Are we expecting BOE to remain at 4.75% on 8th February 2025?

Hoenir

MobileSaver said:

ReadySteadyPop said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

MobileSaver said:

lojo1000 said:

RelievedSheff said:

ReadySteadyPop said:

BarelySentientAI said:

ReadySteadyPop said:

Hoenir said:

MeteredOut said:

ReadySteadyPop said:

Hoenir said:

ReadySteadyPop said:

Hoenir said:

MattMattMattUK said:

Another straw man. It should fall below 4% because to not do so will damage the economy, government and personal finance, it should not be set at a level that benefits only savers. 

All that QE on the BOE balance sheet that was pumped into the banking system primarily to underpin mortgage lending by the banks. Has yet to be transferred onto savers balance sheets. The market will determine the correct level of rates for both savers and borrowers. There's at least a decade of unwinding to go yet. 

Worth remembering that 30 year mortgage rates in the US are currently above 7%. Borrowers in the UK have so far got off lightly. 

And there is a LOT of potential volatility for credit markets.

The nature of fixed term debt is that the unwinding is spread out. There's no cliff edge to speak of.  Adjustment will become seamless. Yes there'll be headline grabbing stories. Be some surprises.  In the main it'll be a quiet and slow process. Even now companies are deleveraging. Sell assets or raise capital through equity issuance. Homeowners will be no different. All making individual decisions based on their own personal financial circumatances. 

https://www.property118.com/rising-interest-rates-hammer-btl-returns-by-45/

I think the opposite, I think the signs of stress are showing very quickly, CRE is another very good example.

What percentage of mortgages are BTL? Hardly indicative of the market.

Last figures I recall.  7% of mortgages but 20% of total outstanding borrowing.  Leverage being the underlying issue. Residential mortgages being overwhemingly on a repayment basis while BTL are interest only. BTL mortgages tend to come with higher product fees and are at higher rates than residential. 

So defaults/losses on BTL could affect bank lending on residential?

So could the price of Jarlsberg cheese or the colour of the board members' shirts.

None of these are the same thing.

Very unlikely that the things you mention would have any effect, but losses to the bank on one balance sheet would make them more cautious overall I think , remember they are also reeling from CRE losses. The main losers of course in a BTL meltdown would be recent landlords who thought they were super-investors.

No the main losers would be the tenants.

Because they would have to move?

 you don't have to be a financial whizz to realise that rental prices would increase resulting in all tenants becoming losers...

if not in the rental market they become available to buy and (somewhere in the chain) increase the stock of houses to buy for those who were previously renting

So the net effect is less rental housing stock and less renters so no net impact.

I'm no "financial whizz" so let me know where i've gone wrong.

Clearly. All other things being equal, your "no net impact" on renters is only valid if every single one of those BTL properties is subsequently utilised by someone who was previously renting which is extremely unlikely to be the case.

house then becomes vacant........which is then occupied by a renter or another owner-occupier

Again, let me know where i've gone wrong as i'm still learning.

The fundamental flaw is your supposition that every new occupant of the ex-BTL was previously either a renter or was an owner-occupier who has now released their previous home back on to the market. There are numerous situations where this is not the case.

For example, according to Crashy, loads of struggling younger people have moved back in with their parents - they are neither owner-occupiers or renters but either they or their parents are ready to snap up any ex-BTL bargains if prices drop.

Similarly, more people than ever are living on their own, often due to divorce/separation. A case in point is a relative of my girlfriend's; she married less than a year ago, it didn't go well so last month she moved out and into a rental while soon-to-be ex-hubby is still living in the marital home.

Another example, I own several properties, only my own home is occupied by an owner-occupier; the others are occupied by neither owner-occupiers or (past or present) renters...

Of course the even bigger fly in the ointment is that the UK isn't building enough homes to keep up with the growing population so if relatively fewer homes are available to renters due to a "BLT meltdown" then that can only result in even higher costs for renters.

The problem here is that you seem to just assume that the landlord can put the house up for sale and someone will "snap it up",

If someone doesn't snap it up and the property languishes on the market for too long then the first thing any decent EA will advise is to get rid of the existing tenants and then re-market with vacant possession...

Can you remind me again how that benefits renters?

Or LL's. As that void rental period will impose a considerable cash drain . Not just the mortgage that has to be paid. 

horsewithnoname

Hoenir said:

horsewithnoname said:

ian1246 said:

I think the biggest issue for renters is scraping a deposit together. Anything which encourages landlords to sell shrinks the rental market. If the demand for rentals then doesn't also shrink at the same/ faster rate... it will result in rental prices climbing. Unfortunately I suspect a very large share of those renting lack the means to purchase the resulting increased supply of homes for sale... which means they may actually become even more lilely to be trapped if rental prices spike...

Also mortgage companies who reckon you can’t afford a mortgage which is significantly less than your rent is per month even when you have a deposit 🤷🏻‍♂️

Owning a house comes with an additional cost burden. Direct comparison between mortgage and rent outgoing is financially misleading. 

Ok then, how about a friend who wanted to pay a lump off their mortgage which would more than their monthly mortgage payment but was told they didn’t pass the affordability test. 

Also you’ll find that a lot of tenants do maintenance themselves to save their rent being increased. What other costs are there, because I can’t think of any. 

MeteredOut

horsewithnoname said:

Hoenir said:

horsewithnoname said:

ian1246 said:

I think the biggest issue for renters is scraping a deposit together. Anything which encourages landlords to sell shrinks the rental market. If the demand for rentals then doesn't also shrink at the same/ faster rate... it will result in rental prices climbing. Unfortunately I suspect a very large share of those renting lack the means to purchase the resulting increased supply of homes for sale... which means they may actually become even more lilely to be trapped if rental prices spike...

Also mortgage companies who reckon you can’t afford a mortgage which is significantly less than your rent is per month even when you have a deposit 🤷🏻‍♂️

Owning a house comes with an additional cost burden. Direct comparison between mortgage and rent outgoing is financially misleading. 

Ok then, how about a friend who wanted to pay a lump off their mortgage which would more than their monthly mortgage payment but was told they didn’t pass the affordability test. 

Also you’ll find that a lot of tenants do maintenance themselves to save their rent being increased. What other costs are there, because I can’t think of any. 

Banks don't take anecdotal instances into account when making blanket policy decisions.

Newbie_John

ReadySteadyPop said:

To get back on topic I think a hold at 5.25% is the likely outcome in August.

Agree with this

horsewithnoname

MeteredOut said:

horsewithnoname said:

Hoenir said:

horsewithnoname said:

ian1246 said:

I think the biggest issue for renters is scraping a deposit together. Anything which encourages landlords to sell shrinks the rental market. If the demand for rentals then doesn't also shrink at the same/ faster rate... it will result in rental prices climbing. Unfortunately I suspect a very large share of those renting lack the means to purchase the resulting increased supply of homes for sale... which means they may actually become even more lilely to be trapped if rental prices spike...

Also mortgage companies who reckon you can’t afford a mortgage which is significantly less than your rent is per month even when you have a deposit 🤷🏻‍♂️

Owning a house comes with an additional cost burden. Direct comparison between mortgage and rent outgoing is financially misleading. 

Ok then, how about a friend who wanted to pay a lump off their mortgage which would more than their monthly mortgage payment but was told they didn’t pass the affordability test. 

Also you’ll find that a lot of tenants do maintenance themselves to save their rent being increased. What other costs are there, because I can’t think of any. 

Banks don't take anecdotal instances into account when making blanket policy decisions.

No of course they don’t. But to say someone can’t afford to pay less than they are already paying is a bit bonkers. 

Hoenir

horsewithnoname said:

MeteredOut said:

horsewithnoname said:

Hoenir said:

horsewithnoname said:

ian1246 said:

I think the biggest issue for renters is scraping a deposit together. Anything which encourages landlords to sell shrinks the rental market. If the demand for rentals then doesn't also shrink at the same/ faster rate... it will result in rental prices climbing. Unfortunately I suspect a very large share of those renting lack the means to purchase the resulting increased supply of homes for sale... which means they may actually become even more lilely to be trapped if rental prices spike...

Also mortgage companies who reckon you can’t afford a mortgage which is significantly less than your rent is per month even when you have a deposit 🤷🏻‍♂️

Owning a house comes with an additional cost burden. Direct comparison between mortgage and rent outgoing is financially misleading. 

Ok then, how about a friend who wanted to pay a lump off their mortgage which would more than their monthly mortgage payment but was told they didn’t pass the affordability test. 

Also you’ll find that a lot of tenants do maintenance themselves to save their rent being increased. What other costs are there, because I can’t think of any. 

Banks don't take anecdotal instances into account when making blanket policy decisions.

No of course they don’t. But to say someone can’t afford to pay less than they are already paying is a bit bonkers. 

The business news these days is dominated by personal opinion rather than informed explanation. Dumbed down financial journalism. Over simplification of complex topics. 

BarelySentientAI

horsewithnoname said:

MeteredOut said:

horsewithnoname said:

Hoenir said:

horsewithnoname said:

ian1246 said:

I think the biggest issue for renters is scraping a deposit together. Anything which encourages landlords to sell shrinks the rental market. If the demand for rentals then doesn't also shrink at the same/ faster rate... it will result in rental prices climbing. Unfortunately I suspect a very large share of those renting lack the means to purchase the resulting increased supply of homes for sale... which means they may actually become even more lilely to be trapped if rental prices spike...

Also mortgage companies who reckon you can’t afford a mortgage which is significantly less than your rent is per month even when you have a deposit 🤷🏻‍♂️

Owning a house comes with an additional cost burden. Direct comparison between mortgage and rent outgoing is financially misleading. 

Ok then, how about a friend who wanted to pay a lump off their mortgage which would more than their monthly mortgage payment but was told they didn’t pass the affordability test. 

Also you’ll find that a lot of tenants do maintenance themselves to save their rent being increased. What other costs are there, because I can’t think of any. 

Banks don't take anecdotal instances into account when making blanket policy decisions.

No of course they don’t. But to say someone can’t afford to pay less than they are already paying is a bit bonkers. 

You are aware that "paying the first month's mortgage instalment" isn't the complete scope of an affordability assessment?

Hoenir

Worth recapping that at the beginning of 2024. General consensus in the media was for disinflation. As a result 6 or 7 cuts to interest rates would follow. Interest rates rather than house prices are the new national obsession. 

BikingBud

Hoenir said:

Worth recapping that at the beginning of 2024. General consensus in the media was for disinflation. As a result 6 or 7 cuts to interest rates would follow. Interest rates rather than house prices are the new national obsession. 

Is that because people are feeling over-exposed in their artificially inflated purchases?

lojo1000

UK inflation tomorrow. Not much change expected.

No rate cut priced in (91%) by Fed on 31 July and I expect BoE will stay put following day on 1 Aug.

Fed now a shoo-in to cut on 18 Sept (100%) and likely BoE will follow next day on 19 Sept.

Normally when CBs start cutting rates and indicate a path of cuts, it is normally due to recession signals. There is only soft data which evidences recession so far (leading indicators) whereas growth remains positive and unemployment is near record lows.

If markets take the indicated path of cuts as a sign of recession (along other signals) then recession will likely follow - since it means capital is withdrawn from risk markets.

It may be the markets have already priced in the benefits from the rate cuts - equities at all time highs - so do not expect cuts to necessarily lead to stimulus once they finally arrive.  Just as the small high street investor thinks rate cuts mean expansion, asset allocators may sell risk assets and move into bonds.

On the flipside, can the largest asset market in the world (US real estate) and UK property market move into a speculation phase on the hope of rate 75bps of cuts in 2024? I have no idea and nor does the Fed/BoE.