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

TerryDuckworth

steve866 said:

tony863 said:

Prior to reading the last few pages of this thread I convinced myself a tracker mortgage might be worth the punt being around half a percent lower than fixed. My finger in the air feeling was that the rate would peak around 5-5.5% and then fall steadily back down to 2 or 3%.

Having now read some of the recent comments am I right in guessing the higher rates are here to stay? I appreciate it's a crystal ball moment, but maybe the better question is - would anyone opt for a 2yr tracker mortgage right now? 

I would be careful taking advice from this thread, some people have agendas! Personally if I wanted a 2 year deal I’d fix because I wouldn’t expect rates to come down drastically within 2 years so wouldn’t lose out on much. I’d be considering whether I’d need to fix for longer if rates could keep increasing. Depends on fees / early repayment charges / other factors of course.

Thanks for that Steve. Reading your post I will be very cautious when taking advice off anyone on here. 

michaels

jonnydeppiwish! said:

Stupid questions time - having read this whole thread twice, I still have very little clue!

Has the interest rates rise has any effect on inflation yet or will it take longer/higher rates to get the desired effect?

Have the banks mortgage stress test not been fit for purpose with mortgagees saying they’ll have to seek or is that down to multiple combinations of reasons?

With rate rises, what’s the chances of more businesses going busy and this more unemployed (especially in the services sector)? We now have 8 or 9 cafes open in our small town and I do wonder if they are all still viable!

Listening to the radio as few days ago and they seemed to think it hasn’t but will do as there’s around 1.2m coming off low fixed rates over the next 6 months.

No doubt it has had some impact but clearly not enough.  WE have benefited from more growth and less unemployment than was expected but the flip side of this is more inflation.  Reasons for this may be because most mortgages are now fixed fro 2-5 years and that there is a big hangover of unspent money from the covid period when those who were still working and earning as normal ended up saving the money they would normally have spent on new cars and holidays and are now trying to reverse that.

Problem is if the economy suddenly flips and people tighten their belts we will simultaneously have lost of people locked into high mortgage rates and any reversal of course on interest rates will also take a long time to have much impact.

michaels

sevenhills said:

MattMattMattUK said:

Reducing VAT to 5% would cost the exchequer around £140 billion per annum, meaning the national debt would reach 200% of GDP within 16 years.

The idea of tax cuts to improve the current position is economically illiterate, as equally illiterate as the idea that a £16 billion pa tax rise can clear a £2.6 trillion debt when the deficit is running at over £230 billion pa.

Who is suggesting tax cuts "to improve the current position"?

An increase in VAT to help pay down government debt would have the same effect as increasing interest rates, but it would affect more people than just mortgage holders that are not on a fixed deal.

Increasing VAT would squeeze people's spending, I am sure you could adjust the numbers to make them work?

The problem with increasing VAT is it is included in the CPI so for the first 12 months after any increase it will push up the headline CPI and thus lead to higher pay demands.  Hence income tax being the better tool for the job.  With fiscal tightening you get double bubble benefit as the govt then has less to spend on interest for debt servicing and rates on debt may be lower as there is less default risk if the debt trajectory is more sustainable.

weddingringman

jonnydeppiwish! said:

Stupid questions time - having read this whole thread twice, I still have very little clue!

Has the interest rates rise has any effect on inflation yet or will it take longer/higher rates to get the desired effect?

Have the banks mortgage stress test not been fit for purpose with mortgagees saying they’ll have to seek or is that down to multiple combinations of reasons?

With rate rises, what’s the chances of more businesses going busy and this more unemployed (especially in the services sector)? We now have 8 or 9 cafes open in our small town and I do wonder if they are all still viable!

Listening to the radio as few days ago and they seemed to think it hasn’t but will do as there’s around 1.2m coming off low fixed rates over the next 6 months.

1) Raising interest rates is bolstering the pound and that’s important when when we import most of the stuff we consume. 

2) Stress tests do work - can you imagine how little house prices would’ve risen if mortgages had been stress tested to 6 or 7% the last couple of years?

Instead we have people panicking about those modest levels of interest.

weddingringman

TerryDuckworth said:

steve866 said:

tony863 said:

Prior to reading the last few pages of this thread I convinced myself a tracker mortgage might be worth the punt being around half a percent lower than fixed. My finger in the air feeling was that the rate would peak around 5-5.5% and then fall steadily back down to 2 or 3%.

Having now read some of the recent comments am I right in guessing the higher rates are here to stay? I appreciate it's a crystal ball moment, but maybe the better question is - would anyone opt for a 2yr tracker mortgage right now? 

I would be careful taking advice from this thread, some people have agendas! Personally if I wanted a 2 year deal I’d fix because I wouldn’t expect rates to come down drastically within 2 years so wouldn’t lose out on much. I’d be considering whether I’d need to fix for longer if rates could keep increasing. Depends on fees / early repayment charges / other factors of course.

Thanks for that Steve. Reading your post I will be very cautious when taking advice off anyone on here. 

People are just tired of generations of people that actively support and attempt to prop-up house prices that are wholly unaffordable for many people now.

I watched rates being slashed during the pandemic and surprise surprise - house prices rocketed. People borrowing record multiples at record lows, and at the same time having the audacity to only fix for 2 years because it’s £20 cheaper per month than a more secure 5 year fix. 

Now that the gambles not paid off, people are crying out for mortgage support which would cost the tax payer billions, continue to prop up house prices, and cause inflation in itself.

In 10 years time I want to help my kids buy a house so I’m afraid we need a house price correction. 

woahsoah

I watched rates being slashed during the pandemic and surprise surprise - house prices rocketed. P

Do you mean 'slashed' from that whopping 0.75%? They were already historically low. I was on a tracker from 2007 until last year and now on a fixed, I expect I'll swap back to a tracker when the fixed expires.

I'm a non resident with a london house rented out and don't have much skin in the game. I don't see how any correction will happen without houses being built. There is too much money in the system ready to step in.

I'd predict that rents continue to increase but as some may not expect. I suspect we'll see a move to more HMOs as the square footage gets squeezed.

Altior

A few points from a thread 'catch up'.

Stress testing is certainly not a soundbite, but the Bank removing the formal requirement was a big red flag, signposting what was coming.

If people feel that those who are on reasonable salaries can't afford rent or mortgage + living costs now, how do they expect immigrants to afford it, if they only earn minimum wage for the so called menial, low skill jobs (or just above)?

To the poster who feels that you have to get a devalued degree to have a good salary and career, have they looked at the money painters and decorators, gas engineers, plumbers and electricians for example after a few years' experience command? I was chatting to the gas engineer who serviced my boiler the other day, and he clears £500 on a good day. The answer is that younger people tend to not want to do a job that requires physical effort. The three year 'uni' party, and then pushing buttons or ideology on twitter is more appealing, even if is less than half the salary.

Supposed 'accounting' graduates who come into my professional arc barely know basic bookkeeping. I'd much rather take them at 18 and educate them myself on the job, when they are willing to learn, than come out of the university machine after another three years, entitled and think they know everything as they technically have a formal degree with the word accounting in it (that was my approach when I made my own recruitment decisions). 

As for the 'future', it a radical idea, not sure if it will catch on at all. Now that we are toward the end of the line of the inevitable MMT doom ride, nothing will begin to be truly fixed until government (political, central and local) only spends the money it takes off us and business, or even more radical, less (and begin to pay down the national debt mountain). That is extremely long odds against (more likely to go the other way), until then it's every man for himself.  

weddingringman

woahsoah said:

I watched rates being slashed during the pandemic and surprise surprise - house prices rocketed. P

Do you mean 'slashed' from that whopping 0.75%? They were already historically low. I was on a tracker from 2007 until last year and now on a fixed, I expect I'll swap back to a tracker when the fixed expires.

I'm a non resident with a london house rented out and don't have much skin in the game. I don't see how any correction will happen without houses being built. There is too much money in the system ready to step in.

I'd predict that rents continue to increase but as some may not expect. I suspect we'll see a move to more HMOs as the square footage gets squeezed.

They have been low for low LTV bandings for many year, but in 2014 the best 90% LTV we could find and took was 5.19% fix for 5 years. So current rates aren’t as alien as people are making out.

With regards to the base rate dropping from 0.75% to 0.1% during the pandemic, this filtered into mortgage rates rapidly. We saw the first ever fixes below 1% for 60% LTV borrowers. More importantly higher LTV bandings started to get rates below 2-3%. This left them over-leveraged and exposed to rate rises. 

This is entirely why we a very small proportion of people are facing a ‘mortgage crisis’ - because people overpaid on property, and at ridiculous, unsustainably low rates.

lojo1000

Mortgages: Banks promise more protection as mortgage rates soar

https://www.bbc.co.uk/news/business-65990833

I'm reading this as: banks don't want to foreclose on property they know they will end up taking a loss on due to the flood of repossessions which would otherwise occur. Rather they would extend and pretend, collect the interest at higher rates for a longer period and hope the govt eventually caves and prints more money.

I was about to say, "or am I just a cynic" but you know, I actually think i'm probably right here.

Also the dumb thing for the govt about this policy (other than trying to appease mortgage holders) is that it counters the BoE work in trying to reduce demand in the economy AND it gives banks LESS capacity to make new loans in the future if rates do fall (since they have less capacity due to their mortgage book being higher than it would be if the debt was being repaid as originally planned).

We've reached peek debt and we're now in one very slow reversal of confidence as more people begin to understand that if as an economy we are not willing to get into more debt then you had better look at your own debt levels.

And what of those bank shareholders? Will they accept less new business? Extending debt as credit quality falls? Or will they sell and force a rethink by the banks?

And to those who are not familiar with the way the economy works, debt has to keep rising for growth to increase each year - 'cos there is zero productivity due to all the lame duck businesses which are constantly being propped up because successive govts cannot face a recession ('cos it's gonna be a big one)

TheAble

The line that's currently often pedalled is "nobody wants repossessions - it's not in the bank's interest to repossess". But is that really true? If a guy's got a 50% LTV that he's stopped making repayments on then as a bank I would absolutely want to be repossessing that (bank's not going to be making a loss at 50% LTV) and re-lending the money at market rate to someone who IS going to pay.