Expected Mortgage Interest Rates

Aberdeenangarse

Money markets are still pricing in two more increases.

Sarah1Mitty2

MattMattMattUK said:

Sarah1Mitty2 said:

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.

The low interest rates in much of the world allowed for fairly steady growth, though in the UK because of the way our economy and particularly corporation tax is structured it was generally used for debt increases rathe than growth, that and with the failure to balance the fiscal books and then Brexit we were always going to struggle with growth.

Property prices are not a bubble, they are a result of imbalanced supply and demand, there will be no bursting bubble or significant drop because we have had and continue to have high net immigration, far below the levels of housebuilding, though affordability could apply a small amount of downward pressure in the short term. 

 No, that argument doesn`t work because everyone looking to buy a house already lives somewhere, if they don`t have access to the cheap credit they won`t buy the bigger better house (Look at U.S mortgage applications data out today for example - lowest since 1995) they will just continue to live where they are until prices come down to match what they can borrow.

Sarah1Mitty2

RelievedSheff said:

Sarah1Mitty2 said:

Jonesy1977 said:

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.   

 How did business survive through most of history when rates were much higher? The property bubble won`t survive, business will be fine eventually (except EA`s and property developers)

You could throw your question on its head and ask how did EAs and property developers survive when rates were much higher?

People always need somewhere to live and we have a chronic shortage of housing in this country.

EA`s survived because there were less of them, same with developers, everyone viewing a property already has somewhere to live so your second point doesn`t really make sense (The US data today shows us what happens to mortgage demand when the price of debt goes up -  It falls to near 30 year lows and people just stay where they already live, it is relatively basic stuff really)

michaels

Sarah1Mitty2 said:

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

Some people are quite clueless.  Savers are much better off with 0.5% interest rates and 1% inflation that we had 2 years ago than 5.25% interest rates and 6.8% inflation that we have now - even before you consider that some of that nominal extra interest might be subject to tax.

Personally I think we are starting to see demand stagnate as the involuntary savings of the covid period are used up and higher mortgages are starting to hit (the move from most being on an SVR to most being on 2-5 year fixes has result din a lag.  Problem is that same lag will mean unwinding monetary policy will also be slow and we may well see a deeper recession than the BoE intends (such things tend to have their own momentum over and above the monetary policy balance) but then again I think the UK is structurally prone to high inflation (phone and broadband contracts with built in RPI plus annual increase for example - who the F allowed companies to get away with that?) so we are likely to see stagflation next year sadly.

Sarah1Mitty2

michaels said:

Sarah1Mitty2 said:

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

Some people are quite clueless.  Savers are much better off with 0.5% interest rates and 1% inflation that we had 2 years ago than 5.25% interest rates and 6.8% inflation that we have now - even before you consider that some of that nominal extra interest might be subject to tax.

Personally I think we are starting to see demand stagnate as the involuntary savings of the covid period are used up and higher mortgages are starting to hit (the move from most being on an SVR to most being on 2-5 year fixes has result din a lag.  Problem is that same lag will mean unwinding monetary policy will also be slow and we may well see a deeper recession than the BoE intends (such things tend to have their own momentum over and above the monetary policy balance) but then again I think the UK is structurally prone to high inflation (phone and broadband contracts with built in RPI plus annual increase for example - who the F allowed companies to get away with that?) so we are likely to see stagflation next year sadly.

  No, that is muddled thinking, the only people better off were people who borrowed too much, they are no longer better off, savers are better off with interest rates at 10%, required debt for housing much lower as higher rates reduce prices and creating their own deflation by cutting back on household spend, that is a lever that an individual or family can control, they can`t control out of control house prices due to loose credit or how much interest the bank pays them, we are definitely moving in the right direction but it takes time, I do agree though that we are approaching a point where it all grinds to a halt as people just can`t service debt any more or don`t want to take on debt at these levels, and for an economy that runs on debt that will be a serious moment. The thing is you can still find a tin of beans for 30p if you look for it, it is housing costs (people`s biggest cost) that got way out of control and needs to be tamed.

Strummer22

Sarah1Mitty2 said:

michaels said:

Sarah1Mitty2 said:

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

Some people are quite clueless.  Savers are much better off with 0.5% interest rates and 1% inflation that we had 2 years ago than 5.25% interest rates and 6.8% inflation that we have now - even before you consider that some of that nominal extra interest might be subject to tax.

Personally I think we are starting to see demand stagnate as the involuntary savings of the covid period are used up and higher mortgages are starting to hit (the move from most being on an SVR to most being on 2-5 year fixes has result din a lag.  Problem is that same lag will mean unwinding monetary policy will also be slow and we may well see a deeper recession than the BoE intends (such things tend to have their own momentum over and above the monetary policy balance) but then again I think the UK is structurally prone to high inflation (phone and broadband contracts with built in RPI plus annual increase for example - who the F allowed companies to get away with that?) so we are likely to see stagflation next year sadly.

  No, that is muddled thinking, the only people better off were people who borrowed too much, they are no longer better off, savers are better off with interest rates at 10%, required debt for housing much lower as higher rates reduce prices and creating their own deflation by cutting back on household spend, that is a lever that an individual or family can control, they can`t control out of control house prices due to loose credit or how much interest the bank pays them

So, like the BoE, you seem to want people to accept that they are poorer...

The bit I've highlighted in bold is dependent on so many other factors. How much higher (or lower) than inflation is the rate you can get on your savings? You might end up with more money in the bank but be able to buy less stuff with it. Ref the point made by @michaels. 

The bit I've highlighted in italics is failing to see the wood for the trees. If house prices reduce because interest rates are high, then the capital of the debt taken on is lower, but the repayments are higher than they would be at low interest rates - therefore the depression of house prices by high interest rates may not help buyers with affordability. 

Of course, the people who benefit most from a period of high interest rates are those who manage to buy a property just as interest rates are falling (locking in a decent fix) and house prices start to recover. A lucky few. 

Sarah1Mitty2

Strummer22 said:

Sarah1Mitty2 said:

michaels said:

Sarah1Mitty2 said:

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

Some people are quite clueless.  Savers are much better off with 0.5% interest rates and 1% inflation that we had 2 years ago than 5.25% interest rates and 6.8% inflation that we have now - even before you consider that some of that nominal extra interest might be subject to tax.

Personally I think we are starting to see demand stagnate as the involuntary savings of the covid period are used up and higher mortgages are starting to hit (the move from most being on an SVR to most being on 2-5 year fixes has result din a lag.  Problem is that same lag will mean unwinding monetary policy will also be slow and we may well see a deeper recession than the BoE intends (such things tend to have their own momentum over and above the monetary policy balance) but then again I think the UK is structurally prone to high inflation (phone and broadband contracts with built in RPI plus annual increase for example - who the F allowed companies to get away with that?) so we are likely to see stagflation next year sadly.

  No, that is muddled thinking, the only people better off were people who borrowed too much, they are no longer better off, savers are better off with interest rates at 10%, required debt for housing much lower as higher rates reduce prices and creating their own deflation by cutting back on household spend, that is a lever that an individual or family can control, they can`t control out of control house prices due to loose credit or how much interest the bank pays them

So, like the BoE, you seem to want people to accept that they are poorer...

The bit I've highlighted in bold is dependent on so many other factors. How much higher (or lower) than inflation is the rate you can get on your savings? You might end up with more money in the bank but be able to buy less stuff with it. Ref the point made by @michaels. 

The bit I've highlighted in italics is failing to see the wood for the trees. If house prices reduce because interest rates are high, then the capital of the debt taken on is lower, but the repayments are higher than they would be at low interest rates - therefore the depression of house prices by high interest rates may not help buyers with affordability. 

Of course, the people who benefit most from a period of high interest rates are those who manage to buy a property just as interest rates are falling (locking in a decent fix) and house prices start to recover. A lucky few. 

People in general were never rich, they just had access to cheap debt and could project an image of themselves through material things for a while, houses cars etc. it was all fantasy and all destined to end in tears, the people lending them the money got rich of course. The quickest way to be poorer is to carry large mortgage debt over decades of interest rate risk, it is better to pay less for the house and clear the debt quicker, and as I said people can create their own "deflation" on household spend, they can`t control house prices and savings account rates so the best scenario for savers is a collapsing housing market and higher bank savings rates (happening now) 

You make the mistake of applying higher interest rates to today`s house prices, that doesn`t work, if buyers are not "helped with affordability" the banks and the buyer will just bid house prices down until they are able to afford it otherwise no one would move and the banks couldn`t lend (this is not going to be allowed to happen)

The people who benefit most from a period of high interest rates are people with savings and no debt, they see the wood and the trees and have time to watch the sky, and they also see the woodsman coming over the rise with his large woodcutting axe.......

TerryTeacake

I would say mortgage rates over the next few years are going to be between 5-10%. A few variables to consider here for example your LTV and credit rating. Can't see inflation coming down much further especially when core inflation is going to prove to be very sticky. Wouldn't be surprised if inflation creeps back up as we enter into a period of continuous rise in prices that is sustained by the tendency of wage increases and cost increases to react on each other.

RogerPensionGuy

The link below is of some interest, guessing it allows the standard plus 3% or 4% stress tests to be ignored by and large and allow people to get more bigger debt upfront to try keeping uk housing prices.

It will be intersection to see the over payments and early redemption fees if any.
☆☆☆

https://www.theguardian.com/money/2023/sep/07/new-uk-mortgage-lender-perenna-offers-30-year-fixed-rate-deals

ACG

RogerPensionGuy said:

The link below is of some interest, guessing it allows the standard plus 3% or 4% stress tests to be ignored by and large and allow people to get more bigger debt upfront to try keeping uk housing prices.

It will be intersection to see the over payments and early redemption fees if any.
☆☆☆

https://www.theguardian.com/money/2023/sep/07/new-uk-mortgage-lender-perenna-offers-30-year-fixed-rate-deals

Personally speaking, I think you would have to be bonkers to do this. 
Who in their right mind secured a mortgage rate for so long at what appears to be a peak.