How much are interest rates going to go up by.

Marcus1991

Hi, i'm a first time buyer and Interest rates seem quiet daunting. Speaking to my parents who said they were 12%+ around 1991-1992.

Will this happen again? Or is there a set proceedure to stop it happening again? I could afford (just) for them to go to 10%, but still quiet worrying, or am I over reacting?

Thanks, Marcus.

Toonsy

I think preparing for the worst isbt a bad thing. However I also feel that rates will never go so high again as the government will know it will cripple the economy.

This is based on nothing but my opinion lol

debtisnotme

Actually they went up to 17% in the 80s, highest rate since records began, you are over reacting but its good to be realistic, nobody can tell you what interest rates might do in the future. If you can afford to pay up to 10% interest then you're in better place than probably 4/5 people with a mortgage - me included! If you think you'll be settled in your new property for a long time then take out the longest fixed rate you can, this will give you all the security you need.

ACG

I remember remortgaging someone away from 5.99% with halifax when I started out in 2012.

Rates are not going to hit 10% for at least 5-10 years unless something drastic happens. By then, you will likely have had 5-10 pay rises.

If you do have a concern about rate rises, tie in to a fixed rate for 5 or 10 years. The only issue there is if you plan on moving during that period, you are tied to one lender. So if they will not lend on the new property or to you for any reason, you will have a hefty ERC to pay.

Marcus1991

We are planning on staying in our first house for atleast 5 years. I was planning on over paying aswell, just so when they do rise, it won't cost as much.

robatwork

On 30th July 2022 base rate will be 4.6%

Make a note in your diary to come back and thank me.

McDizzle

Hi Marcus,

Although no one can tell you when or by how much rates will rise, mortgage lenders are required to perform stress tests when you apply for a mortgage to evidence that you could afford a significant interest rate increase. If you have been offered a mortgage it means you have passed this test.

Obviously if you take on any further debt after you get your mortgage then the lender has no way of knowing this so best to set your own budget that you feel has a little breathing room.

Marcus1991

Thanks everyone, if I remember correctly, they test you up to 8%.
I don't like the idea of debt, but you never know what's around the corner!
Suppose it's just fear of the unknown!

Toonsy

Marcus1991 wrote: »

Thanks everyone, if I remember correctly, they test you up to 8%.
I don't like the idea of debt, but you never know what's around the corner!
Suppose it's just fear of the unknown!

Which isn't a bad thing having that fear. Renember there'll be people who have had mortgages for maybe ten years who have never seen rates above even maybe 3%.

Cornucopia

Interest rates might look random, but they are (in theory) chosen by Central Banks to control the economy.

As such, although it's inevitable that they will rise from their historic low today, it's inconceivable that we will see them above 5% for the foreseeable future.

Mortgages offer the relative peace of mind of fixed rate products, and if you fear mortgage rate rise, that could be an option. They do tend to "price in" the pessimism of the market, though, so you have to be content to possibly pay more (at least in the short-term in order to obtain long-term protection).

First Direct apparently have a 10-year Fix which is 2.49% for 60% LTV. That seems like a bargain to me, depending on the redemption conditions and penalties.

http://www.telegraph.co.uk/personal-banking/mortgages/should-get-10-year-mortgage-now/

z1a

robatwork wrote: »

On 30th July 2022 base rate will be 4.6%

Make a note in your diary to come back and thank me.

Rubbish, it'll be 1.15%.