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

Hovis_Granary

As a FTB I'm trying to get my head around all these changes and keep up to date with these trends.. by my estimates we're anywhere between 6 months to 1 year away from being at the stage where we will start putting offers in for places.

If the interest rates keep rising, I understand this will increase our monthly payments and therefore limit the upper bounds of what we may be able to borrow. Fortunately we have a good chunk of deposit (around 20-25%) so were hoping to borrow a lot less (around 3x income) than what our potential maximum may be (4 to 4.5x income is usual?).

Are these interest rate rises and higher monthly payments likely to balance out in terms of house prices rising slower (or falling?) over this period, so we can still look at the same kind of place, or is it likely we need to lower expectation and go for somewhere even more affordable?

Apologies if these questions are not allowed as they are pretty speculative, I'm just trying to understand the implications of what is happening.

In my mind as a renter for 7 years, I can't help but feel any money invested in property is better than !!!!!! it away in rent but I wasn't expecting more of a safe bet as opposed to it to feeling like playing roulette... 

lojo1000

Earnings growth is expected to rise again tomorrow (April data). But employment gains are expected to slip whilst unemployment is expected to rise leaving a difficult decision for the BoE next week.

Consensus is they will raise, just not by how much.

Are we beginning to see businesses cutting back on their supply plans? The economic concern now has to be businesses are starting to reduce their output plans as the cost of finance continues to increase whilst their ability to continually raise prices diminishes.

6% wage gains are not consistent with a 2% inflation target if the BoE is not raising rates.

Sg28

Hovis_Granary said:

As a FTB I'm trying to get my head around all these changes and keep up to date with these trends.. by my estimates we're anywhere between 6 months to 1 year away from being at the stage where we will start putting offers in for places.

If the interest rates keep rising, I understand this will increase our monthly payments and therefore limit the upper bounds of what we may be able to borrow. Fortunately we have a good chunk of deposit (around 20-25%) so were hoping to borrow a lot less (around 3x income) than what our potential maximum may be (4 to 4.5x income is usual?).

Are these interest rate rises and higher monthly payments likely to balance out in terms of house prices rising slower (or falling?) over this period, so we can still look at the same kind of place, or is it likely we need to lower expectation and go for somewhere even more affordable?

Apologies if these questions are not allowed as they are pretty speculative, I'm just trying to understand the implications of what is happening.

In my mind as a renter for 7 years, I can't help but feel any money invested in property is better than !!!!!! it away in rent but I wasn't expecting more of a safe bet as opposed to it to feeling like playing roulette... 

Generally prices will fall as rates rise, although this has quite a delay. You could be find yourself better off in 1 year time with prices falling and motivated sellers more likely to take a lower offer. 

Hovis_Granary

Sg28 said:

Generally prices will fall as rates rise, although this has quite a delay. You could be find yourself better off in 1 year time with prices falling and motivated sellers more likely to take a lower offer. 

Thank you for confirming I was on the right train of thought.. We're buying in Scotland so the main thing we'd like to avoid is a situation where we're having to offer much over what the Home Buyer's report states as it would decimate the amount available for deposit and LTV ratio. So in actual fact I am thinking the current market situation may have it's advantages for us.

NorfolkCanary

Deleted_User said:

If they were serious it would be a 1% raise. Typical of the modern world, nobody wants to make the omelette. 

you'll have to explain what raising the base rate will do to lower inflation? Especially given profit margins seems to be fairly stable.

weddingringman

NorfolkCanary said:

Deleted_User said:

If they were serious it would be a 1% raise. Typical of the modern world, nobody wants to make the omelette. 

you'll have to explain what raising the base rate will do to lower inflation? Especially given profit margins seems to be fairly stable.

By reducing demand as borrowing becomes more expensive and therefore less appealing. House prices being the obvious example.

lojo1000

More pain for those looking to remortgage today as wages rise more than expected. Chart below shows wage growth is accelerating. Positive news on employment as well today means an even tighter labour market will likely not see any downward pressure on wages.

Good news for banks on employment as they will likely be able to refinance mortgage holders at higher rates if they're holding on to their jobs.

But this has to compound misery for BTLs looking to exit as mortgage rates will be inclined to rise on this news.

Not sure how the stress tests apply when you already have a mortgage but need to refinance at a rate for which the bank would not want to give you as a new customer. I guess both sides have an interest in financing the property at a higher rate - unlike in the US where they just get to hand the keys over if they're losing money on the house every year.

Aberdeenangarse

Aberdeenangarse said:

I see bond rates have hit 4.55% this morning. Unfortunately I can see mortgage rates climbing above 6% in the near future.

Markets are now predicting interest rates peaking at 5.75%

The Bank of England will raise interest rates to 5.75pc by the end of the year, traders are betting, as wages surged at their fastest pace on record outside of the pandemic.

Markets have fully priced in interest rates to rise over the Monetary Policy Committee’s next three meetings by 0.25 percentage points from their current level of 4.5pc.

Now traders are also increasing bets on the Bank raising rates by the same amount at the following two meetings in November and December, delivering a blow to mortgage payers.

If the rises come to pass, that would take borrowing costs to their highest level since November 2007.

Aberdeenangarse

Two year gilts have now risen above the September highs. This isn’t looking good!

lojo1000

Whilst employment is strong, there are no issues on a macro level.

And that is a problem for the BoE.

If you are earning, you can access debt and pay higher prices (I know on an individual level there are exceptions).