Interest rates

[calibeach76]

Prob one more. Although market forecast peak 4.95% inflation will drop

the main issue is core inflation which actually increased.
Market forecast now peaks at 5.5%

All part of the plan I'm afraid.

 

[Mansfieldman750]

I thought it was a brave call from you when you made it!!!

You’re right. My prediction was so bad I could get a job at the Bank of England.

 

[calibeach76]

You’re right. My prediction was so bad I could get a job at the Bank of England.

You're probably too good!!

 

[66tim99]

All part of the plan I'm afraid.

Interested in hearing more about the plan...

 

[soulstyledevon]

Interested in hearing more about the plan...

Depends, does it involve the Freemasons…

 

[calibeach76]

Oh I love a bit of irony!

 

[Amarillo]

Prob one more. Although market forecast peak 4.95% inflation will drop

the main issue is core inflation which actually increased.
Market forecast now peaks at 5.5%

At 5.5% I will have some big decisions to make come November.

Barclays is currently offering a 2 year tracker at base rate plus 0.15%. If rates are likely to ease over the next two years a tracker might be the best option.

 

[The Merle]

At 5.5% I will have some big decisions to make come November.

Barclays is currently offering a 2 year tracker at base rate plus 0.15%. If rates are likely to ease over the next two years a tracker might be the best option.

Had a .18% above base rate life time tracker took it out years ago, great gamble that paid off

 

[HowieDog]

Was fortunate to fix in Jan 22 for 10 years a 1.69%.

 

[willwander]

BOE hiked 0.5%

Politician's syllogism

 

[Jimmylondon07]

As someone with 20+ years remaining on my mortgage (albeit fixed at 1.49% for the next 5 years) it’s got me questioning the wisdom of my Cali order so I guess it’s having an effect. Unfortunately there are millions out there who don’t have the choice to save or spend and all of their income’s already accounted for on basic necessities. Really worry for them.

 

[willwander]

Chatting with to our resident millennial last night. He was outraged that mortgage rates were 6% and wondered how long before they went back to their ‘normal’ 1%. Here lies the problem.

 

[Californication69]

Exactly. It’s a total disaster.
I remember my sister & BIL paying 15% and wondering how they were going to cope.
I’ve had it lucky, paying BOE for 5 years which was a just 0.5% then another 10 years at 1.34% for part and 1.79% for another 4 years.
Then I’ll be finish with just two years of mortgage to pay. (About £30k)
Very worrying times for the younger generation.
But that’s the way isn’t it. Learn the hard way.

 

[Mansfieldman750]

As someone with 20+ years remaining on my mortgage (albeit fixed at 1.49% for the next 5 years) it’s got me questioning the wisdom of my Cali order so I guess it’s having an effect. Unfortunately there are millions out there who don’t have the choice to save or spend and all of their income’s already accounted for on basic necessities. Really worry for them.

That’s an interesting one.
You are very fortunate if your mortgage is fixed at 1.49% for 5 years.
If you are of a cautious nature you could cancel the Cali and overpay the mortgage by as much as you can instead so that when you have to remortgage in 5 years time the reduced amount owed will mitigate the increased mortgage rate.
But then again if you really want that California….
Only you can decide.

 

[RockinNRollin]

Chatting with to our resident millennial last night. He was outraged that mortgage rates were 6% and wondered how long before they went back to their ‘normal’ 1%. Here lies the problem.

This is indeed part of the problem. I am technically a millennial (but I definitely don't "identify" as one), but there's no way in a month of Sundays I'd ever suggest that any long-term interest rate below 5% was "normal". I remember when I applied for my first mortgage 11 years ago, they "stress tested" my financial situation based on a 6% interest rate. I deliberately constrained the value of my mortgage so I wasn't overstretched and although we have a bigger one now since I bought a house with my wife, we're still quite careful. We're also extremely fortunate to have secured a 10 year fixed at a little over 3% last year, but even if it was 6%, it wouldn't be unaffordable.

I think there's been a perfect storm (perfect arrogance, ignorance and/or even greed?) of lenders being enthusiastic to lend to the stretched maximum (I was shocked at what they were suggesting we could borrow - it would leave no wiggle room at all), younger generations being particularly aspirational and feeling they're "entitled" to what they want, and a recent interest history of low single digits. This has encouraged many to stretch their mortgage to the maximum while in the absolute optimum conditions, meanwhile conditions are changing (and they were only ever going to go that way) and these uber-stretched folk have nowhere to go.

 

[Jimmylondon07]

That’s an interesting one.
You are very fortunate if your mortgage is fixed at 1.49% for 5 years.
If you are of a cautious nature you could cancel the Cali and overpay the mortgage by as much as you can instead so that when you have to remortgage in 5 years time the reduced amount owed will mitigate the increased mortgage rate.
But then again if you really want that California….
Only you can decide.

Yeah this is the quandry and I guess is exactly what the BoE are hoping for! I am paying for the Cali in cash so even doing nothing with that money will return ~£3.5k a year in interest if I leave it sitting in a savings account…that’ll get me a fair few weekends each year in a hire Cali.

On the flipside, tomorrow isn’t promised to anyone and I have two young kids; likelihood is that by the time I’ve paid off the mortgage they’ll no longer want to come away with their old man and we’ll have missed out on years of spontaneous memories. I was never fortunate enough to do anything like this with my Dad much as I would have loved to. I do have some contingencies which will offset a future increase in the mortgage rate, most significantly I’ll have shed about a grand a month in childcare costs by next renewal so hopefully won’t be any worse off a month unless the rate keeps climbing, but will obviously need to keep paying my mortgage for longer in that scenario.

Problem is mortgages and finances are pretty quantifiable, even amid all the uncertainty. It’s much harder to put a price on memories and experiences. For all I know I may never see the end of my mortgage term, even if I overpay as much as I can!

 

[andyinluton]

Yeah this is the quandry and I guess is exactly what the BoE are hoping for! I am paying for the Cali in cash.

If it’s fully paid for, even if disaster strikes, it would be worth a fair chunk of what you pay even as an emergency sale in five years time.
It makes more sense if you are using it instead of a regular car, as then it’s just the difference in cost that you need to justify to yourself rather than the whole purchase price.

 

[Amarillo]

This is indeed part of the problem. I am technically a millennial (but I definitely don't "identify" as one)

Oooo… I hadn’t thought of that! What matters is not the Generation you are born into, but the Generation you identify as. Now being born a Generation X, how should I identify myself!?

Another 0.5% on interest rates (an 11.1% increase not a 0.5% increase as commonly misreported). How can we economise? We’ve already switched from Waitrose, to Sainsbury’s, to Lidl. Where can we go from there…?

More seriously, 5% base rate is looking pretty reasonable in a historic context. When I bought my first flat in May 1990, the base rate was 14.88%. I still have the estate agent details for that flat. The asking price had been slashed from £69,950 to £57,000, (which is what I paid). Could we be heading towards a similar 15 to 20% drop in house asking prices?

 

[Jimmylondon07]

If it’s fully paid for, even if disaster strikes, it would be worth a fair chunk of what you pay even as an emergency sale in five years time.
It makes more sense if you are using it instead of a regular car, as then it’s just the difference in cost that you need to justify to yourself rather than the whole purchase price.

Yeah that’s also the plan to be fair, we’ll move on our current family car early next year if we can get by using the Ocean. Though I do know insurers aren’t great fans of a Cali being the only car in the household…

 

[johnyboy]

Born in 79 so Xennial... started witha. 7% mortgage tracker which fell with the base rate.. looked at the historic graph and thought "this can't last better overpay" mortgage free and for the past three years was wondering if I was the mug.

 

[Mansfieldman750]

Oooo… I hadn’t thought of that! What matters is not the Generation you are born into, but the Generation you identify as. Now being born a Generation X, how should I identify myself!?

Another 0.5% on interest rates (an 11.1% increase not a 0.5% increase as commonly misreported). How can we economise? We’ve already switched from Waitrose, to Sainsbury’s, to Lidl. Where can we go from there…?

More seriously, 5% base rate is looking pretty reasonable in a historic context. When I bought my first flat in May 1990, the base rate was 14.88%. I still have the estate agent details for that flat. The asking price had been slashed from £69,950 to £57,000, (which is what I paid). Could we be heading towards a similar 15 to 20% drop in house asking prices?

If house prices drop 15 to 20% it only be a small move towards the historical ratio between average wage and house prices

 

[66tim99]

heading towards a similar 15 to 20% drop in house asking prices?

That’s exactly what first time buyers need. What is a ‘normal’ average house price? Didn’t it used to be 5 x average salary?
If average salary is £35k in London, that should make the average house price £245k.
I see one site suggests it is currently £533k …

 

[Mansfieldman750]

We’ve only ever had two houses.
The one in Scotland when we got married was £23,800 in 1982. I was on £7,300 as a Dyehouse Manager in a sock factory, my wife on c£3,000 at Falmers jeans. So ratio 2.3.
Moved here 1993, house was £80,000, combined salaries £35,000, so ratio 2.28.
If house prices plummet it will be a very good thing. They are unaffordable and they only became affordable because of next to zero interest rates.

 

[willwander]

Due to the number of people already on fixed rate, their may be a lag between now and house price crash, recession and doom. Of course it may not happen at all. There may be a long period of choppy churn, where as some default, others buy the dip, this and lack of supply, moves prices sideways. Who knows.

Thankfully we are mortgage and debt free. Feel so fortunate to only have crippling inflation eroding our income, savings, and future pensions.

 

[Mansfieldman750]

Due to the number of people already on fixed rate, their may be a lag between now and house price crash, recession and doom. Of course it may not happen at all. There may be a long period of choppy churn, where as some default, others buy the dip, this and lack of supply, moves prices sideways. Who knows.

Thankfully we are mortgage and debt free. Feel so fortunate to only have crippling inflation eroding our income, savings, and future pensions.

We’ve owned our house outright since 2015 and only debt is on the Van, but that’s on a 5 year PCP at 2.8%. If inflation cannot be controlled, we’ll be paying off the balloon payment in devalued pounds. Thank you VW finance, I’ll be forever grateful.