Fairies Wear Boots Posted February 13, 2009 Share Posted February 13, 2009 When I buy a house, I want to fix the mortgage for ten years. Preferably even longer. I see it, that just because we've had low rates recently, is no reason for them to stay low. I would have also said six months ago they can't really get much lower (how wrong I would have been). It bugs me that even though the base rate is low, decent length fixes aren't that low. But aren't they as low as they can get? What I'm worried about is that interest rates will go up, and so will ten year fixes. For example I could get a ten year fix with Britannia at present at 4.89 percent. If price falls meant I wanted to borrow 200K in future instead of 250K now, that saving would be negated if the interest rate was 7.2 percent. What do people think about this? Alot of people want to see the base rate go up. Maybe because it's fair, to savers, and will help the crash out! But I'm worried in 18 months time, all the gains I make because of house price deflation will be wiped out by rising interest rates . Quote Link to comment Share on other sites More sharing options...
Starcrossed Posted February 13, 2009 Share Posted February 13, 2009 (edited) I understand your point, Fairies Wear Boots and I think about it a lot as well. At the moment my thinking is that if interest rates start to rise into a falling or even static market and recession we will see even bigger price drops. So I still think it's a win/win situation for those holding cash and looking to use that cash to buy a house eventually. The only uncertainty is whether we would get rampant inflation without interest rate rises which is possible but unlikely given the subsequent pricking of the bond bubble that would result and which mikelivingstone highlights in an earlier thread. Still, a very valid question to keep an eye on. Edited February 13, 2009 by Starcrossed Quote Link to comment Share on other sites More sharing options...
whoami Posted February 13, 2009 Share Posted February 13, 2009 What I'm worried about is that interest rates will go up, Interest rates haven't got a hope in hell of going up. Not for a long time. Quote Link to comment Share on other sites More sharing options...
Fairies Wear Boots Posted February 13, 2009 Author Share Posted February 13, 2009 I understand your point, Fairies Wear Boots and I think about it a lot as well.At the moment my thinking is that if interest rates start to rise into a falling or even static market and recession we will see even bigger price drops. So I still think it's a win/win situation for those holding cash and looking to use that cash to buy a house eventually. The only uncertainty is whether we would get rampant inflation without interest rate rises which is possible but unlikely given the subsequent pricking of the bond bubble that would result and which mikelivingstone highlights in an earlier thread. Still, a very valid question to keep an eye on. Although 50 percent plus drops seem ludicrous, it'd have to happen if rates went up a reasonable amount... ...which is why this is probably true.... Interest rates haven't got a hope in hell of going up. Not for a long time. Sorry, the hyper inflationary camp are making me nervous! Note to self, must not buy tin hat. Quote Link to comment Share on other sites More sharing options...
threetimesdead Posted February 13, 2009 Share Posted February 13, 2009 When I buy a house, I want to fix the mortgage for ten years. Preferably even longer. I see it, that just because we've had low rates recently, is no reason for them to stay low. I would have also said six months ago they can't really get much lower (how wrong I would have been). It bugs me that even though the base rate is low, decent length fixes aren't that low. But aren't they as low as they can get? What I'm worried about is that interest rates will go up, and so will ten year fixes. For example I could get a ten year fix with Britannia at present at 4.89 percent. If price falls meant I wanted to borrow 200K in future instead of 250K now, that saving would be negated if the interest rate was 7.2 percent. What do people think about this? Alot of people want to see the base rate go up. Maybe because it's fair, to savers, and will help the crash out! But I'm worried in 18 months time, all the gains I make because of house price deflation will be wiped out by rising interest rates . If I were you I would wait for my P45 to allay all worries about rates and prices Quote Link to comment Share on other sites More sharing options...
m4rk Posted February 13, 2009 Share Posted February 13, 2009 When I buy a house, I want to fix the mortgage for ten years. Preferably even longer. I see it, that just because we've had low rates recently, is no reason for them to stay low. I would have also said six months ago they can't really get much lower (how wrong I would have been). It bugs me that even though the base rate is low, decent length fixes aren't that low. But aren't they as low as they can get? What I'm worried about is that interest rates will go up, and so will ten year fixes. For example I could get a ten year fix with Britannia at present at 4.89 percent. If price falls meant I wanted to borrow 200K in future instead of 250K now, that saving would be negated if the interest rate was 7.2 percent. What do people think about this? Alot of people want to see the base rate go up. Maybe because it's fair, to savers, and will help the crash out! But I'm worried in 18 months time, all the gains I make because of house price deflation will be wiped out by rising interest rates . exactly the same boat. and the property fall is only starting here. was hoping to have my cake and eat it. low price and lock in 10 year fix before interest rate rises, Quote Link to comment Share on other sites More sharing options...
arthurwasright Posted February 13, 2009 Share Posted February 13, 2009 I really shudder to think of the kind of mess that will be left behind when all of the quantitative easing and interest rate cuts work their way through the system. Take the next 10 years of your life and throw it in the bin because it won't be worth living. Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted February 13, 2009 Share Posted February 13, 2009 Mortgage rates for new customers can't get any lower because the banks need the profit, apparently they are in a bit of financial trouble. There only hope is to make a profit and pray to god. However mortgage rates may get reduced when all the banks end up nationalised, but I have a feeling future interest rate levels will be the least of your problems if the financial system collapses. Quote Link to comment Share on other sites More sharing options...
threetimesdead Posted February 13, 2009 Share Posted February 13, 2009 Mortgage rates for new customers can't get any lower because the banks need the profit, apparently they are in a bit of financial trouble. There only hope is to make a profit and pray to god.However mortgage rates may get reduced when all the banks end up nationalised, but I have a feeling future interest rate levels will be the least of your problems if the financial system collapses. 5% of the workforce made redundant during this week another 5% will be made redundant next quarter - they will not be the last either, done deal Quote Link to comment Share on other sites More sharing options...
Fairies Wear Boots Posted February 13, 2009 Author Share Posted February 13, 2009 exactly the same boat. and the property fall is only starting here. was hoping to have my cake and eat it. low price and lock in 10 year fix before interest rate rises, Maybe Gordy will sort us out with a nice sweetner before the next election. He always bangs on about long term fixes. Maybe he'll get one/ all of the governments banks to start offering low interest long fixes. Quote Link to comment Share on other sites More sharing options...
threetimesdead Posted February 13, 2009 Share Posted February 13, 2009 Maybe Gordy will sort us out with a nice sweetner before the next election. He always bangs on about long term fixes. Maybe he'll get one/ all of the governments banks to start offering low interest long fixes. And free houses so that you can keep your STR: Quote Link to comment Share on other sites More sharing options...
Fairies Wear Boots Posted February 13, 2009 Author Share Posted February 13, 2009 And free houses so that you can keep your STR: STR ? I'm wannabe FTB. Quote Link to comment Share on other sites More sharing options...
threetimesdead Posted February 13, 2009 Share Posted February 13, 2009 STR ? I'm wannabe FTB. That is even worse If you are the bottom of the "ladder" FTB you wishing youself a place at the bottom of the PONZI pyramide Now who loses most in a PONZI scheme? Correct - last entrants at the bottom of the pyramide Quote Link to comment Share on other sites More sharing options...
Fairies Wear Boots Posted February 13, 2009 Author Share Posted February 13, 2009 That is even worseIf you are the bottom of the "ladder" FTB you wishing youself a place at the bottom of the PONZI pyramide Now who loses most in a PONZI scheme? Correct - last entrants at the bottom of the pyramide I'm not buying. I think the correct answer was "If rates go up, the crash will be bigger". Quote Link to comment Share on other sites More sharing options...
threetimesdead Posted February 13, 2009 Share Posted February 13, 2009 I'm not buying. I think the correct answer was "If rates go up, the crash will be bigger". I thought you said: "But I'm worried in 18 months time, all the gains I make because of house price deflation will be wiped out by rising interest rates " Quote Link to comment Share on other sites More sharing options...
porca misèria Posted February 13, 2009 Share Posted February 13, 2009 But I'm worried in 18 months time, all the gains I make because of house price deflation will be wiped out by rising interest rates . Even if you're paying more interest (likely), you've got less capital to repay. So that's two gains against one loss. Quote Link to comment Share on other sites More sharing options...
ader Posted February 14, 2009 Share Posted February 14, 2009 Lower buying price doesn't mean just less interest to pay but also less compound interest! Btw a 10 year fix at even 7.2% would be a low rate as the average boe rate for the past half a century is higher than this! People who haven't been around long don't seem to realize that mortgage interest rates above 7% are the norm. Quote Link to comment Share on other sites More sharing options...
eastleighfan Posted February 14, 2009 Share Posted February 14, 2009 Interest rates haven't got a hope in hell of going up. Not for a long time. Never say never , I was told this in 1986 !!! I was also told in the late 80's and just 2 years ago that house prices will never go down ,and they always go up ! What has happened before can happen again Quote Link to comment Share on other sites More sharing options...
ccc Posted February 14, 2009 Share Posted February 14, 2009 Lower buying price doesn't mean just less interest to pay but also less compound interest!Btw a 10 year fix at even 7.2% would be a low rate as the average boe rate for the past half a century is higher than this! People who haven't been around long don't seem to realize that mortgage interest rates above 7% are the norm. Indeed. Interest rates since 1971 are actually the most important to look at IMO. This was when any semblance of a gold/silver backed monetary system was abolished. A purely FIAT monetary system became the World standard. Since that time interest rates have been far higher than the few centuries before. The last 8 years have been the small exception. This small experiment of a purely FIAT based currency combined with low interest rates led to the entire system collapsing. Therefore I think a purely FIAT based World Monetary system requires higher interest rates than we have been used to for the past 8 years. I think the reason behind this is in a pure FIAT monetary system - the temptation to simply increase the money supply exponentially and give cheap and easy credit is too much. Everyone dives in and wants a piece of the action - cheap and easy money. It is just too easy to create, however eventually the whole thing collapses. In conclusion: FIAT monetary system + Low interest rates = Doomed to failure. IMO. Quote Link to comment Share on other sites More sharing options...
tim123 Posted February 14, 2009 Share Posted February 14, 2009 I really shudder to think of the kind of mess that will be left behind when all of the quantitative easing and interest rate cuts work their way through the system.Take the next 10 years of your life and throw it in the bin because it won't be worth living. That's a bit extreme. Even if it is the end of easy credit and people only buying what they can afford, this is no worse than the situation that your parent/grandparents had to live in. When I was a kid, my father had to cost out absolutely everything that we bought. "Could we afford a holiday", could we afford the TV (rental)", now people just go out and buy these things with not a thought for the consequences. I think a return to the "old days" would be enlightening. tim Quote Link to comment Share on other sites More sharing options...
contractor Posted February 14, 2009 Share Posted February 14, 2009 5% of the workforce made redundant during this weekanother 5% will be made redundant next quarter - they will not be the last either, done deal So you think 1.5 million people will be made redundant this week and another million or so by end of June? By my reckoning that would make about 4.5 million out of work, or 15% unemployment? Quote Link to comment Share on other sites More sharing options...
Imp Posted February 14, 2009 Share Posted February 14, 2009 Sorry, the hyper inflationary camp are making me nervous! Note to self, must not buy tin hat. Whilst not knowing what the future will hold, I think the hyper-inflation situation is sufficiently likely to try and take some protection against it by locking into a reasonably low interest rate, even if it is more expensive now. I will almost certainly be wrong (in which case I am just not quite as wealth as if I had assumed continuous low inflation and interest rates), but if I am right I have a reasonable chance of getting through the hyper-inflation period in one piece. Quote Link to comment Share on other sites More sharing options...
Fairies Wear Boots Posted February 14, 2009 Author Share Posted February 14, 2009 I thought you said:"But I'm worried in 18 months time, all the gains I make because of house price deflation will be wiped out by rising interest rates " Just because I'm worried about it, doesn't mean I'm going to buy a house. -------------------------------------------- I hear the arguement that they will have to put up interest rates, because of inflation. But I think realistically they can't. There are way too many who have stretched themselves on low rates. So, I'm wondering if they do raise them, will the crash be absolutely horrendous (from Krusty's point of view)? Or will they keep them low and we get cgnao hyperinflation? Quote Link to comment Share on other sites More sharing options...
porca misèria Posted February 14, 2009 Share Posted February 14, 2009 (edited) I hear the arguement that they will have to put up interest rates, because of inflation. But I think realistically they can't. There are way too many who have stretched themselves on low rates. So, I'm wondering if they do raise them, will the crash be absolutely horrendous (from Krusty's point of view)? Or will they keep them low and we get cgnao hyperinflation? That's what was bothering me when I recoiled from taking out a mortgage to buy in 2005. Interest rates must rise substantially, but they can't because there are just too many middle-class voters who'll get wiped out, including the whole housing market. Whoops, how do the lenders survive the carnage? Am I better off in and aligned with middle-class interests, banks and government, or out and clear of it?[1]. I think what we're seeing now is selective debt forgiveness. What'll happen increasingly is that general rates will rise sharply, but existing borrowers with unserviceable debts will get preferential rates. And in many cases still fail to pay 'cos they're spending it all on the chelsea tractor, school fees, etc, thus fueling the downward spiral. [1] I think I kept out principally 'cos I thought the bubble was nearer to bursting and would snap pretty-much immediately after the election. [edit] - reformat with indent - except the indent doesn't work, try again with colour. Edited February 14, 2009 by niq Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted February 14, 2009 Share Posted February 14, 2009 interest rates cant go up! tell that to the 30,000 repos in 2008 who were caught when rates, that could never rise, went up to just 5.5%. Quote Link to comment Share on other sites More sharing options...
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