Interest rates at 7%

lypsey

Headlines in the Independent. As I have said before it is all about perception. If people start to believe 7% is just round the corner and see it in black and white it can have the same effect even if it doesnt get there. There will be alot of people who have mortgages fixed since 2001/2 that are going to see a doubling of there mortgages . Everyone talks about the last crash being caused by the doubling of interest rates... well what is happening now??

Also would you rather have a house for 70k at 12% interest rates a decade ago or as the Halifax etc say , an average house of 200k at 7%. It doesnt even take a calculator , everyone would take the option of interest rates at 12%.

Lets wind the clock back and wait for one of the biggest crashes in history. And its going to start with all the BTL investors who have bought in the last 2 years running for cover with negative yields and falling asset prices.. oh dear

http://news.independent.co.uk/business/comment/article2553967.ece

mystic_trev

Unfortunately the Inflation Genie's out of the bottle. Who know how high Interest rates will have to go? One things for sure, they won't be coming back down in a hurry!

pinkshoes

Lypsey, maybe you should change your user name to "Doom & Gloom", as you seem to have a rather negative spin on life going by a few of your posts!!

So long as people have borrowed sensibly and not overstretched themselves, then all will be fine and you will have nothing to worry about!

7% isn't that high, as i'm sure the average interest rate is about 6.5% over the last 30 years or so, is it not?!?!

Maybe just chill out a bit, enjoy life, stop fretting about interest rates, and pick up a half full glass rather than a half empty one! If people have borrowed irresponsibly with no back up money for rate rises, then that's their problem and not yours!

adr0ck

i thought inflation had just come down

you seem to be saying its just gone up

i thought it had fallen by 0.3 %

did i mishear on the radio?

Generali

adr0ck wrote: »

i thought inflation had just come down

you seem to be saying its just gone up

i thought it had fallen by 0.3 %

did i mishear on the radio?

Inflation is falling but is above target. There are good reasons to suppose that it could rise again over the next couple of years, especially if the value of the pound drops.

Romani_Ite_Domum

pinkshoes wrote: »

Lypsey, maybe you should change your user name to "Doom & Gloom", as you seem to have a rather negative spin on life going by a few of your posts!!

I thought he/she seemed quite cheery about it

Really depends on your situation. My elderly parents have no mortgage and money in the bank. Their pension has been adversely eroded by supposedly low inflation figures whilst the cost of real living has soared.

Interest rates at 7% or more would certainly give them something to smile about :T not doomy or gloomy at all.

Romani_Ite_Domum

adr0ck wrote: »

i thought inflation had just come down

you seem to be saying its just gone up

i thought it had fallen by 0.3 %

did i mishear on the radio?

You are correct. It has fallen from 55% above target to 40% above target.
It has been above target ( 2%) for 12 months running.
At 3.1% ( Last month) Merv had to write to the chancellor and explain why inflation is out of control. MPC then raised IRs by 0.25%

He has also hinted at more interest rate rises in the future hence the OP.

lypsey

Pink shoes

The people that have borrowed irresponsibly is everyones problem who owns a house. These are the people that will be repossessed and will have huge effects on the housing market ( I include BTL in this).

By the way I really enjoy life , I have no debt , live in the country , have two fab children... I am just waiting now for the crash. Look at the facts

1) The largest debt this country has ever had (1.3 tn)
2) BTL taking over where FTB'er SHOULD be. Don't forget BTL is an investment and not somewhere to live. If there investments are negative yields and houses start falling what would you do... swap into shares , bank account paying 5% , gold etc etc . Houses are just another market like any other and I don't know any market on the planet that goes up ALL the time
3) Global inflation rising and global interest rates rising. You are correct that we have decade low interest rates . That cannot go on for ever
4) Halifax , Nationwide etc etc say houses at 200k and office for statistics say wages are 23.5k. That is somewhere around 8 times salary. The ratio has never EVER EVER been this high in any other crash.
5) I read in the Telegraph yesterday FTB'er were paying the biggest part of there salaries since 1992 for there mortgage . We all know what happened next
6) House prices are falling in US , Spain had a big panic last week when a lot of the house builders fell on the stock exchange due to falling house prices , France falling , NZ , Australia ...... we are next

lypsey

By the way have you noticed petrol at 99p a litre again. This will not help inflation . Everything we consume depends on oil. If that is rising so does everything else.

gil13

nobody has mentioned supply and demand, that we need more houses being built, although if the bottom falls out of the BTL that may bring some cheaper housing stock onto the market for those want to purchase their own home, particulalry FTB's. There is also no getting away from the fact that we live in an expensive country these days. The advent of fixed rate mortgages also need to considered in the historic analysis, as these types of loans were not that common in the 1980's for example. For many they look at what is costs each month for 3-5-10 years and say i can pay that and if it goes up by 100,200 pound, I can still pay it. What will be interesting is to see these fix deals unravel, especially the ones taken out within the last few years..it might all come down to timing and what the base rate is going to do, to me there has for some time been a disconnect between the bank of england rate setting and the house market. I am not entirely convinced they have that much of an effect on the house market, they have the inflation target and that is it. There are so many variables involved it is very difficult to know where the economy is going, I suspect they might just be able to keep a lid on it but even the BOE are not entirely sure themselves.

lypsey

gil13
I really think supply and demand is a red herring. It is affordability that counts

Take a look at Japan , they had 100 year mortgages , passing them on generation to generation. No-where to build and look what happened.... a 60% fall in prices which they are only just getting out of