What are 'ultra low' interest rates?

MarcMCFC1986

Martin Lewis has mentioned that the anomaly is the ultra-low interest rates - and though rates will eventually go back down, we shouldn't expect them to go back down to the 'ultra-low' rates we have seen recently.

My question is, what is ultra-low? Are we talking 0.5% mortgages? Or lower?

Or should we even not hold our breath for rates as low as 2-3% ?

I'm not sure what is ultra-low and what is 'realistically-low'?

We are currently on 3.89% and expires on 21st October 2024, so have 15 months to hope to see the rates come down a little. We've worked out that we can afford 5.3%, but anything above that and we wouldn't be able to make ends meet!

Newbie_John

Each person will give you different answer.

Someone who's been paying mortgage since 80s would say ultra-low are below 10%.
Someone who started paying mortgage since 2014 would say anything below 3%.
Someone who started mortgage during Covid would say that anything below 0.5%.

But for now probably better if you prepare yourself for 5.3% in October 2024. 

silvercar

Way back when...I think the 00s, interest rates were higher than they are now and people could get mortgages that were base rate minus a small amount eg BoE-1% for 5 years. Interest rates fell to 0.5% and so some people had mortgages that were -0.5%. There was a condition that they couldn't go negative. So they were effectively 0%. At that time some people had interest only or endowment mortgages, so they had nothing to pay each month.

I am on an IO lifetime tracker of base+0.75%, so I was paying 1.25% for many years. Enough to save (I put away the equivalent of a 5% mortgage to save) a significant capital sum to help clear the mortgage.

stuhse

You can see historic interests rates since 1975 on a graph  here  --id say ultra low started in about 2008  before that the norm was an average of 7 ish ?  https://www.economicshelp.org/blog/1485/interest-rates/historical-real-interest-rate/

When i got my first mortgage in 1991 they were at about 13%  .  My repayment on a 36k mortgage was  £400 a month.  

ACG

My personal view is that we wont see anything below 3.5% again unless something goes drastically wrong. 

But I am just taking a stab in the dark. 

MarcMCFC1986

Each person will give you different answer.

Someone who's been paying mortgage since 80s would say ultra-low are below 10%.
Someone who started paying mortgage since 2014 would say anything below 3%.
Someone who started mortgage during Covid would say that anything below 0.5%.

But for now probably better if you prepare yourself for 5.3% in October 2024. 

Yeah I'm saving as hard as I can between now and then, and saving my end-of-year bonus - hopefully then I'll have some savings to take the hit of any increase above 5.3%.

Very, very, very worrying times though. Terrifying, actually! Worked so hard and sacrificed so much to finally get on the property ladder, and can already see me falling off it! 

MeteredOut

MarcMCFC1986 said:

Each person will give you different answer.

Someone who's been paying mortgage since 80s would say ultra-low are below 10%.
Someone who started paying mortgage since 2014 would say anything below 3%.
Someone who started mortgage during Covid would say that anything below 0.5%.

But for now probably better if you prepare yourself for 5.3% in October 2024. 

Yeah I'm saving as hard as I can between now and then, and saving my end-of-year bonus - hopefully then I'll have some savings to take the hit of any increase above 5.3%.

Very, very, very worrying times though. Terrifying, actually! Worked so hard and sacrificed so much to finally get on the property ladder, and can already see me falling off it! 

When you took out your 3.89% mortgage, your affordability should have been stress tested at 6.89%, so, like many, it should not be that you won't be able to afford the mortgage once you move onto a new deal, but that you won't be able to afford the lifestyle you have today that supports that mortgage.

Not wanting to be harsh, but this is exactly what the rate increases are designed to do - stop people spending in order to curb inflation.

(the mandatory requirement for this +3% stress test was scrapped in August 2022 so if you're current deal is a 2 year one, that might not be the case).

dimbo61

For a long time the BOE base rate was 0.5% and even dropped to 0.1%
Well it's now 5% and heading higher so the days of Ultra  low interest rates have gone.

MarcMCFC1986

MeteredOut said: 

When you took out your 3.89% mortgage, your affordability should have been stress tested at 6.89%, so, like many, it should not be that you won't be able to afford the mortgage once you move onto a new deal, but that you won't be able to afford the lifestyle you have today that supports that mortgage.

Not wanting to be harsh, but this is exactly what the rate increases are designed to do - stop people spending in order to curb inflation.

(the mandatory requirement for this +3% stress test was scrapped in August 2022 so if you're current deal is a 2 year one, that might not be the case).

I took it out in October 2022, and it came into effect January 2023 - but I renewed with the same bank so not sure how much they stress tested my affordability as I didn't have to do a new application.

Either way - in theory I could afford £400 a month. But, that would be it. 

I'd go to work, pay bills, go to bed. What would happen if my car needed repairing? What do I do for my kid at Christmas? What if he needs new clothes, or a school uniform? What if I want to socialise one day?

I understand that it is designed to stop people spending, but there has to be a point where peoples mental health and sanity is also being stretched too far.

 

RogerPensionGuy

My guess is bank rate will go to 6/6.25% by January 24, hover around that value, then late 24 or early 25 it will slide down slowly and get to about the 5% long-term historical value for a long time. 

We enjoyed bonkers low rates for far too long and that party is now well over.

Mortgages normally sit a bit or more above bank rates and then personal circumstances get put in and the banks find ways to charge people more as that's what their business is.

The banks don't appear to remember the good uk people bailed them out in 2008 unfortunately. 

Maybe an expert from the Bank of England will quietly post on here please?

*******

https://www.taxresearch.org.uk/Blog/2023/07/11/bank-of-england-employees-did-very-nicely-in-the-last-year-thank-you-very-much/

Admiral_Barbarossa

Mortgages are always hard when you first take them out, you ride out the storm, because when its settles again, you are in a better position.