Interest Rates?

bobbytooshoes

Hi All

Just wondered if anyone could tell me what was the typical interest rate on mortgages before the recession and how high are they likely to get in the future? (or probably a better question what was the highest in your experience??)

I understand that this is like asking how long is a piece of string but we are FTB's to be and want to realistically look at how high our repayments could/will rise in the future.

Thanks

skid112

highest interest we paid was 15.25% back in 1990.
look on here for rough history
http://www.moneyextra.com/dictionary/interest-rate-history-003455.html

Thrugelmir

Longer term a rate between 5.5% - 8.5% would be more of a norm.

bobbytooshoes

Thanks for the quick replies.

I was slightly alarmed by the rates in the late 80's/early 90's. This would make even a relatively small mortgage a lot more expensive!

I assume that if we were to reach these dizzy heights again it would be only be for a year or two?

Cortinaa_GTR

Here a link to the BOE site which goes back to 1975. I took out my mortgage in 2007 and got a rate of 5.75% but now I'm on the SVR which is 2.99% - Nowadays your mortgage rate will be dependant upon how much of a deposit you can provide - I'd say you need a 20% minimum to get a decent product.

http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp?Travel=NIxIRx

skid112

Bank of England base rate history http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp
past performance dah dah dah etc etc
given the last 20 year average is about 5-8% the previous 20 years was higher at around 10-13%.
If you stare at them long enough they will scare the pants off you. However inflation was running at something like 25-30% bewteen 1972-77 and the powers that be decided we needed to be in the ERM (prelude to the Euro) in 1989/90

jamesd

My contingency planning is a year at 12%. Rates that high are likely to be for only a few months at most because they would be an emergency response to lack of confidence in the Pound or the UK government credit rating. More realistic would be 8-10% for a year to control inflation. The last decade or so has been a time of low interest rates because the Bank of England has been setting interest rate policy in part to regulate inflation. At the moment they seem inclined to accept inflation to stimulate economic growth but that inflation will have to be dealt with at some point. the longer the wait, the higher the possible interest rates could be.

To avoid financial shocks it's likely that increases from today's historic low bank rate will be spread over a couple of years in quarterly steps of 1% or less. But no guarantee, that's just the way central banks try to do things when markets are fragile.