Expected Mortgage Interest Rates

Baldeagle095

I was googling MSE and I was met with the strapline:- 'Martin Lewis: What you need to know NOW about mortgage rates' .It was a TV programme from 7th February 2023.

I was immediately struck by how obsolete and outdated it is some 6/7 months later.

The consensus of the 'experts' was that there might be one more base rate rise (from 4%) in 2023 and would fall back to 3% by the end of 2024. A 2 yr fix was 4.35%, 5 yr fix 3.99% and 10 yr fix 3.99%. 

How I wish that were the case now!  We have been overtaken by the mantra: 'Higher for longer'

Currently Moneyfacts have 2 yr fix 6.14% reverting to 7.99%, 5 yr fix 5.64% reverting to 7.99%, 10yr fix 5.04% reverting to 7.99% after 10 yrs.

Scary stuff. No expert. Watching Bloomberg and they expect at least 2 BoE bps rises this year.

MorningcoffeeIV

Ignore the reverting rates. They're simply based on today's variable.

Aberdeenangarse

SWAP and Gilt rates currently predict IR’s going higher and staying higher for longer. That could all change but I somehow doubt it.

Sarah1Mitty2

High interest rates are healthy, people who don`t want to take risk in stock markets etc. get rewarded for saving.

CSI_Yorkshire

It's certainly scary if you misunderstand "what a 10 year fix must be quoted as reverting to" as "what the interest rates will be in 10 years".

And ignore Crashy's nonsense.  There is no particular interest rate that is or isn't "healthy" overall in isolation.

lmitchell

Sarah1Mitty2 said:

High interest rates are healthy, people who don`t want to take risk in stock markets etc. get rewarded for saving.

Interest rates which keep inflation at 2% are 'healthy'.

By 2025, we'll find a middle ground between the rock-bottom rates and today's rates; rates which will keep a lid on inflation without restricting growth and investment in next-generation industries.

MattMattMattUK

Sarah1Mitty2 said:

High interest rates are healthy, people who don`t want to take risk in stock markets etc. get rewarded for saving.

That is not healthy though, economies grow through investment, not by money sitting in savings accounts. 

Ideally one wants an environment where investment is rewarded, interest rates are low, but corporation tax and regulatory requirements benefit investment and reinvestment rather than borrowing on money markets.

Sg28

Baldeagle095 said:

I was googling MSE and I was met with the strapline:- 'Martin Lewis: What you need to know NOW about mortgage rates' .It was a TV programme from 7th February 2023.

I was immediately struck by how obsolete and outdated it is some 6/7 months later.

The consensus of the 'experts' was that there might be one more base rate rise (from 4%) in 2023 and would fall back to 3% by the end of 2024. A 2 yr fix was 4.35%, 5 yr fix 3.99% and 10 yr fix 3.99%. 

How I wish that were the case now!  We have been overtaken by the mantra: 'Higher for longer'

Currently Moneyfacts have 2 yr fix 6.14% reverting to 7.99%, 5 yr fix 5.64% reverting to 7.99%, 10yr fix 5.04% reverting to 7.99% after 10 yrs.

Scary stuff. No expert. Watching Bloomberg and they expect at least 2 BoE bps rises this year.

At that time there were many predictions of 6% peak.
I was suprised by that show who quoted capital economics as predicting such a low peak and dramatic fall after, which was going against most of what I was reading at the time. 

Jonesy1977

MattMattMattUK said:

Sarah1Mitty2 said:

High interest rates are healthy, people who don`t want to take risk in stock markets etc. get rewarded for saving.

That is not healthy though, economies grow through investment, not by money sitting in savings accounts. 

Ideally one wants an environment where investment is rewarded, interest rates are low, but corporation tax and regulatory requirements benefit investment and reinvestment rather than borrowing on money markets.

Very true.  High interest rates may be beneficial for individual savers but it also means business is unable to borrow, invest and create jobs, fund wage rises etc.   

Strummer22

Given the lag between rate rises and their peak effects - I've seen some articles saying 18 months - the full effect of recent rises won't be felt until the latter half of 2024. Given that inflation is currently falling, is there a risk of 'overshooting' and pushing the economy into a recession and deflation? 

Or to put it another way, if interest rate rises paused the effect of previous rises would still be working their way through.

I've posted this in another thread, but given the headline rate of inflation should fall fairly steadily over the next two months and then almost certainly fall dramatically in November (due to effect of Oct 2022 energy price cap increase dropping out), I predict I sudden change in sentiment in November. Although quite why that should be I don't really know as it can be seen a mile off. 

Sarah1Mitty2

CSI_Yorkshire said:

It's certainly scary if you misunderstand "what a 10 year fix must be quoted as reverting to" as "what the interest rates will be in 10 years".

And ignore Crashy's nonsense.  There is no particular interest rate that is or isn't "healthy" overall in isolation.

Last 15 years will be considered "unhealthy" in future debates IMO (except the early period where the banking system was propped up) as all that has been encouraged by super low rates is people borrowing to join a property bubble.