Do people budget for interest rate rises?

lookstraightahead

I remember mortgage interest temporarily reaching 15% in the nineties! I know of many people (younger than me) who have been used to low interest but are mortgaged to the hilt. Do you think people are generally prepared for higher interest if it does happen?

quantumlobster

We did - took a mortgage offer that was at least a couple of hundred quid a month below the limit of affordability we'd set ourselves.

walwyn1978

We did/do. But my honest guess based on the last few years of extremely low interest rates and high house prices is that a lot of people are maxed out on their affordability and if (when) rates go up there will be tears.

SmashedAvacado

BoE base rate was no higher than 7% in the 90's. If you were paying a mortgage interest rate of 15% you were in the minority. 80's though - that might be true.

lookstraightahead

1992 I think .... it was literally overnight

MobileSaver

lookstraightahead wrote: »

Do you think people are generally prepared for higher interest if it does happen?

Mortgage affordability rules mean that lenders have already checked that people can afford rates of around 7% or 8% so, at least for the foreseeable future, it is highly unlikely that many people will get into trouble.

RedFraggle

SmashedAvacado wrote: »

BoE base rate was no higher than 7% in the 90's. If you were paying a mortgage interest rate of 15% you were in the minority. 80's though - that might be true.

First mortgage 1992/3, special FTB rate of 10%. We had a 25% deposit too.

stueyhants

I’d be very surprised if I ever see Base rates above 5% or 6% in my lifetime. Given the level of debt mortgage holders now hold there is no reason to go above that to have the inflation controlled if required by the BoE. Past world events have also shown it’s practically useless to defend a currency using high IRs as the speculators will just bet against the central bank and win. So low IRs are the new normal.

sevenhills

stueyhants wrote: »

I’d be very surprised if I ever see Base rates above 5% or 6% in my lifetime. Given the level of debt mortgage holders now hold there is no reason to go above that to have the inflation controlled if required by the BoE. Past world events have also shown it’s practically useless to defend a currency using high IRs as the speculators will just bet against the central bank and win. So low IRs are the new normal.

The Governor of Bank of England, Mark Carney, cannot predict interest rates, so I dont believe you can either!

Red-Squirrel_2

'Stress tests' for affordability were introduced after the credit crunch, lenders take into account the possibility of future rate rises when deciding whether to lend.

DD265

We did, but it's very difficult to know where to draw the line! There's always going to be a point where we get to crossing fingers and hoping, but we're a few hundred a month off that.