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

sevenhills

lmitchell said:
And before anyone says 'they should've budgeted for this when buying', a rise of 500 basis points in just over a year is something no economist countenanced pre-Ukraine war.

They couldn't have predicted the Ukraine war, but when interest rates rise, they can rise very quickly.

https://thinkplutus.com/uk-interest-rate-history/

michaels

lmitchell said:

michaels said:

Aberdeenangarse said:

Any additional help for mortgage holders would increase inflation which is why it’s a no no.

Why put in place a policy to remove spending power from the economy - only to replace it using borrowed money.  Even for the lib dems it is a bonkers policy - so expect to see it in place before Christmas...

This is the whole problem though, isn't it? There isn't any spending power in the economy anyway. It's flatlined for the last 6 months and is almost certain to enter life support in the next 6 months.

As so many people keep saying, where do the BoE and government expect ordinary families to just magic an extra £3-4k out of thin air? And before anyone says 'they should've budgeted for this when buying', a rise of 500 basis points in just over a year is something no economist countenanced pre-Ukraine war.

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

norsefox

michaels said:

lmitchell said:

michaels said:

Aberdeenangarse said:

Any additional help for mortgage holders would increase inflation which is why it’s a no no.

Why put in place a policy to remove spending power from the economy - only to replace it using borrowed money.  Even for the lib dems it is a bonkers policy - so expect to see it in place before Christmas...

This is the whole problem though, isn't it? There isn't any spending power in the economy anyway. It's flatlined for the last 6 months and is almost certain to enter life support in the next 6 months.

As so many people keep saying, where do the BoE and government expect ordinary families to just magic an extra £3-4k out of thin air? And before anyone says 'they should've budgeted for this when buying', a rise of 500 basis points in just over a year is something no economist countenanced pre-Ukraine war.

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

To some extent, frozen tax thresholds and below-inflation pay increases will help to reduce people’s spending power.

Also, those renting seem to be getting hammered by further rent increases, ostensibly due to interest rate increases. Presumably they had a similar effect to those renewing their mortgages?

lojo1000

lmitchell said:

michaels said:

Aberdeenangarse said:

Any additional help for mortgage holders would increase inflation which is why it’s a no no.

Why put in place a policy to remove spending power from the economy - only to replace it using borrowed money.  Even for the lib dems it is a bonkers policy - so expect to see it in place before Christmas...

This is the whole problem though, isn't it? There isn't any spending power in the economy anyway. It's flatlined for the last 6 months and is almost certain to enter life support in the next 6 months.

As so many people keep saying, where do the BoE and government expect ordinary families to just magic an extra £3-4k out of thin air? And before anyone says 'they should've budgeted for this when buying', a rise of 500 basis points in just over a year is something no economist countenanced pre-Ukraine war.

And who could have predicted house prices would rise so fast during Covid? And who knows where interest rates will go in the future?

I don't think the government should be giving any help to those who had the financial capacity to save for a deposit and willingly entered into a loan with a lender.

I didn't see anyone mortgage holder calling for their tax burden to be raised when interest rates went down or house prices went up.

Those who have rented and saved by being financially prudent and were wary of the risks in taking out a mortgage when interest rates were at HISTORIC lows should be helped before mortgage holders who find they cannot afford their mortgage due to interest rate rises.

Strummer22

michaels said:

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

That's ignoring renters. Most landlords have mortgages which have also gotten more expensive, hence they put rent up and that affects a much larger % of the population.

Only those with no housing costs, which I suppose is the opposite ends of the spectrum from social housing paid for by benefits, to those with fully paid off mortgages, are completely immune to the increased costs of borrowing. 

jjmmww1

nic_c said:

jjmmww1 said:

TheAble said:

jjmmww1 said:

Sounds like bad new for me rate is due to run out dec 2024 anyway to work out what i could be paying from then? if rates go to 6%?

Just plug it into a mortgage calculator using 6%, remaining balance, remaining term.

Thanks didn't relise it was that simple be looking at over a £300 pound rise then for us next year

Overpay like crazy. Once interest rates started ramping up and we weren't going to get the gradual increase many predicted, we just cut back on everything we could, holidays etc put it all in increasing interest savings to be able to put as much in as possible before my 1.69% ended. I appreciate it might not be possible for you, but glad we did it.

Was over paying £50 a month since the start and can no longer afford to do that at the point where just about making it though each month as my wage has been slowly eaten away each year. Just got a new car as well to save money as my last car was costing me £235 a month in petrol and tax now the new car is only cost £186 a month in total no fuel or tax currently 

london21

Likely going up again on thursday as the lenders have already increased.

I do wonder when it will go back to 3% again.

michaels

Strummer22 said:

michaels said:

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

That's ignoring renters. Most landlords have mortgages which have also gotten more expensive, hence they put rent up and that affects a much larger % of the population.

Only those with no housing costs, which I suppose is the opposite ends of the spectrum from social housing paid for by benefits, to those with fully paid off mortgages, are completely immune to the increased costs of borrowing. 

Rents relate to supply and demand, landlords did not cut rents when mortgage costs fell and can not just automatically pass on increases to mortgage costs, whatever simplistic picture the TV News might present.

MattMattMattUK

Strummer22 said:

michaels said:

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

That's ignoring renters. Most landlords have mortgages which have also gotten more expensive, hence they put rent up and that affects a much larger % of the population.

The majority of, but roughly 60/40, landlords have mortgages. . There are some inconsistencies in the data because some is collected nationally, where as others at by England & Wales, Scotland and NI separately. 
Using the 29 million household figure as a baseline, 28.2% of those have a mortgage against them, so 8.17 million. Of that 2.7 million are BTL mortgages, 61% vs 1.7 million, 39% without mortgages. 

Strummer22 said:

Only those with no housing costs, which I suppose is the opposite ends of the spectrum from social housing paid for by benefits, to those with fully paid off mortgages, are completely immune to the increased costs of borrowing. 

Of the 71.8% of dwellings owned without mortgages the majority are owner occupied, some will be second homes and some will be rental. Social housing paid for from benefits (so the taxpayer) will likely fall under both mortgaged and non-mortgaged property, as well as some of the rental property being paid for by the taxpayer. 

I understand the requirement to raise interest rates is largely to protect Sterling otherwise inflation would get even worse, but it does seem that placing the burden and the negatives of that "solution" on just 28.2% of the population is a very poor way of spreading the pain.

lojo1000

MattMattMattUK said:

Strummer22 said:

michaels said:

Thing is only 30% of households have  a mortgage and of those only a proportion renew their rate each year.  So it is this small proportion who have to have their spending severely reduced in order for demand to reduce enough that wages and prices stop rising.  Fair would be to use fiscal policy to reduce spending power which at the same time would help with the deficit but what matters is not fair but popular (or least unpopular)

That's ignoring renters. Most landlords have mortgages which have also gotten more expensive, hence they put rent up and that affects a much larger % of the population.

The majority of, but roughly 60/40, landlords have mortgages. . There are some inconsistencies in the data because some is collected nationally, where as others at by England & Wales, Scotland and NI separately. 
Using the 29 million household figure as a baseline, 28.2% of those have a mortgage against them, so 8.17 million. Of that 2.7 million are BTL mortgages, 61% vs 1.7 million, 39% without mortgages. 

Strummer22 said:

Only those with no housing costs, which I suppose is the opposite ends of the spectrum from social housing paid for by benefits, to those with fully paid off mortgages, are completely immune to the increased costs of borrowing. 

Of the 71.8% of dwellings owned without mortgages the majority are owner occupied, some will be second homes and some will be rental. Social housing paid for from benefits (so the taxpayer) will likely fall under both mortgaged and non-mortgaged property, as well as some of the rental property being paid for by the taxpayer. 

I understand the requirement to raise interest rates is largely to protect Sterling otherwise inflation would get even worse, but it does seem that placing the burden and the negatives of that "solution" on just 28.2% of the population is a very poor way of spreading the pain.

Rates are being increased to quell the demand for money; that doesn't just relate to property but also credit cards, car finance and even business investment.

Rate policy is a sledgehammer which has many ill effects but rates should never have been lowered so far and left so low at such an expansionary level for so long.