"+ 0.5% to 5%, is it gonna cut spending, was at the airport on friday it was rammed"
Martin Lewis on Twitter earlier explaining how Interest Rates only effect the housing costs of less then 20% of people directly and even then, there's a long lag.
I'm feeling it now because I'm trying to remortgage, my deal, which is currently 1.4% ends at the end of Nov, paying £1200 a month now with a 17 year term, it was going to be £1700 with a 21 year term. The extra term hurt, but I got over it, it's only what we cut last time when rates fell, the money though I don't care who you are, losing £500 of disposable income is going to hurt, assuming it's going to rise another 0.5% when they inevitably pull the deal later today or tomorrow is going to add £70 a month to that, and we’re getting to the point where we’re running out of difficult decisions, the easy ones were all made when food and fuel prices rose.
How far can you take it? We've got 3 kids, we both work full time. How far do you take it? Cut, and cut until you're working full time to eat, keep the lights on and pay the mortgage? Or go interest only, it's still over a grand a month, over-pay when we can and hope rates fall, or at least wages rise? Which side do I want my shit sandwich buttered on?
Ouch 5%. Didn’t expect it. Haven’t seen the minutes yet, have they said how many for / against?
Vote was 7 to 2 - i think that's been the same way for the last few increases.
This doesn't affect my mortgage because i'm fixed, but it will delay me moving/getting a house with my girlfriend
Sunak just now - "working really hard to get inflation down." Nothing they do can be defined as working hard.
I saw this in the minutes:
"Two members preferred to leave Bank Rate unchanged at 4.5% at this meeting. There were two main factors underlying their votes. First, as the energy price shock and other global cost-push shocks continued to reverse over the course of 2023,"
Well yeah. So why are you doing this again?
I’m with rone, let’s drop interest rates. Inflation will surely fall to match. It worked for the Turks!
Lol they've just lifted them by 6.5% in a reverse decision to 15%. Imagine that in one go.
What's interesting is inflation was on its way down with previous reduction of rates.
It's chaos out there.
The USA have done okay out of rising rates in terms of adding to the economy but like I said before it's not affecting mortgage rates as much due to long term fixes.
Thing is with interest rates the money has to go somewhere so will be adding something to inflation but by how much and what part no one knows.
Probably now with that much of overlapping adjustments going on in the economy and the lagging nature of it all - it's anyone's guess where we are going - but does appear they will keep going until something breaks.
Chase bank did immediately announce 3.8% return on their account. But that's only good for those of us with cash.
Not that many in the UK. And let's face it you'd have to have way more than your mortgage debt for that to even slow the erosion of capital.
When I was renting years ago I did okay under those crazy 7% interest rates for savings (remember those Icelandic banks?) And my rent stayed fixed for 3 years at a time. Do most rental contracts have a clause that they can lift rates month to month these days?
Monzo have just upped their savings amount yesterday afternoon. 3.7% I think the email said.
We fixed last year, 3.8% for 3 years, we have a decent LTV now so our mortgage is fairly low & are fortunate enough to both be higher earners so I think our total outgoings (absolutely everything accounted for) is now about 15% of our take home.
We’re considering a move or extension, so cash is king right now - our savings are earning a decent chunk, way more than the mortgage rise actually, which is a new concept to me 😆
We are in a much better position than 2008, when we lived in a partly finished building site & a house very hungry for cash…
to 15%. Imagine that in one go.
I remember it. 1989 IIRC black friday and all that. although I had a mortgage then my rate was fixed so I was OK but the recent years of low interest rates are the outlier
The reality is a lot of landlords have decided it is no longer worth their while, especially with mortgage rates going up, so are selling up. This means there is less rental stock and therefore prices have shot up.
Landlords selling up doesn't restrict stock, because the people they sell to were renting before, so you have 1 less house for rent and 1 less household renting. Net zero impact
The reality is a lot of landlords have decided it is no longer worth their while, especially with mortgage rates going up, so are selling up. This means there is less rental stock and therefore prices have shot up.
Any actual evidence of this? In Scotland not only do we have the mortgage pressures but also a rent freeze ad much harder eviction process with no discernible effect on the supply of rentals. The cry was that this would cause a collapse in rental but it does not seem to have happened
so you have 1 less house for rent and 1 less household renting
I don't think that's the case.
I sold my buy to let. It's now an Airbnb.
My tenants were refused mortgage even though for two years they had paid £20 more rent monthly than the mortgage.
Thing is with this low interest rate v high interest rate, it's a classic manipulated market.
The financial system needs to cream money; so low interest rates are designed to net the debt in. High interest rates are designed to swill the money back to people with assets. Wages are supressed so you by and large have to borrow to live. So you're stuck with those rates.
Most elements of the current macroeconomic system is designed to take money away from the working to capital.
Somewhere along the way we got conned into believing this would work for us (trickle down.)
And of course as the government/BoE is the monopoly creator of £££ (commercial banks make loans) - instead of the money going to you on public services etc it mostly goes to those with capital.
Is it really that shocking it doesn't work?
Then we get the inequality and all the things associated with Neoliberalism.
Good to see the usuals dragging an interesting thread off to another series of fairly dull diatribes on macro-economics, I mean they’ve only two or three other threads debating that at present. Give yourselves a hand-clap.
Ta pisco - I am not sure how to read that tho - is the shortfall because demand has risen or supply has dropped or both? Also what is the effect of short term ( holiday) lets? How much of the decreased supply is down to that?
am not a financial whizz, but had the foresight 12 years ago when we bought this house to do it well within our means.
lol so did i, but i failed to also account for my electricity cost tripling, food increasing by 50%, house insurance up 30%, car insurance up 20%, water up X%, council tax up Y% etc all at the same time.
I honestly don’t get why there’s no protests or disorder, when is enough, enough.
I’ve no skin in this game, but had a mortgage and the luxury of cheap house prices but what they are doing is insane.
I honestly don’t get why there’s no protests or disorder,
IMO two reason - british "stiff upper lip" and its been a slow ramp up ie boiling a frog
tjagain, it doesn't read to me like the shortfall is because demand has risen. I got this from the post letting agent I know who seems very knowledgeable on these things. I'll see if he knows any of the reasoning behind the stats
Ta
Point noted on the same few rehearsing the same fiscal arguments as on other threads, but it does seem relevant here. I'm no economist, although I can do a household budget and consequently when I see people using the same model for a country it kind of makes sense - maybe because I understand it. I should make the effort to find out more about alternatives....
The question - I've see a few (critical) tweets recently about Norway - from what I understand they adopted a different approach and in the end have now had to resort to interest rate rises. I can't find them now but if they pop up again I will link. What did they do differently and why didn't it work (or did it and the tweeter is just critical because it's not their preferred economic model)
norway, extremely low population (less than yorkshire) and heavily subsidised by oil and hydro electric..
great country, not really comparable
tjagain, it doesn’t read to me like the shortfall is because demand has risen. I got this from the post letting agent I know who seems very knowledgeable on these things. I’ll see if he knows any of the reasoning behind the stats
Along with tj, I am not sure what to make of that chart. Demand has increased by a greater % than supply has fallen, what conclusion can you draw from that without knowing whether there was a shortage or excess of rental accommodation?
I honestly don’t get why there’s no protests or disorder, when is enough, enough.
I don’t think people know how to protest. If I wanted to go out now and protest, where would I go and what would I do?
I honestly don’t get why there’s no protests or disorder, when is enough, enough.
Had far worse in the 80s and 90s and I don't recall any interest rate riots back then...
Repossessions are very low right now.
.
I did some working out last night and as it stands we are looking at £4k a year increase.
I do worry about friends though, alot have bought houses with 5% deposits and maximum term lengths just to get on the market. They won't have much wiggle room.
With just over a year left on the fix I'm going to hang on as long as I can. Current rate is under 2%
I don’t think that’s the case.
I sold my buy to let. It’s now an Airbnb.
Airbnb is a separate issue in the same market. I imagine it will take an absolute hammering as one of the first things to be cut when disposable drops is travel.
Landlords selling up doesn’t restrict stock, because the people they sell to were renting before, so you have 1 less house for rent and 1 less household renting. Net zero impact
A large amount of landlord selling up are the one or two property landlord helped in personal names and a high % of those properties are bough by larger landlords running ltd companies. It can equal rental stock if it is landlord to landlord or restrict stock if it is someone just moving home owner, or equal stock if it is rental to home owner ship or restrict stock if its HMO rental to home ownership. There is a chance that the person buying is a ex-renter but by no means given due to the lack of rental properties available there is a back log so to speak. Its not as simple as one in one out.
I remember being a kid and rates being 12% or so, and what impact that had on my parents. Mrs FD remembers this clearly too and the impact it had on her family.
We have only ever bought houses on the basis that rates could rise to similar levels, and could we afford to keep paying. Obviously many people do not apply any such logic and max out their mortgage and house size based on what they can afford there and then. Which would explain why house prices keep rising and rising
We are currently on a fixed rate 5 yr deal with 3 yrs left to run at something like 2.6%. The mortgage itself is something like £950pm but since we took out this fixed rate we have been over paying each month to make it £1,500pm. If rates remain high we wont see an increase per month, just I guess our mortgage in theory will take longer to pay off.
It does seem we are looking at a relatively small proportion of people affected, but the impact/rise in mortgage cost is really significant for that small proportion.
Less than 40% of UK homes are owner with mortgage.
Of that number, less than 20% of them are coming off fixed rate deals in the next two years or already on tracker mortgage.
A proportion of those facing this change are either: a) reduce expenditure and keep paying the increase cost b) be able to extend terms of the mortgage or similar to reduce monthly costs, c) be wealthy enough to crack on as normal.
It seems to me that the increase in Buy to Let mortgage costs will be as big a story over a similar period - because landlords will just pass that increase on to renters.
And a really significant proportion of homeowners (like me) will sit smugly and say "we do not have a mortgage / we are locked into a deal for the next 3-10 years".
So yes, this has big standard of living impacts for a few people - but how many will be forced to sell or default on a mortgage?
matt_outandabout
Full MemberIt does seem we are looking at a relatively small proportion of people affected, but the impact/rise in mortgage cost is really significant for that small proportion.
Yes this is what makes this method seem pretty harsh.
Feels like it's not cutting everybody's discretionary spending by 5%, it's cutting 10% of the population's discretionary spending by 50%.
(obviously made up numbers to illustrate)
I remember being a kid and rates being 12% or so, and what impact that had on my parents. Mrs FD remembers this clearly too and the impact it had on her family.
Me too – I almost bought a house in 1991. The repayments were £500 a month on a £50,000 house (which was about the average house price at the time) – with a small deposit and 25 year term. Fast forward to today and an average price of £220,000 and that same rate would mean a monthly repayment of £2,200. Ouch.
It seems to me that the increase in Buy to Let mortgage costs will be as big a story over a similar period – because landlords will just pass that increase on to renters.
Only in England ( maybe wales?) This can only be done in exceptional circumstances in Scotland
Yes this is what makes this method seem pretty harsh.
It’s not cutting everybody’s discretionary spending by 5%, it’s cutting 10% of the population’s discretionary spending by 50%.
(obviously made up numbers to illustrate)
It does seem if we need to 'move' where money is flowing in the economy, then tax changes and targeted support for the poorest and increasing resources into councils would achieve more and faster.
Good to see the usuals dragging an interesting thread off
Good to see the usual whingebags trying to cancel and silence people they may not agree with. It's not fair mum! Someone on the internet said something I don't like! 🙄
Here's an idea, instead of whining and trying to shut people up, why not engage with the subject matter and explain why you might disagree?
I honestly don’t get why there’s no protests or disorder, when is enough, enough.
Simple explanation for this, most of the people affected are middle class professionals who are not particularly partial to throwing bricks at riot police. What they will do however is vote accordingly when they get the chance, and that opportunity is fast approaching. If the tories sit back and shrug their shoulders while swathes of the propertied middle class see their savings and disposable incomes evaporate then we could see a total wipeout. Rishi is toast and he knows it. And I doubt he's too bothered, he can retire to the Californian sun secure in the knowledge that he'll get invited to all the great state occasions.
A large amount of landlord selling up are the one or two property landlord helped in personal names and a high % of those properties are bough by larger landlords running ltd companies. It can equal rental stock if it is landlord to landlord or restrict stock if it is someone just moving home owner, or equal stock if it is rental to home owner ship or restrict stock if its HMO rental to home ownership. There is a chance that the person buying is a ex-renter but by no means given due to the lack of rental properties available there is a back log so to speak. Its not as simple as one in one out.
don't disagree - but "accidental" landlord selling to an institutional investor doesn't reduce the housing stock, and the "accidental" landlord selling to an existing homeowner doesn't because they're selling their house. Basically landlords being force to flog their houses isn't an issue for the housing stock until you get down to a very small number of rented homes existing (we're a long way from that)
t does seem we are looking at a relatively small proportion of people affected, but the impact/rise in mortgage cost is really significant for that small proportion.
Less than 40% of UK homes are owner with mortgage.
Of that number, less than 20% of them are coming off fixed rate deals in the next two years or already on tracker mortgage.
significantly impacted people is a lot smaller than the 40% too - if you're in the later stages of your mortgage the proportion of your monthly payment spent on interest is much much smaller than early on (on day 1 its over 90% on interest, on the last day its less than 1%), which in turn means the amount your payment goes up.
the jump from a 2% interest rate to 6% on a 35 year mortgage doubles your monthly payments, if you've only got 5 years remaining your monthly payment only goes up by 10%
I believe it’s been said already, but I don’t understand why they’re putting up interest rates to curb spending, then supposedly speaking to the Banks & building societies to get them to reduce the impact.
Are they:
A) ****ing clueless?
B) putting up a smokescreen, whilst implementing a policy that will line their own pockets? Trying to look like they care, whilst not giving a shit?
C) doing something smart, that is too clever for me to comprehend?
D) fiddling whilst the country burns?
E) something else I’ve not considered?
Good to see the usual whingebags trying to cancel and silence people they may not agree with. It’s not fair mum! Someone on the internet said something I don’t like! 🙄
Here’s an idea, blah, blah, blah
Normally I really wouldn’t bother but it’s quiet at work today so why not.
Quite weirdly hypocritical to complain about something someone has said on a forum by using the rejoinder “It’s not fair mum. Someone on the internet said something I don’t like! ”
The OP was quite a clear question “So, Interest Rates and Mortgages – how’s everyone looking?”; a look at how people are coping in trying circumstances and possibly a chance for people to discuss situations they may not have the opportunity to talk about elsewhere - the sort of thing stw does well, nothing to indicate an for invitation big hitters let’s talk macroeconomics again ( a subject I’ve not put forward any opinions on so not sure how you’ve got me in the disagreement camp on macroeconomic policy espoused on STW) and thus smother the original intention.
As alluded to macroeconomics seems to be regularly and extensively covered in the Sunak and Starmer threads, to name but two, so there seems little point reposting the same arguments here, ymmv.
I had already posted about how the interest rate rises were likely to adversely effect my mother’s care finances - i.e engaged with the subject matter.
“cancel and silence people they may not agree with…” yes that’s exactly it, well spotted. If people want to go on about economic policy that’s their prerogative, much as it’s mine to say I find it misplaced in this thread.
But thanks anyway you for your valuable input I shall treasure it always.
Namaste.
The OP was quite a clear question “So, Interest Rates and Mortgages – how’s everyone looking?”; a look at how people are coping in trying circumstances and possibly a chance for people to discuss situations they may not have the opportunity to talk about elsewhere – the sort of thing stw does well, nothing to indicate an invitation big hitters let’s talk macroeconomics again ( a subject I’ve not put forward any opinions on so not sure how you’ve got me in the disagreement camp on macroeconomic policy espoused on STW) and thus smother the original intention.
100%.
I believe it’s been said already, but I don’t understand why they’re putting up interest rates to curb spending, then supposedly speaking to the Banks & building societies to get them to reduce the impact.
When you say they you do mean The Bank of England are putting rates up, and then the Government are independently of that speaking to lenders. Yes it doesnt sound that well joined up.
I guess what it does do is stop people buying luxury goods on credit.
Someone on the internet said something I don’t like!
Or... someone on the internet is saying something I do like (and in the main agree with)... but repeating it over and over and over in any thread they can shoe horn it into until everyone else gives up on that thread, and perhaps even the forum. The thread stuffing is tiresome and crowding out the interesting chat, more and more. Whether you agree with the themes is neither here or there. I've found myself doing it quite a few times, and asked for temporary forum bans to stop me endlessly repeating the same points, and make room for others... some other posters could do with doing the same occasionally. Take a break.
The lack of empathy from people who got lucky/financial geniuses is heart warming
The Forums usual CJ’s ‘I didn’t get where I am today…’ brigade are as predictable and graceless as ever.
Summed up by the Mash a few years ago…
Man whose house has gone up in value thinks he's a brilliant businessman
Reflecting on the personal ask (which is what this thread was about, and I am one of the folk guilty of moving onto wider economics) - how many are going to find this *painful* and how many will have to sell / mortgage on interest only until they are 70 / seriously drastic and life changing issues?
I really don't know what we would have done if this had happened 8 years ago when we had just bought on a 2-year fix, and needed to re-mortgage but also were just about surviving on what we had.
The last time I appealed to my lender help they offered to send an advisor round to show me which DDs I could cancel to ensure they got their money. I'm not expecting the "help" to be any different this time.
When you say they you do mean The Bank of England are putting rates up, and then the Government are independently of that speaking to lenders. Yes it doesnt sound that well joined up.
I guess what it does do is stop people buying luxury goods on credit.
Fair point, ta. It does slip my mind at times that the BoE is ‘independent’, also that people would buy things on credit, I really do live in a bubble 😀
