When will interest rates return to normal?

Huynha

All I see on the news is interest rates climbing higher, but when will they return to normal? Does anyone know?

xylophone

All I see on the news is interest rates climbing higher, but when will they return to normal? 

How do you define "normal"?

[Deleted User]

I thought this was normal?
I certainly expect these levels (if not higher) to continue for the foreseeable future.

Interest rates have been extremely low for the last decade or so.

Imvrasos

Concerning to see people defining ultra low interest rates, manipulated to the bottom by the central bank, as normal; and then basing long term financial decisions on these low rates remaining in perpetuity. 

masonic

They've not yet climbed to normal levels, but further increases are predicted in the next MPC meetings that will bring the base rate close to its historical average.

NedS

Huynha said:

All I see on the news is interest rates climbing higher, but when will they return to normal? Does anyone know?

From 1970 to 1990, normal was 10-15%, from mid nineties to 2008, normal was ~5%, and for the last 13 years it's been very low. To which 'normal' do you refer?
Do you mean the free money normal that has driven house prices into a bubble and out of reach for most young people?

superstylin

Hi Huynha,

See the below link for historical base rates. You'll see that what we've had since 2009 has been far from normal. 

https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp

coastline

Green above blue is " normal " looking at the data over decades   GF Crash saw record lows from 2008 until recently. Hopefully this spike in CPI falls quickly .

  base-rates-vs-inflation.jpg (727×514) (netdna-ssl.com)

EssexHebridean

We're a lot closer to normal now than we've been in the last few years. 

The OP's post does highlight the issue though that there are a lot of people out there who think that the historic and unsustainable low rates we've seen in recent times are "normal" though - and that is a massive issue. When MrEH and I bought our home as first time buyers back in 2003, when we spoke with a mortgage broker we were repeatedly told that we could "easily" borrow far more than we had. Yes, we said, but then hat if interest rates go up? Throughout, I based what we decided to borrow on not only what we could afford to repay at that stage, but also on what we could afford to repay if interest rates increased. Ironically enough, we didn't see that increase - indeed the highest rate we paid was 6.87% (I think, from memory) when we first took the mortgage out - the lowest was 4.34% in our final 5 year fix up to 2016. Do I regret the level of planning that meant we knew we were shielded from any likely rises though? Hell no! I get the nasty feeling that there are vast numbers of people out there who haven't - or in some cases haven't been able to - give themselves that level of "slack" though - and now that so far relatively modest increases in base rate are being combined with other rises in the cost of living, they are going to be  well and truly up the proverbial creek without a paddle in sight. 

The_Green_Hornet

What the UK has experienced since 2008 is far from normal.


orm

NedS

EssexHebridean said:

We're a lot closer to normal now than we've been in the last few years. 

The OP's post does highlight the issue though that there are a lot of people out there who think that the historic and unsustainable low rates we've seen in recent times are "normal" though - and that is a massive issue. When MrEH and I bought our home as first time buyers back in 2003, when we spoke with a mortgage broker we were repeatedly told that we could "easily" borrow far more than we had. Yes, we said, but then hat if interest rates go up? Throughout, I based what we decided to borrow on not only what we could afford to repay at that stage, but also on what we could afford to repay if interest rates increased. Ironically enough, we didn't see that increase - indeed the highest rate we paid was 6.87% (I think, from memory) when we first took the mortgage out - the lowest was 4.34% in our final 5 year fix up to 2016. Do I regret the level of planning that meant we knew we were shielded from any likely rises though? Hell no! I get the nasty feeling that there are vast numbers of people out there who haven't - or in some cases haven't been able to - give themselves that level of "slack" though - and now that so far relatively modest increases in base rate are being combined with other rises in the cost of living, they are going to be  well and truly up the proverbial creek without a paddle in sight. 

Indeed, I am unfortunately old enough to remember a period in the late eighties where high interest rates and negative equities meant many people lost their homes. I fear we may now be on the precipice of a similar event, where people thought low interest rates were here to stay and are over-leveraged. A recession, with job losses, combined with rising interest rates and a large fall in house prices is something many are simply not equipped to deal with.
People simply have far too much debt - we saw it at the start of Covid where people unexpectedly lost their jobs and were suddenly unable to make their monthly payments for their iPhone, internet, Netflix, Sky, car, clothes bought on credit, credit card debt. The list is endless as absolutely everything seems to be on credit these days. All very different to when/how I was brought up - if you can't afford to pay for it, you can't have it. Simples