[Closed] Interest rates - if they drop to 0.5% today

I thought the idea was the that banks encouraged folk to deposit/save money by offering them a reasonable return and that this money could then be loaned out? Once everyone starts stashing their cash under the bed, what do the banks have to lend?

people took out 110% mortgages, people took out 5x salary mortgages , people bought way overpriced houses and lied on applications to do it and greedy salesmen helped them

those who bought what they could afford, people who thought what if things get tight in the future and thought there was a possibility that interest rates could go up, and hose values could go down and saved a bit for a rainy day, i feel sorry for as we are paying for a lot of peoples greed and stupidity

the end of the world is nigh!!

rickmeister - Member

Savings not accruing interest as they should... Pay more into your house to clear the mortgage earlier, you can always draw down again later if you need cash. Or am I missing something.....

Yep. You're missing that fact that not everyone has a mortgage - or indeed an income other than that generated from savings (e.g. pensioners).

People losing their jobs and getting reposessed is a separate issue - mmw was suggesting that middle class people with savings had no right to moan because other middle class people owning houses and not getting reposessed were losing out more. I'm afraid I still have relatively little sympathy for anybody who does borrow so much that they land in negative equity though - they are part of the problem.

Lower interest rates, makes the UK a less attractive place for foriegn investors. This is partly why the pound has devalued. We don't produce much in our country, our imports are greater than our exports. Imported goods have become 30 - 40% more expensive. This will lead to inflation. Lowering interest rates further and fiscal easing will lead to further reductions in pound sterling.

How can lowering interest rates and fiscal easing be good?

Or am I missing something

Well no all mortgages are flexible enough for that and there can be fees involved. However, those of us with offset mortgages do this all the time without thinking about it.

and i'm not suggesting that anyone should be surprised if their house drops in value

i AM suggesting that you should count yourself lucky if your income has allowed you to save, i'd rather be renting a house and have £25k in savings right now.

I'm 18 months into a 5 year fixed rate. C'est la vie.

oh and what greatape said, i'm still paying less than i was a year ago

i AM suggesting that you should count yourself lucky if your income has allowed you to save

i'd rather be renting a house and have £25k in savings right now.

the end of the world is nigh!!

How about a bit of perspective? So some IT managers are going to have to sell one of their 5 ridiculously expensive mountain bike - boohoo!

About 840 million people are malnourished, and close to one billion find it difficult to meet their basic consumption requirements. More than 880 million people lack access to health services, and 2.6 billion people have no access to basic sanitation.

http://hdr.undp.org/en/reports/

On the news last night it was reported that reduced demand has resulted in workers in southern China struggling to get jobs paying as little as £4 a day. For most life is hard in China at the best of times.

No it's not. Not unless you were planning on not owning a house and renting instead, but given you've obviously been brainwashed into the idea that a house is an investment not a home to come out with that, then you're not about to do that are you?

I'm not a brainwashing victim mate. A house IS an investment. You can rent, or you can buy - why buy? One reason is so that you can get something back from the money you put in. That's called an investment.

Me and the Mrs are mobile people. I don't particularly like living where we do, and I am only living here because the Govt was paying me huge sums of money. Now we're looking for more work we could well be going overseas, or maybe moving out to the countryside with rented city flat. If we had a stack of money in the house we'd sell up, pay the debts and travel or live in a tent or something. That money (that we paid in) has vanished, which means that our options are lot more limited.

Why does it have to be a bad thing that people view their own home as an investment?

IMHO this attitude that "I've lost money" when house prices fall is part of the whole problem.

I HAVE lost money. The value of my investment has gone down. My net worth (assets v debts) is less. So how have I not lost money?

I'm not bleating or whining, or expecting someone to "do something!" about it, just pointing out that I have in fact lost money. I'm in a better position that many, and I intend to work my way out of the situation.

On an off-track but lighter note - Whatever happened to the former STW'er who sold up and took hiself off to live in a tent...... ?
is he still blogging?

Yours Mr MM - 4.5 years into a fixed deal and not bleating - sadly, poo happens, we can moan, we can apportion what we see as blame, we just gotta work through it....

He's not living in the tent anymore, I think they got a bit wet.

Despite it 'shrinking' to seal all gaps - shame that, not for me but had to admire him for his efforts.......

In about 2 years time interest rates are going to move so fast the other way we'll be getting nosebleeds as they go up. Make hay with those savings as you'll need 'em.

haha my fixed rate of 6% ends this year, I'm gonna increase my repayments and kill off as much of it as possible!

I'm happy that I bought our house as a home not an investment, we don't want to move and the fact that I can still pay the same amount of money each month but my mortgage can be paid off in half the time is a bonus.

Reducing debit is better then saving cash, but if you're mortgage free and have cash in the bank, then spend some of it, buy something that will rise in value.

None of feels real to me, the interest people moan they aren't getting could only be paid before on the profits of the silly deals done on mortgages. My house is my house, its only value is what someone is prepared to give me for it, the same as shares and most other investments. Negative equity only effects you if you have to sell

my 175k mortgage is now costing me £35 pcm (0.23% interest). I really can't complain. if things stayed like this, it'd all be gone in under 10 years! won't be though 😐

I'm not sure the OP's maths are right - unless he's massively increased his payment as well?

I'm afraid I still have relatively little sympathy for anybody who does borrow so much that they land in negative equity though - they are part of the problem

So what about a first time buyer who saved hard for a £10k deposit, bought their first home for £100k and has now seen 20% knocked off the value meaning they're now in negative equity?

So what about a first time buyer who saved hard for a £10k deposit, bought their first home for £100k and has now seen 20% knocked off the value meaning they're now in negative equity?

But it doesn't effect them at all unless they have to sell, just pay the mortgage and go and play with the kids ride your bike, etc... Pay off the mortgage at a faster rate if you want to and stop reading the daily mail.

In about 2 years time interest rates are going to move so fast the other way we'll be getting nosebleeds as they go up.

Possibly but I'd imagine if they do the government would step in to force the banks to keep them down???

[i]I'm not sure the OP's maths are right - unless he's massively increased his payment as well?[/i]

Well, I'm paying an amount that was calculated when the rate was 5.85%, it's now accruing at 1.35%, so I make that the best part of four times overpayment.

you've got 4 times as much interest, but not 4 times the capital.

if you borrowed 200k (the exact amount doesn't matter, as the dates will be the same regardless) on your 5.85%, over 25 years the repayments would have been 1270 pcm. of your first payment, ~£300 is capital, the other 970 is interest. all good.

now, if rates the whole time were 1.35%, the minimum would be £785 pcm. your first payment is £560 capital, and £225 interest. the blend of these changes over time, so your last payment is nearly 100% capital.

now, if you choose to overpay by £485, bringing your total payment to 1270, your first payment will be £1045 capital and still £225 interest. Your loan will be paid off in 14 years, 5 months, provided rates remain the same. 10 years off your mortgage is a bloody good thing, but not as good as 20!

this tool is very useful for doing this sort of calculation..

http://www.bankrate.com/brm/calculators/mortgages.asp

even if you paid no interest at all, it'd still take 13 years 2 months to pay off the mortgage at 1270 per month!

But it doesn't effect them at all unless they have to sell,

Or you lose your job. That's been happening a fair bit recently, didn't you hear?

my 175k mortgage is now costing me £35 pcm

You mean the interest is costing you that? You still have the capital to repay yes?

Anyway - it doesn't matter if we all lose loads of money on our houses - they are gonna print a load more now aren't they? I'm off to see Ole One Eye and ask for some.

In about 2 years time interest rates are going to move so fast the other way we'll be getting nosebleeds as they go up.

Possibly but I'd imagine if they do the government would step in to force the banks to keep them down???

Not if Iceland's any example. Isn't their interest rate something daft like 30% now? And Japan did the same.

next economic cycle im goign to make sure im bancrupt by the time its over, no feking point saving for a house if the fekwits in charge are going to go for the ohh so clever philosophy of pushing prices up, then just as it looks like those who havent yet might one day soon be able to afford a shed in a crap part of town, bang, and your savings are worth fek all.

Labour- ****ing things up in way pornstars can only dream of.

5lab - ah, fair enough. A Level maths was a long time ago... 🙂

I reckon I could afford to pay off my mortgage about 10 years early if rates stayed the same and I stop saving into my ISA (I already overpay my flexible mortgage by about 15% a month as it is)...

Hmmm...

[i]Not if Iceland's any example. Isn't their interest rate something daft like 30% now? And Japan did the same.[/i]

When? Haven't Japanese interest rates have been under 1% for the last decade now?

she is thinking of buying another house for a few years as an investment.

Seems to me that's the kind of thing that got us into this mess...

Seems to me that's the kind of thing that got us into this mess...

Only partly. People wouldn't have been doing that if it wasn't worth it...

[i]People wouldn't have been doing that if it wasn't worth it...[/i]

But it was only worth it because people were doing it, thus limiting the supply of housing so pushing up the price.

A few people investing a fraction of the nation's wealth in property investment has nothing to do with the mess the world is in right now FFS. The combined wealth (on paper) of every individual in the UK with investment homes will be a tiny blip in the overall economy.

A little bit of upward pressure on house prices would help stabilise house prices more quickly.

In a similar vein some people with a bit of spare cash might think about getting a 2nd home; I've always been a bit anti that as reduces available housing stock but is it worth worrying about? In some small desirable areas I think it's an issue.

Not if Iceland's any example. Isn't their interest rate something daft like 30% now? And Japan did the same.

They do free local delivery also.

But it was only worth it because people were doing it, thus limiting the supply of housing so pushing up the price.

Very few people really bought second homes. Most bought to let out, which didn't diminish the supply of housing. In rural beauty spots the problem was severe, agreed tho.

Housing stock is limited because there are more households than properties. That's still the case, even more so now because building's slowed to a crawl. Having said that, a lot of migrant workers are leaving so that might help supply.

Icelandic base rate is currently 18%.
They pay about 15% on Current Accounts.

The housing market may soon receive a boost due to falling prices. Here in Nottingham there are absolutely shedloads of trendy flats etc. on the market that can't sell because they are asking too much and the prices have been dropping recently quite a bit, even out in the suburbs. In a similar vein a number of buy-to-let people are finding it hard to recoup the money for the mortgage and are starting to sell-up. They may make a loss, but investments can go *down* as well as *up*.

That will be at least good for the young first-time buyers who have a little money tucked by to get onto the housing ladder. Unless, of course, other people start that cycle again and snap up houses when they are at the bottom of the market and cause the prices to rise significantly, pricing them out of the market again. I guess it means that they will just live with their parents until they are old-aged. I'm hoping that mortgagers will be sensible the next time around and the market stays sensible as opposed to stratospheric.

I'm hoping that mortgagers will be sensible the next time around and the market stays sensible as opposed to stratospheric.

The housing market may soon receive a boost due to falling prices.

And the govt efforts might have an impact. Nationwide seem to be offering 95% mortgages again...

[i]The housing market may soon receive a boost due to falling prices.
[/i]

An estate agent we do work for said his February sales were really good - not back to the boom days, but waaay better than they have been in the last year.

95% doesn't concern me too much; what would do is the criteria that the lender uses for eligibility. Making sure that the borrower can reasonably afford to pay back the loan without dodgy investment vehicles (usually with a fee/commission attached, natch) may sound boring but sounds a lot safer.

And, obviously, making sure that those monstrosities called 'MIPS' are consigned to the bin of history.