Rate predictions

OhWow

Cheesy77 said:

 A large proportion of the population will have no disposable income, both mortgage holders and renters, which equals zero growth and in fact probably recession and repossession. 

With things like 30 free childcare now or other reduced childcare costs; many more parents will have to work/increase their hours, to get that extra money.

Years ago with the high mortgage rates, there was no free childcare. Parents used to have to work their hours around each other, so that one parent was there to provide the childcare.

Those who work hard will manage. Those waiting for somebody to help them, will likely struggle (think The Hitchhiker's Guide to the Galaxy and those on the crashed spacecraft, waiting for the others to help them).

I worked 7 days a week and 6 evenings a week, to buy my first house as a single person. The guy I worked with in the evenings and weekends, was doing the same hours because they had a  baby and had gone down to one wage to pay the mortgage and other bills.

tony3619

Edi81 said:

Interest rates aren’t going to come down any time soon. 

Market expectation at the moment is for base rate between 4 and 5% for the next few years. 

The days of sub 1% are long gone!

Would you fix for 2 yrs at 5.59% or 5yrs at 4.64%? I'm split....as I don't like being locked into something. 

gener8or

tony3619 said:

Edi81 said:

Interest rates aren’t going to come down any time soon. 

Market expectation at the moment is for base rate between 4 and 5% for the next few years. 

The days of sub 1% are long gone!

Would you fix for 2 yrs at 5.59% or 5yrs at 4.64%? I'm split....as I don't like being locked into something. 

I wouldn't be happy to fix for either but that's because I got burned at 6.09% for 5 years in 2008.
Would you be better off on a variable?

london21

tony3619 said:

Edi81 said:

Interest rates aren’t going to come down any time soon. 

Market expectation at the moment is for base rate between 4 and 5% for the next few years. 

The days of sub 1% are long gone!

Would you fix for 2 yrs at 5.59% or 5yrs at 4.64%? I'm split....as I don't like being locked into something. 

Personally prefer 5 years for some certainty but not sure about 4.64%, not sure how long the interest rates will be high before they maybe go to 2-3%.

wheldcj

OhWow said:

Cheesy77 said:

 A large proportion of the population will have no disposable income, both mortgage holders and renters, which equals zero growth and in fact probably recession and repossession. 

With things like 30 free childcare now or other reduced childcare costs; many more parents will have to work/increase their hours, to get that extra money.

Years ago with the high mortgage rates, there was no free childcare. Parents used to have to work their hours around each other, so that one parent was there to provide the childcare.

Those who work hard will manage. Those waiting for somebody to help them, will likely struggle (think The Hitchhiker's Guide to the Galaxy and those on the crashed spacecraft, waiting for the others to help them).

I worked 7 days a week and 6 evenings a week, to buy my first house as a single person. The guy I worked with in the evenings and weekends, was doing the same hours because they had a  baby and had gone down to one wage to pay the mortgage and other bills.

Appreciate your own experience but traditionally in the 1980s the family unit was one parent working full time and the other working at most part time around the children.

30 hours free childcare care (it isn’t in practice entirely free) is welcome for parents with young children but logistically both working full time is impractical when children are primary school age.

Besides even with 2 full time working people interest rates of 5-6% will force many repossessions.

wheldcj

We have a real structural issues with our housing economy that I really don't envy future governments of whichever colour solving.

I am sure the Goldilocks position for the BOE is to have an average rate over time that sits at a number which means that short term intervention can be implemented upwards and downwards.   The issue we had with the pandemic is that rates were already so low that there was hardly anywhere to go.

However as has been said above low rates implemented for such a long period has made housing affordability shoot to unprecedented levels.  Therefore house prices rise way way beyond a level where rates much higher than 4-5% in anything but the very short term will have really profound effects on the economy.   I am certain that if rates edge up to the levels reported we will have record repossessions, some of that will be collateral damage to the banks.  The much more economically catastrophic effect will be on expendable income.   That drop in spending just becomes an economic vortex,  less money, less spending, less spending, longer and deeper recession, increased unemployment, less money and round we go.

Socially our housing stock is already increasingly owned by the elderly generation, I think 56% of house value is with the over 70s.  This housing stock is already unaffordable for many as in some areas as these big houses were the current occupants "top rung of the ladder" house.   With rates going up in the short term these houses won't sell.   Neither will those properties at the bottom because first time buyers will be both unable to live with mortgage repayments and will be terrified of negative equity. 

Either as a country we need the BOE to traverse a very narrow rate tightrope for maybe a decade or more of a very narrow rate fluctuations in-between currency stability and avoidance of household default/recession.  Hoping that this frugality flattens or very slowly reduces house prices for future generations.  Or they continue on a path which will crash the housing market, cause the next few years to be extremely dark and difficult but may result in more control of rates in the future.  

My prediction is that we will see rates hit a maximum of 4.5% - 2 year fixed up to around 6%.   Inflation will drop mostly of its own free will as energy prices stabilise.   A significant recession will hit in late 2023 and the rate will quickly go down to 2-3% again and will stay there.

raf300

Interesting discussion and shows nobody knows where rates will be in 2 or 5 years time. 

However everyone thinks the rates will never be under 2% to 3% for a long time 


Does anyone think that lifetime trackers might make a comeback? 

For example your mortgage rate could be   Bank of England plus 1.5 to 2%.   

biscan25

raf300 said:

Interesting discussion and shows nobody knows where rates will be in 2 or 5 years time. 

However everyone thinks the rates will never be under 2% to 3% for a long time 


Does anyone think that lifetime trackers might make a comeback? 

For example your mortgage rate could be   Bank of England plus 1.5 to 2%.   

I'll dissent and say that there is a state of the world where low/negative interest rates could occur. (I'm not saying that it's likely though).

The UK is in a fairly unique position in that it is facing a slight recession, with high inflation (stagflation). The BoE could prioritise growth over controlling inflation by slashing rates, to stop this scenario as the outcome is pretty horrible. This needs the negative growth and inflation to come down pretty sharply to be a plausible scenario though.

IMO there is a way out of this mess, it's pretty unpalatable though for the government. A return to the single market, state ownership of the drivers of inflation, higher tax burden on the wealthy, and tax cuts for the low paid.

biscan25

It's also worth noting that the Tory government in it's current guise will only exist for a maximum of 2 years (and probably much less). What its successor will prioritise is anyone's guess.

propertyhunter

I think this current government is toast, and they know it, so will give their friends as much money as possible for the next two years, or as long as they can stay in power. The funny thing is Rishi Sunak predicted this mess during the hustings. He must be loving the Schadenfreude while planning his escape to California.