Advice: Interest Rates going up and house prices going down

lookstraightahead

gazfocus said:

I read that if you're currently on a low interest rate with your fixed mortgage, your best option would be to squirrel away as much as you can into a high interest rate savings account (there's a few that are 4-5% now), then when your fixed term comes to an end, make a lump sum overpayment to your mortgage and then move onto a new fixed rate.

There's no point overpaying your mortgage at the moment because the interest rate is low so you'd 'earn more' in a savings account by comparison.

This. Absolutely no point at all. Just save.

Sarah1Mitty2

[Deleted User] said:

GDB2222 said:

https://www.bankofengland.co.uk/statistics/yield-curves

Check the nominal forward rates curve. These are the rates the government pays to borrow. Retail borrowers pay more.

The government rate is skewed at the moment by the "moron tax", as Robert Peston likes to call it. I.e. it pays more because it's been catastrophically stupid recently, with Liz Truss' mini budget, and the lenders are not convinced that the government has fully recovered from that madness.

So what I'm asking is how different are current retail rates, compared to how they were historically? Obviously we are paying higher rates right now, but will the gap return to normal? Seems unlikely in the timeframe that the OP is considered. There will be an election next year and lenders will probably wait to see what happens with that before making major changes.

You should take Peston with a large dose of salt, like many journalists he just spouts soundbites that less financially literate members of the public will latch onto, by "lenders" I assume you mean "bond markets"? Bond markets are looking at the health of the UK in much greater detail than a short lived historical budget (Sunak and co. are making all the right noises about not bailing anyone out for their debt mistakes to calm the bond markets) rates are going higher in the UK for a reason, and it has almost nothing to do with Truss.

Sarah1Mitty2

BendyTaffies said:

I’m reading that interest rates are going up to help stop inflation, which is among the stubborn in the west. This dramatically affects people with mortgages. There’s also an expectation that the U.K. is going to suffer the worst housing crash in the west, as a direct cause of higher interest rates and presumably just the wonderful state the country is in.

We bought our house during lockdown and didn’t overstretch thankfully! Our mortgage is fixed for another two years, but I’m still getting anxious and want to make sure I know exactly what to do when the time comes. If house prices come down, to the point that we’re potentially in negative equity, and mortgage interest rates are really high, what is the best thing to do now to combat that?

Start cutting you outgoings now (to get used to doing it if times become really tough in future) and start getting a savings pot together, don`t touch this pot until you have to start making overpayments, and get the highest rates you can find ( shouldn`t be difficult now to get good high interest rates on a healthy savings pot)

jimbog

BendyTaffies said:

I’m reading that interest rates are going up to help stop inflation, which is among the stubborn in the west. This dramatically affects people with mortgages. There’s also an expectation that the U.K. is going to suffer the worst housing crash in the west, as a direct cause of higher interest rates and presumably just the wonderful state the country is in.

We bought our house during lockdown and didn’t overstretch thankfully! Our mortgage is fixed for another two years, but I’m still getting anxious and want to make sure I know exactly what to do when the time comes. If house prices come down, to the point that we’re potentially in negative equity, and mortgage interest rates are really high, what is the best thing to do now to combat that?

Save, save, save. Then pay off some of the mortgage before taking on the new one.

Notice I say 'save'  not 'invest'. Investments can go down as well as up

TerryDuckworth

MultiFuelBurner said:

MobileSaver said:

BendyTaffies said:

There’s also an expectation that the U.K. is going to suffer the worst housing crash in the west,

I don't know where you got that idea from, can you share some of the respected sources predicting such a thing?

Most of the UK housing market players are predicting at worst a drop of 10% over the next few years and pretty much everyone expects house prices to be higher than they are now in just four years time...

I believe this is one of the many faces. Moving home with Charlie rings a bell with a lot of rhetoric on this users few posts so far.

Trying their hardest not to be too crashy too early.

I have just discovered his channel on youtube. Not sure I agree with his predictions but he is saying there could be a drop of 35% in house prices in nominal terms. Although watching his videos he does have access to a lot of stats and data. I think he said he has worked in the property industry for around 30 years.

Be interesting to see how this pans out over the next year or two.

MobileSaver

TerryDuckworth said:

MultiFuelBurner said:

MobileSaver said:

BendyTaffies said:

There’s also an expectation that the U.K. is going to suffer the worst housing crash in the west,

I don't know where you got that idea from, can you share some of the respected sources predicting such a thing?

Most of the UK housing market players are predicting at worst a drop of 10% over the next few years and pretty much everyone expects house prices to be higher than they are now in just four years time...

I believe this is one of the many faces. Moving home with Charlie rings a bell with a lot of rhetoric on this users few posts so far.

Trying their hardest not to be too crashy too early.

I have just discovered his channel on youtube. Not sure I agree with his predictions

Considering he himself admits to "20 years of repeated failures" and that he went personally bankrupt  in 2015, I think you have made the right decision to take his predictions with a very large pinch of salt... much of his content is just clickbait to generate traffic to his various sites.

grumbler

km1500 said:

 Either save the money or preferably overpay on your mortgage.

How come? Preferably save!

Mortgage taken during lock-down has to be very cheap. Current savings rates are 4%+ for easy-access savings and almost 6% for 2-year fixes. Unless there are restrictions on overpayments it makes much more sense to save and make a lump-sum overpayment when the mortgage fixed rate expires.

custardly

OP best thing you can do, to reduce the risk of negative equity and reduce any anxiety, is save up money so that the ball is in your court in two years time. Either via overpayments to the mortgage or highest interest savings account. Whichever has the highest rate of return (taking into account tax).

No one can predict the future but if have you have decent savings then at least you give yourself choices.

CSI_Yorkshire

fackers_2 said:

MobileSaver said:

BendyTaffies said:

There’s also an expectation that the U.K. is going to suffer the worst housing crash in the west,

I don't know where you got that idea from, can you share some of the respected sources predicting such a thing?

Most of the UK housing market players are predicting at worst a drop of 10% over the next few years and pretty much everyone expects house prices to be higher than they are now in just four years time...

I’ll help you with some information. 

Ohh just to help, this is from The Bank of England themselves  

What's an "implied" fall in house price?

Is it a forecast?  A relative calculation against a baseline (like price vs inflation)? I don't get where those numbers come from.

I mean, that graph seems to suggest that any mortgage rates above 2% result in prices falling, which clearly isn't true based on what's actually happened in the past?

tooldle

CSI_Yorkshire said:

fackers_2 said:

MobileSaver said:

BendyTaffies said:

There’s also an expectation that the U.K. is going to suffer the worst housing crash in the west,

I don't know where you got that idea from, can you share some of the respected sources predicting such a thing?

Most of the UK housing market players are predicting at worst a drop of 10% over the next few years and pretty much everyone expects house prices to be higher than they are now in just four years time...

I’ll help you with some information. 

Ohh just to help, this is from The Bank of England themselves  

What's an "implied" fall in house price?

Is it a forecast?  A relative calculation against a baseline (like price vs inflation)? I don't get where those numbers come from.

I mean, that graph seems to suggest that any mortgage rates above 2% result in prices falling, which clearly isn't true based on what's actually happened in the past?

Not a forecast. Output of a research model. Very likely connected to this work, although not referenced in the earlier post. https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2019/uk-house-prices-and-three-decades-of-decline-in-the-risk-free-real-interest-rate.pdf