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

Sarah1Mitty2

TerryDuckworth said:

Sarah1Mitty2 said:

TerryDuckworth said:

weddingringman said:

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. 

I have been having a good read over some of the posts on here and it seems if anyone mentions a house price correction or crash they get shot down. I am no economist but from what I have been seeing on the news recently it looks like we could be heading into a crisis. 

I was talking with a work colleague the other week and their 2-year fixed rate is up for renewal soon and they were saying that their payments could shoot up from £1,500 to £2,500 per month. The only way they could bring this payment down is to take a longer term mortgage or go interest only.

Yes, but all that means is that with the media trumpeting on about a crash 24/7 the poster just won`t be taken seriously and may end up on a few "Ignore" lists. Amazing isn`t it how quickly the media switched from "Housing Crisis" (result of too much cheap debt) to "Mortgage Crisis" (result of too much cheap debt) as if they were two separate things!?

I listen to LBC Radio a lot and over the last 2 weeks they have been a flood of callers who say they will struggle to pay these new rates as there mortgage rolls over. It is the same on GB News they haven't stopped talking about lately.

Judging by all these stories it doesn't sound to good for many people.

That`s right, and many people just take their cue from the media, for those who have not already taken on mortgage debt the mood is very much "wait and see" now, not good for people trying to sell property.

Sarah1Mitty2

lojo1000 said:

naf123 said:

Thanks for the insight Lojo. So what would you advise someone who has 25 more years left, and their low interest fix ends in April 2024.....

I wouldn't advise. I and people like me are still in the minority. This has all taken a lot longer than I ever imagined. So read widely and take your own advice.

Very good advice.

Sarah1Mitty2

lojo1000 said:

Mortgages rates: Fresh round of rises imposed by lenders

https://www.bbc.co.uk/news/business-66051704

If banks are being asked to defer foreclosures (more risk/less lending capacity) and increase savings rates (lower margins) as they are by the govt - what do you think they will do with their mortgage rates? Raise them. And not just in response to higher swap rates but in response to the profit squeeze being imposed on them elsewhere.

Breaking point for the economy is coming if inflation does not move down quickly from here (and i mean sub 3%). Banks are facing credit losses and slowing, if not falling, revenues.

Either banks will tighten lending standards even more or raise lending rates (which will be easier as the number of mortgage products contract).

And yet the government is working against what inflation and the BoE needs. The govt is actually 'telling' banks they need to extend and pretend yet again. The effect of this is to maintain the money supply/ not allow debts to be repaid which otherwise would (either borrowers find the money somehow or the banks foreclose).

By artificially maintaining the money supply at a higher, artificial level, the government is going to put unwanted, upward pressure on inflation.

My prediction however is inflation falls (though slower than if the govt wasn't interfering) as the economy contracts, slowly at first, then very fast as everyone says - "oh, so here it is, they said there would be a recession some time".

The BoE however tries to be cautious, not wanting to cut rates too fast and stoke inflation again and create another speculative bubble ('cos all they really care about is how they're perceived and this will be the talking next point). So they cut too slowly and the economy contracts hard.

Then the BoE relents (or the govt takes back control) and they cut hard. Then we get one final almighty, speculative, hyperinflation bubble and currency dies.

You didn't hear it here first. Many have predicted this for decades now since 2008 (me since 2001). It has taken an incredibly long time to play out. It moves so slowly you don't even see it coming.

But when it happens, it happens VERY quickly as we are now seeing, many of the more tuned in posters on forums have warned for years that large numbers of people would be in a lot of financial trouble when things finally reverted to "normal"..

sevenhills

valten said:

It's the wrong medicine to tackle the current inflationary issues and will make things worse. It's not the 70s any more. 

With the proportion of mortgage holders being less and less compared to those who own outright and the lag caused by fixed rates I don't think it's fit for purpose as the only tool to tackle inflation. Especially in the current circumstances. Eventually I suspect the government and BoE will realise this and try something else but only after many people have lost their homes.

I agree with your point, other measures should be taken, such as increasing taxes. People feel too confident, they need to stop spending.

What happened with Truss, could happen again, had interest rates not increased. Interest rates also affect the currency. So the Bank of England only has one option, to use the interest rate to crush peoples confidence.

Sarah1Mitty2

I think we need to be careful with the "Truss Budget" narrative, it is an overly simplistic narrative in my opinion that the media seem keen to use to avoid deeper discussion.

Why have Sunak and Hunt not resigned yet for example?

https://www.theguardian.com/business/2023/jun/13/uk-wage-growth-jumps-making-interest-rate-rise-more-likely

michaels

Thing is we still have the pandemic unplanned savings overhang and it is pretty huge - all those car, holiday and kitchen purchases that couldn't happen during the pandemic.



That is now being spent so even with the cost of living squeeze and the slow acting mortgage squeeze (slow acting because of the preponderance of fixed rates) spending is still keeping the economy humming.  I predict that suddenly the supertanker will turn, the savings will have been spent and/or confidence will disappear and the economy will reverse very quickly - but monetary policy will again prove to be a very slow acting lever, with mortgage fixes again meaning that it takes years for impacts to be felt.

Fiscal policy should have been the answer and a brave politician would have done the unpopular because in the mid to long term it would have been the right thing to do.  That is what we lack in terms of political leadership, too much is decided by focus group.

Strummer22

lojo1000 said:

Strummer22 said:

lojo1000 said:

My prediction however is inflation falls (though slower than if the govt wasn't interfering) as the economy contracts, slowly at first, then very fast as everyone says - "oh, so here it is, they said there would be a recession some time".

The BoE however tries to be cautious, not wanting to cut rates too fast and stoke inflation again and create another speculative bubble ('cos all they really care about is how they're perceived and this will be the talking next point). So they cut too slowly and the economy contracts hard.

Then the BoE relents (or the govt takes back control) and they cut hard. Then we get one final almighty, speculative, hyperinflation bubble and currency dies.

You didn't hear it here first. Many have predicted this for decades now since 2008 (me since 2001). It has taken an incredibly long time to play out. It moves so slowly you don't even see it coming.

Is this somehow different to the boom and bust we've endured since time immemorial?

What does 'currency dies' even mean?

It's all part of the same longer cycle. But the amplification gets wider each time as the stimulus needs to be more each time due to the cumulative debt (due to not letting the last cycle contract fully) and lack of productivity (due to allowing otherwise unprofitable firms to survive by cutting rates artificially low).

"Currency dies" - this thread is not supposed to be a discussion of the foundations of an economy but suffice to say, with hyperinflation it is not prices which are rising in value so much as the currency falling in value.

So you're predicting a deep recession, eventual reactionary rate cut, and then "one final almighty, speculative, hyperinflation bubble". Is that affecting just the UK, or Europe and USA as well, or the whole world?

"Hyperinflation" may just mean very high inflation, but I've seen a couple of sources citing a threshold of 50% price increase per month (equivalent to nearly 13,000% annually). Obviously under hyperinflation currency effectively ceases to have value, and therefore ceases to have meaning. Do you really mean hyperinflation in this sense? If you do, it's obviously just sensationalist twaddle.

Real, significant economic damage happens at an inflation rate much below 50% per month. Perhaps using less hyperbole will help people to take you seriously.

lojo1000

Strummer22 said:

lojo1000 said:

Strummer22 said:

lojo1000 said:

My prediction however is inflation falls (though slower than if the govt wasn't interfering) as the economy contracts, slowly at first, then very fast as everyone says - "oh, so here it is, they said there would be a recession some time".

The BoE however tries to be cautious, not wanting to cut rates too fast and stoke inflation again and create another speculative bubble ('cos all they really care about is how they're perceived and this will be the talking next point). So they cut too slowly and the economy contracts hard.

Then the BoE relents (or the govt takes back control) and they cut hard. Then we get one final almighty, speculative, hyperinflation bubble and currency dies.

You didn't hear it here first. Many have predicted this for decades now since 2008 (me since 2001). It has taken an incredibly long time to play out. It moves so slowly you don't even see it coming.

Is this somehow different to the boom and bust we've endured since time immemorial?

What does 'currency dies' even mean?

It's all part of the same longer cycle. But the amplification gets wider each time as the stimulus needs to be more each time due to the cumulative debt (due to not letting the last cycle contract fully) and lack of productivity (due to allowing otherwise unprofitable firms to survive by cutting rates artificially low).

"Currency dies" - this thread is not supposed to be a discussion of the foundations of an economy but suffice to say, with hyperinflation it is not prices which are rising in value so much as the currency falling in value.

So you're predicting a deep recession, eventual reactionary rate cut, and then "one final almighty, speculative, hyperinflation bubble". Is that affecting just the UK, or Europe and USA as well, or the whole world?

"Hyperinflation" may just mean very high inflation, but I've seen a couple of sources citing a threshold of 50% price increase per month (equivalent to nearly 13,000% annually). Obviously under hyperinflation currency effectively ceases to have value, and therefore ceases to have meaning. Do you really mean hyperinflation in this sense? If you do, it's obviously just sensationalist twaddle.

Real, significant economic damage happens at an inflation rate much below 50% per month. Perhaps using less hyperbole will help people to take you seriously.

I was feeling hyperbolic, what can I say. Regardless, this is what I mean.

Imagine yourself in the 'Roaring '1920s' - do you see a market crash, global depression and than just 10 years later, World War 2?

Did you predict the global pandemic? Did you predict the global inflation which followed? I didn't; not many did.

I am not saying I or anyone else can predict the future. I am saying, we cannot. But the scenario I referred to above is I believe, a likely outcome.

I'm not saying this will happen. I am just saying what I think will happen if govts and central bankers continue to be more concerned with their egos than with what is best for the country(ies).

I don't actually think it is healthy to worry about what may happen. If I offer any advice, it is be don't worry about the worst than can happen but don't over-expose yourself in case it does - because it can.

Live life, love and smile as much as you can to as many people as you can.

I am only sharing my thoughts because I've loved markets and economics since I was 16. (again I am no better at predicting anything that anyone else).

Sarah1Mitty2

Strummer22 said:

lojo1000 said:

Strummer22 said:

lojo1000 said:

My prediction however is inflation falls (though slower than if the govt wasn't interfering) as the economy contracts, slowly at first, then very fast as everyone says - "oh, so here it is, they said there would be a recession some time".

The BoE however tries to be cautious, not wanting to cut rates too fast and stoke inflation again and create another speculative bubble ('cos all they really care about is how they're perceived and this will be the talking next point). So they cut too slowly and the economy contracts hard.

Then the BoE relents (or the govt takes back control) and they cut hard. Then we get one final almighty, speculative, hyperinflation bubble and currency dies.

You didn't hear it here first. Many have predicted this for decades now since 2008 (me since 2001). It has taken an incredibly long time to play out. It moves so slowly you don't even see it coming.

Is this somehow different to the boom and bust we've endured since time immemorial?

What does 'currency dies' even mean?

It's all part of the same longer cycle. But the amplification gets wider each time as the stimulus needs to be more each time due to the cumulative debt (due to not letting the last cycle contract fully) and lack of productivity (due to allowing otherwise unprofitable firms to survive by cutting rates artificially low).

"Currency dies" - this thread is not supposed to be a discussion of the foundations of an economy but suffice to say, with hyperinflation it is not prices which are rising in value so much as the currency falling in value.

So you're predicting a deep recession, eventual reactionary rate cut, and then "one final almighty, speculative, hyperinflation bubble". Is that affecting just the UK, or Europe and USA as well, or the whole world?

"Hyperinflation" may just mean very high inflation, but I've seen a couple of sources citing a threshold of 50% price increase per month (equivalent to nearly 13,000% annually). Obviously under hyperinflation currency effectively ceases to have value, and therefore ceases to have meaning. Do you really mean hyperinflation in this sense? If you do, it's obviously just sensationalist twaddle.

Real, significant economic damage happens at an inflation rate much below 50% per month. Perhaps using less hyperbole will help people to take you seriously.

Exactly, and that is why ECB/US/UK are coming out and saying that rates will be hiked until inflation goes away, the problem is that the public are not really listening (unless they have bumper mortgage debt) have you seen hotel room rates recently?

Altior

sevenhills said:

valten said:

It's the wrong medicine to tackle the current inflationary issues and will make things worse. It's not the 70s any more. 

With the proportion of mortgage holders being less and less compared to those who own outright and the lag caused by fixed rates I don't think it's fit for purpose as the only tool to tackle inflation. Especially in the current circumstances. Eventually I suspect the government and BoE will realise this and try something else but only after many people have lost their homes.

I agree with your point, other measures should be taken, such as increasing taxes. People feel too confident, they need to stop spending.

What happened with Truss, could happen again, had interest rates not increased. Interest rates also affect the currency. So the Bank of England only has one option, to use the interest rate to crush peoples confidence.

Do you see what has happened here, sevenhills? You have been manipulated into thinking that paying more tax is a good thing, and reducing your tax is a bad thing. 

It is quite unbelievable if you think about it rationally. People seem to prefer begging for handouts from government (taxpayers) to keeping more of their money (generally, not you). 

Quite normal stuff like interest rates rates going up to not unreasonable rates is portrayed by the nudgers as the end of the world. 

Apparently, the last decade or so was the first time in 5 millennia that there has been a long period of effective negative real interest rates. 

I do wonder what the correlation would be with the people who thought/think lockdown was a great idea, and those who are complaining about the inevitable damage that the lockdown experiment would reek. Perhaps they believed the MMT nudgers, who were out in force, peddling the line that it didn't matter how much money was being created out of thin air, because interest rates are on the floor. Some of us did try to argue that they won't always be on the floor, but may as well have been whistling in the wind.

As others have alluded to, the origins are back in 2008 when western countries made up a load of money, and got away with rapid asset inflation without excessive general inflation. The difference was I believe that the money creation for the most part flowed into assets, and not into the hands of the public, as occurred in the activities of 2020 and subsequent years.