[News] The first interest rate rise in 10 years [Sponsored]

[Weststander]

Mmmm.... as was the 14% that nearly lost me my house back in the halcyon days of John Major and Nigel Lawson. Taking a lead from another poster, the Major years were obviously a direct consequence of the true villian, Jim Callaghan.

Under Lawson in 1989 base rates rocketed to 15%, to brutally end the house price boom, which Lawson exacerbated by stupidly giving advance warning of the end of multiple MIRAS relief per property.
In 1992 Major and Lawson were foolishly trying to beat the currency markets by attempting to have the £ shadow the deutsche mark, as part of the ill fated ERM which was the precursor to the equally disasterous Euro. Base rates went from 10 to 15 to 10% all in September. Lamont had to resign.

As you say, homeowners bore the brunt. 750,000 families lost possession of their homes, whilst millions of others lived with negative equity for years.

Today's rate rise could easily be reversed should UK growth disappear, for example, due to the implications of Brexit. The BoE won't be afraid to do that. They look at macro economics, not the complaints of the minority who happen to have cash deposited at banks and building societies.

 

[larus]

Circumstances change though, don't they? People lose jobs, have hours cut or other outgoings arise. What may have been seen as a perfectly manageable increase when a mortgage was taken out, may not be quite the same by the time it happens.

Agreed, but 0.25% increase in base rates won’t change that. The reality is, more people are in work now, the jobs market if buoyant so those problems are unlikely to impact most people.

 

[larus]

Since we took our mortgage out nearly 10 years ago our household income has dropped by over 50% AND costs have risen. If we tried to borrow our mortgage today we couldn't. Interest rates of the past ( and I don't mean the 1980's ) will cripple many households who already had to make cutbacks to the bone.

And what are interest rates when you took the mortgage out? 0.25%? They are nearly 6% 10 years ago.

I’m not saying that this won’t impact some people whose circumstances have changed for a variety of reasons, but there are always people who are penalised by economic circumstances. At present, it’s the young who are being penalised as interest rates are too low and this had led to asset bubbles (stock markets and house prices), which has in effect, priced the young out of the housing market. That and high levels of immigration and foreign owners biting up propert as investments.

I’m sorry if your circumstances are impacted, but the western world needs to wean itself off cheap money. When the next crisis hits, there is no ammunition for central banks now for boost growth. No room to cut and maxed out on QE.

 

[Beach Hut]

Unsecured debt which is a huge worry for the economy as spiralling out of control may come back haunt a few very shortly.

 

[nicko31]

Probably the right decision, a warning shot to consumers to stop borrowing. What would happen if rates hit 4 or 5%?

 

[Weststander]

Probably the right decision, a warning shot to consumers to stop borrowing. What would happen if rates hit 4 or 5%?

Many hundreds of thousands on very tight budgets, would eventually go bankrupt or lose their homes. No one would win from that, not even savers or schadenfreuders "they shouldn't have borrowed so much". The BoE will not allow that to happen. These are minute interest rate rises to gently get inflation down to 2%.

Ironically the falls in the £ today from the global negative view of the rise, will increase import prices and inflation.

 

[beorhthelm]

Ironically the falls in the £ today from the global negative view of the rise, will increase import prices and inflation.

the dip today wasn't a reflection of anything but day to day trading. 8% above lows for the year.

 

[Herr Tubthumper]

What if what? I don't see the point you're making?

It was a dig at [MENTION=2393]Uncle C[/MENTION]’s smug and insensitive earlier post.

 

[Mellor 3 Ward 4]

It was fun winding you lot up though.

No, you just made a complete arse of yourself.

 

[larus]

No, you just made a complete arse of yourself.

Maybe he did, but the premise is correct. House prices are overvalued. People are now looking at 35 year mortgages, help-to-buy and the like. The fact is the housing market is broken because of supply/demand imbalance.

There’s been a lack of building, a lack of affordable housing and a planning process which is unfit for purpose.
We need to free up a little bit more land for new developments.
There’s been a drop off in small builders due to the excessive rules in planning making it onerous for small builders.
The large builders are now sitting on land banks and only build slowly as this keeps prices high (supposedly).
The influx of immigrants has not been meet with a similar increase in housing, hence an even greater demand for property.
And then the ‘affordability’ of mortgages is cheaper due to interest rate being so low, so people who can afford to borrow, borrow more money as they think they can afford it. This pushes up house prices, and perversely, make the rich even richer as they own more property then the average person.

High interest are bad for the economy, but so are low interest rates. These low interest rates penalise savers and pensioners with savings. If they get little interest, then they eat more into their capital so it affects how long their saving will last.

The rich have got richer over the last 20 years or so and home ownership is declining. Too much wealth with the super-rich, and governments do sweet f.a. about it. The all cosy up to business and get on the globalisation bandwagon.

Just my opinions of course.

 

[Billy the Fish]

Why? A fixed rate is normally much higher than a variable rate. My current variable rate is 1.45%. This will now go up to around 1.7%. I can't imagine you could get a fixed rate for anything like 1.7% (I might be totally wrong).

Was going to say the same thing.

Why would I want to fix at an extra 1.5% interest compared to my tracker in order to protect myself from a 0.25% rise

 

[Wrong-Direction]

Maybe he did, but the premise is correct. House prices are overvalued. People are now looking at 35 year mortgages, help-to-buy and the like. The fact is the housing market is broken because of supply/demand imbalance.

There’s been a lack of building, a lack of affordable housing and a planning process which is unfit for purpose.
We need to free up a little bit more land for new developments.
There’s been a drop off in small builders due to the excessive rules in planning making it onerous for small builders.
The large builders are now sitting on land banks and only build slowly as this keeps prices high (supposedly).
The influx of immigrants has not been meet with a similar increase in housing, hence an even greater demand for property.
And then the ‘affordability’ of mortgages is cheaper due to interest rate being so low, so people who can afford to borrow, borrow more money as they think they can afford it. This pushes up house prices, and perversely, make the rich even richer as they own more property then the average person.

High interest are bad for the economy, but so are low interest rates. These low interest rates penalise savers and pensioners with savings. If they get little interest, then they eat more into their capital so it affects how long their saving will last.

The rich have got richer over the last 20 years or so and home ownership is declining. Too much wealth with the super-rich, and governments do sweet f.a. about it. The all cosy up to business and get on the globalisation bandwagon.

Just my opinions of course.

Well said !

Sent from my SM-A310F using Tapatalk

 

[Butch Willykins]

Cannot recommend Gareth enough. He’s helped me through x2 purchases and remortgage. I owe the man a beer!

Ash

 

[HastingsSeagull]

As someone who's paid off their mortgage in the 5% days and currently earning pennies a year on savings, this is quite nice. It's hardly back to the days of 15% or even 5.75%.....

I also think that with so many people renting, whilst this will indeed hit a lot of people it might finally sort out house prices if can SLOWLY go back to the 2-3% mark that seems to make sense to me for all sides.

 

[HantsSeagull]

Why? A fixed rate is normally much higher than a variable rate. My current variable rate is 1.45%. This will now go up to around 1.7%. I can't imagine you could get a fixed rate for anything like 1.7% (I might be totally wrong).

Was going to say the same thing.

Why would I want to fix at an extra 1.5% interest compared to my tracker in order to protect myself from a 0.25% rise

well you would both be wrong I am afraid. 5 year fixes at 60% loan to value have been below 1.7% for months. Even now you can fix for 5 years at 1.79% - won't last long now I admit.

 

[Weststander]

As someone who's paid off their mortgage in the 5% days and currently earning pennies a year on savings, this is quite nice. It's hardly back to the days of 15% or even 5.75%.....

I also think that with so many people renting, whilst this will indeed hit a lot of people it might finally sort out house prices if can SLOWLY go back to the 2-3% mark that seems to make sense to me for all sides.

The 0.25% rate rise will only generate a smidgen of extra income for savers.

The average cash savings of over 55's is £47k. The rate rise if fully passed on, will give them less than £10 per month addititional monthly income, gross.

 

[Uncle Spielberg]

Thanks for the interest. As Hants Seagull says a 5 year fixed rate at 1.79% is fabulous, if you meet the criteria and if you do not plan to sell in that time and have a 40% equity. It is all about choices and there are thousands of different rates. With 4 000 000 people on a variable or tracker rate now could be a good time to look at options and those within 6 months of coming to the end of a fixed rate. All information is generic as full fact find would need to be done to assess the best options for individuals. US/GG

 

[Sarisbury Seagull]

Maybe he did, but the premise is correct. House prices are overvalued. People are now looking at 35 year mortgages, help-to-buy and the like. The fact is the housing market is broken because of supply/demand imbalance.

There’s been a lack of building, a lack of affordable housing and a planning process which is unfit for purpose.
We need to free up a little bit more land for new developments.
There’s been a drop off in small builders due to the excessive rules in planning making it onerous for small builders.
The large builders are now sitting on land banks and only build slowly as this keeps prices high (supposedly).
The influx of immigrants has not been meet with a similar increase in housing, hence an even greater demand for property.
And then the ‘affordability’ of mortgages is cheaper due to interest rate being so low, so people who can afford to borrow, borrow more money as they think they can afford it. This pushes up house prices, and perversely, make the rich even richer as they own more property then the average person.

High interest are bad for the economy, but so are low interest rates. These low interest rates penalise savers and pensioners with savings. If they get little interest, then they eat more into their capital so it affects how long their saving will last.

The rich have got richer over the last 20 years or so and home ownership is declining. Too much wealth with the super-rich, and governments do sweet f.a. about it. The all cosy up to business and get on the globalisation bandwagon.

Just my opinions of course.

This. The lack of supply is what has caused the problem and has been the case for many years now.

Even where development has happened it has been the wrong type of development. There have been far, far too many 'luxury' flats and large 'executive' style detached houses built and not enough smaller, more affordable 2/3 bed houses. When these are built, because the demand is so high and supply so low, the builders can price them at extortionate figures. Having worked in the industry since 1999 I can say that it has been going on for as long as that.

Here in Winchester, a small development has popped up just outside the city called Winchester Village. They are totally average 'Bovis' homes, the small 2 bed terraced houses look over a park and ride car park and are what traditionally would be your standard first time buy but are on the market at £450,000, and that's cheaper than a lot of developments here. It's ridiculous even in an area like Winchester which is traditionally more expensive than the surrounding area.

The government, who have proven completely useless at dealing with the housing crisis, have tried to help first time buyers by penalising Landlords and trying to put them off buy to let but this has created another problem for first time buyers as the supply of rental property has gone down meaning rents have gone up so it's even harder to save for a deposit.

On the 30 and 35 year mortgages though, I can't see this as a bad thing. As the retirement age and life expectancy is going up surely this is a natural increase from the traditional 25 year mortgage?

 

[Berty23]

Thanks for the interest. As Hants Seagull says a 5 year fixed rate at 1.79% is fabulous, if you meet the criteria and if you do not plan to sell in that time and have a 40% equity. It is all about choices and there are thousands of different rates. With 4 000 000 people on a variable or tracker rate now could be a good time to look at options and those within 6 months of coming to the end of a fixed rate. All information is generic as full fact find would need to be done to assess the best options for individuals. US/GG

It is such a difficult decision isn't it! My tracker is 0.95 above base rate which is obviously good. I would love to fix for five years but.....my kids are 9,7 and 7. I have a feeling that we may outgrow our house and need somewhere bigger so if we fix we could be hit with various fees (on top of arrangement fees). Like so many decisions it is about managing risk isn't it. God I wish we had kept critical illness cover when we didn't have a mortgage! Oh well.

 

[WATFORD zero]

It was fun winding you lot up though.

So all these years and posts where we thought you were a complete **** were a wind up. Well played

(It's lucky you told us though, or else there would have still been idiots on here thinking you were a real **** )