Everything in place for a US rate rise

Kendall80

I'll believe it when I see it. Super Mario overpromised/underdelivered last week leading to huge volatility in the markets. I would not be overly surprised if Yellen suddenly found a piece of data that suggests she leave rates on hold. That said, it does seem that the US is ready for it. Is the rest of the world though? Countries with dollar denominated debt that are reliant on commodities could take a severe hit. Unless of course the rate rise has been globally 'priced in'. Have to say i'm sceptical on that - the markets always seem to find a way to show surprise at events that really aren't surprising.


I hope I get a chance to fix my mortgage again in 2016 before the UK follows suit.

missyrichards

kabayiri wrote: »

The story about the couple buying the 4 bed house on the HTB scheme brought home to me that we have a new generation of house buyers who have never known the concept of rate changes.

I don't think it's a bad thing to send out a message that rates can change and people need to include some buffer space in their finances.

Yes, it's weird to me how many people I have spoken to in their twenties who seem to be unaware that we have been in a very unusual situation in regards to interest rates.

chucknorris

missyrichards wrote: »

Yes, it's weird to me how many people I have spoken to in their twenties who seem to be unaware that we have been in a very unusual situation in regards to interest rates.

I think my highest mortgage rate was about 12.5%, but that was a long time ago (obviously) and I can't actually remember. But new mortgage products are not that close to the 0.5% base rate (if you ignore initial discounts), so if the base rate went up eventually to say 4%, I wouldn't anticipate that recently new borrowers would have to pay 3.5% more than they currently do. Most lenders seem to have healthy margins over the base rate (not that they themselves borrow at the base rate).

Generali

michaels wrote: »

I know Gen sees UK rates rising soon after the US but I am not quite sure what the mechanism is for this? UK obviously has a very benign inflation outlook currently and if anything the economy is softer than was anticipated 6 / 12 months ago with nominal wage increases falling back and it looks like no propensity of any wage increases to be spent - I guess the delay in cutting tax credits has left a bit more demand in the economy than had been anticipated but we are talking only a couple of billion pa.

I still think no move in the UK before next summer at the earliest.

In general terms the mechanism is hot money: cash earned from selling huge amounts of oil that need a short term home before being turned into longer term assets, consumed or being used to repay debts. If the US raises rates then the lesson learned since 1974 is that huge amounts of money flow after the rise and the rest of us need to raise rates to maintain the currency and all continued import of dollar denominated commodities.

The This Time It's Different moment could be that the collapse in the oil price and the ongoing destruction of the OPEC dictators means that petrodollars (so called) are in short supply and can't move FX markets. Oh well, I suspect we'll know by Xmas.

missyrichards

chucknorris wrote: »

I think my highest mortgage rate was about 12.5%, but that was a long time ago (obviously) and I can't actually remember. But new mortgage products are not that close to the 0.5% base rate (if you ignore initial discounts), so if the base rate went up eventually to say 4%, I wouldn't anticipate that recently new borrowers would have to pay 3.5% more than they currently do. Most lenders seem to have healthy margins over the base rate (not that they themselves borrow at the base rate).

12.5%!:eek: I remember my Dad telling me how high the interest rates were when I was younger. One of my relatives lost his house. The highest rate I've had with our mortgage was just over 5%.

Thrugelmir

missyrichards wrote: »

12.5%!:eek: I remember my Dad telling me how high the interest rates were when I was younger. One of my relatives lost his house. The highest rate I've had with our mortgage was just over 5%.

When I bought my first property they were 10%. A few months later. BOE base was raised by 1% for 4 consecutive months. Which left us paying 14%. Still remember walking round Sainsburys with a calculator. As money was that tight. We didn't borrow just spent what we had.

mwpt

What chance and what set of circumstance sees rates at those (10%+) levels again?

Thrugelmir

mwpt wrote: »

What chance and what set of circumstance sees rates at those (10%+) levels again?

Has to be put into the context of much higher rates of inflation. So what is different to then. Is that salary increase no longer devalue debt and make easily make it more affordable. Allowing people to trade up the ladder. By simply borrowing more.

Same principle of course can be applied to any form of credit. In this era the buy now pay later concept took off. Gone were the days of offering cash for a TV and getting a discount. Finance made the shop more money.

We appear to be entering a totally new era ( last one you could say was early the 70's to 2008). History when written will tell the tale.

HAMISH_MCTAVISH

mwpt wrote: »

What chance and what set of circumstance sees rates at those (10%+) levels again?

There was a time when it was prudent to plan for double digit interest rates, just as there was a time when it was prudent to build a bomb shelter in your garden thanks to German air raids.

The chances of seeing either of those circumstances today are vanishingly small.

chucknorris

Thrugelmir wrote: »

When I bought my first property they were 10%. A few months later. BOE base was raised by 1% for 4 consecutive months. Which left us paying 14%. Still remember walking round Sainsburys with a calculator. As money was that tight. We didn't borrow just spent what we had.

I bet you remember the day that we left the ERM on 16/9/92, I certainly do. For anyone that doesn't know or remember:
http://news.bbc.co.uk/onthisday/hi/dates/stories/september/16/newsid_2519000/2519013.stm