competitive advantage to get the economy going, but as all the easy ideas have been done already, it's likely to be more sophisticated and complex than what is out there already. Unfortunately, this will mean that it won't be a broad economic growth story should it happen.

If people are hoping for a crash, I think it will most likely happen if there is a serious flu epidemic in the UK where millions die, leaving a massive supply of homes on the market.

globalds

It seems odd that people are talking as if things are normal.

Our deficit with the rest of the world is getting bigger.

our debt is getting bigger.

None of the reductions in government spending have filtered into the economy.

Prices for consumers will rise, not only due to the fall in the value of the pound,but also V.A.T is to increase.

Although I would like to see a rise in interest rates it really does not look like it is going to be considered as an option for quite a while.

Japan has had next to zero rates for years.I reckon that is what the UK government would chose over having to face the reality of facing watching our banks collapse.
My concern is that these low rates are costing us something ( I don't know how much) and we may not be able to continue with this policy.
The Japanese seem to have a far better trade balance than us.

I would be genuinely interested if anybody could enlighten me as to how a problem like this may arise and also what alternatives would be available ?

richdeniro

Friends of mine from Canada and America tell me that because of the new student fees you will now more or less start saving for college fees from the day your kids are born. Over time the consequences will be severe. Young families now face not only the prospect of paying for their kids education but also subsidising the final salary pensions of the older generation before they even think about their own retirement. This will depress disposable income and will lead to long term downward pressure on house prices. It will mean low interest rates for a generation.

Jonbvn

Henry_P_Chester wrote: »

Three years ago the average mortgage rate was around 7.5%.....

Sorry, but that is just not true.

kriss_boy

Whats all the excitement about- the article simply suggests the BoE rate will increase to 5% in the future.

Well all knew this. We just dont know when and at what pace?!? So we are none the wiser...

Gorgeous_George

kriss_boy wrote: »

Whats all the excitement about- the article simply suggests the BoE rate will increase to 5% in the future.

Well all knew this. We just dont know when and at what pace?!? So we are none the wiser...

It's a catch 22 for the Government.

They need banks to make profits to avoid further bail outs and to get their money back. They can't raise base rates for fear of sparking an economic disaster.

So, they use propaganda. Frightening people into switching to more expensive mortgage products by hinting at base rate rises should help the banks (and if the propaganda doesn't work they might throw in a small rise or two). I'm no expert and have a little interest in house prices (more likely to buy than sell) but I think rates are not likely to rise any time soon.

I could be wrong of course.

Savings rates are pants at the moment but I have NSandI RPI +1% (tax free), ISAs at 4.5%, Zopa at 6.2% (gross) and a couple of other investments that beat inflation but with some risk. I also have some savings at 2.5% (gross) but I expect to spend this by March.

GG

ess0two

brit1234 wrote: »

Sorry I am gleefull at the idea of an interest rate rises. I'm a portential first time buyer loosing £1000s in interest from my deposit to bail out those who borrowed recklessly or buy to let investors.

The sooner rates go up the faster house prices will fall to normal levels. I'm glad you are mortgage free but I am also in my 30s and still waiting to get on the housing ladder.

Interest rises are good for a healthy economy and even 5% is to low. After all the previous 5% rates helped to create the biggest housing bubble of all time.

Utter bolx,you'll still be sat here in 5 yrs whinging.

Berger

brit1234 wrote: »

Sorry I am gleefull at the idea of an interest rate rises. I'm a portential first time buyer loosing £1000s in interest from my deposit to bail out those who borrowed recklessly or buy to let investors.

The sooner rates go up the faster house prices will fall to normal levels. I'm glad you are mortgage free but I am also in my 30s and still waiting to get on the housing ladder.

Interest rises are good for a healthy economy and even 5% is to low. After all the previous 5% rates helped to create the biggest housing bubble of all time.

And that was a good thing?! Look at the mess it has got our economy into. People thinking their house was their nest egg, when in reality, it should be their house - no more. One generation got lucky with house prices, the next generation (mine) has to mop up the financial mess that has been made. No more 'housing bubbles' please, as much as it would benefit me now.

fedupbankstaff

I work in a bank as you can probably tell from my log in name. I moved house in March and did not take a 'subsidised' mortgage. Wasn't much different to normal rates and as I would have then paid tax on the difference as a 'taxable benefit' I would probably have been worse off!
I did however, set up a regular overpayment to proof myself from future rate rises. Payment should be £480 and I am paying £550.
I don't however have sky TV, an Xbox, Wii, i phone or any other 'essential'.
I see many people everyday complaining about every rise imaginable but are still happy to pay £61 pm for sky from their child benefit, tax credits or job seekers allowance or a £40 pm phone contract.
It's about priorities and a large percentage of the population have got them wrong!
My new house needs a new bathroom, kitchen and redecorating throughout having been owned by a 75 year old lady with a passion for green and yellow(yes every room!). This will be done 1 room at a time as I can afford it and not as seems to have been the norm, all in one go on credit.