Financial Analysts Warn Mortgage Rates Will Go To 14%

[Mancghirl]

14% would screw anyone who bought with a high LTV in the last 10+ years. Also any over leveraged BTLers (I shed no tears there).

The repo rate would be so much worse than in the last big housing bust, its a case of 'be careful what you wish for'. I've no desire to see millions of people homeless.

On the other hand, I should be able to pick up a nice flat in Edinburgh for cash - so hey ho.

[thecrashingisles]

The repo rate would be so much worse than in the last big housing bust, its a case of 'be careful what you wish for'. I've no desire to see millions of people homeless.

Unless there's some scientific process I'm not aware of which causes houses to evaporate when interest rates reach a certain number, that's not going to happen.

[Mancghirl]

Unless there's some scientific process I'm not aware of which causes houses to evaporate when interest rates reach a certain number, that's not going to happen.

Nope, but there is virtually no social housing to speak of, so its into the B & B courtesy of the council (ooh, its like the 80s coming back) or into the arms of the landlords who haven't gone bust. Hell - this might be what saves the Wilsons - oh no, wait, they'll be repo-ed as soon as IR's are up to 0.75%

[fatsam]

I still have 8 years left on my 10year fix so i fully expect interest rates to remain at 0.5 for another decade

[Guest_James Toney_*]

Sorry about the cliche, but careful what you wish for. That sort of rise would be unthinkably catastrophic, and much as i want to see a correction of some magnitude, I have no wish to see people's lives ruined. In any case, the ramifications are such that there woulod be zero chance of everything suddenly being fine and dandy for savers and for people who have been waiting to buy after being priced out for so many years. (I am one such). Life is rarely like that. Something or someone will pull the rug out from under your feet. As what's 'is name once famously said, "events, dear boy, events". So all your crowing is possibly misplaced, you lot..

i do, i am an a***hole i know, but i really do want this, and also i will laugh,

[Tonkers]

A fellow HPCer tonight was telling me of some conversations he has had with friends and colleagues with mortgages of long standing.

Apparently, despite the fact that they are now benefitting from ultra low IRs, all have not only not continued to pay the same sum they were paying montly but have actually reduced their mortgage payments.... mainly to pay the other bills.

I wonder just how many are doing this across the UK.

Problem is, us mugs are the ones supporting them!

Raising interest rates will only affect a small minority. It would benefit the majority.

Too late for me, I have eaten up my savings whilst unemployed. A decent interest rate would have really helped.

Still, at least I can claim all my benefits now.

Edited August 24, 2010 by Tonkers

[StainlessSteelCat]

Much as I'd like it as a saver - I don't see it happening in the next 2 years unless there is somekind of crisis in confidence in the UK economy and a run on sterling. We may be bad but there are others who are worse (Greece, Ireland, Iceland).

They have clearly stopped targeting inflation at 2% (was it really that realistic anyway?). The question is what is the level they are actually targeting?

I do agree with the sentiment that once it happens rises will take place quickly though and probably go above 5% (the BoE will inevitably get it wrong and act too late).

[Pole]

Regardless of where the IRs are, the following two groups will be supported by the government during the crisis:

- the banks,

- the reckless borrowers.

I can see myself sitting on this board in 3 years, with many on here still waiting for the reckless to be punished, etc, etc. But don't forget that it's so much easier for the government to milk the savers and the prudent. And BTW, everything in the UK is based on nominally high house prices - absolutely everything.

14%??? Sorry, I can't this happening anytime soon. After what has been done in 2009 (QE, 0.5% IRs and mortgage support) - let's face it - it IS different this time.

[lets get it right]

Let's be honest - the government haven't got a clue how to get us out of New Labour's mess.

Having dropped base rate to 0.5% they have left themselves with nowhere to go. All it has done is bought some time. Now the time is running out.

As has been stated on here many times, you cannot expand debt forever. Yet our economy is based on ever expanding debt.

The real crunch must surely be around the corner now. If interest rates do go up, the economy is going to go into free fall. Or is it?

People keep saying there are more savers than borrowers - with some big ratio quoted - 6 to 1 I think.

If interest rates were higher - would the higher spending of savers compensate for the lack of borrowing? If interest rates are high borrowing will fall - how will banks pay higher interest if no-one is borrowing?

[Minos]

rates of 14% would, however, give a substantial house price crash in the region of at least 50%.

So if you have savings you may be able to buy a house with a very small mortgage and wouldn't mind paying 14% on it.

That really wasn't my question. I asked if you were happy to put your lives on hold for at least another two years? How long has it been so far?

[Minos]

So can someome just confirm, 14% interest rates signal inflation or deflation? I thought this was a deflation oriented site?

[Tired of Waiting]

We don't need 14 or even 8% my friends....anything above 5% & the "sheep" are toast!

Mike

You are probably right. It should at least be enough to trigger a correction, and then perhaps an stampede.

[xux42]

An 8% BOE base rate is the easiest forecast to make, given that this is exactly the mean average BOE base rate over the past 50 years.

I don't think we'll see the 14% mortgage rate this soon though, I think the margin that lenders charge will narrow as the BOE base rate rises (after the first couple of percent).

Agreed. Certainly lenders won't increase their margin as it will trigger even greater arrears problems.

Surprised at the scepticism on here that the BOE rate can rise to 8% in 2 years* - its only an average rise of 0.3% pcm - almost exactly the same as the speed at which rates were cut in 07/08.

There have been times when rates have been increased massively at similar speeds - 73, 79, 89, by 8, 12 and 8% respectively.

BOE

Fast moves happen in both directions.

*We have a Tory govt. - think about the wealthy Pakistan elite looking on while millions suffer.

How bothered do you really think the Tories will be about people being repossessed once they are confident they can trigger this & remain in power?

Supposing that they can control SVRs - which they can't.

Edited August 24, 2010 by xux42

[Minos]

Agreed. Certainly lenders won't increase their margin as it will trigger even greater arrears problems.

Surprised at the scepticism on here that the BOE rate can rise to 8% in 2 years* - its only an average rise of 0.3% pcm - almost exactly the same as the speed at which rates were cut in 07/08.

There have been times when rates have been increased massively at similar speeds - 73, 79, 89, by 8, 12 and 8% respectively.

BOE

Fast moves happen in both directions.

*We have a Tory govt. - think about the wealthy Pakistan elite looking on while millions suffer.

How bothered do you really think the Tories will be about people being repossessed once they are confident they can trigger this & remain in power?

Supposing that they have any control over SVRs - which they don't.

These aren't times with normal lending multiples. If interest rates get that high spend a year or two in the Caribbean or at least a safe distance from here and watch the destruction.

[Badger]

We don't need 14 or even 8% my friends....anything above 5% & the "sheep" are toast!

Mike

mm toasted sheep

[digoutabook]

Regardless of where the IRs are, the following two groups will be supported by the government during the crisis:

- the banks,

- the reckless borrowers.

I can see myself sitting on this board in 3 years, with many on here still waiting for the reckless to be punished, etc, etc. But don't forget that it's so much easier for the government to milk the savers and the prudent. And BTW, everything in the UK is based on nominally high house prices - absolutely everything.

14%??? Sorry, I can't this happening anytime soon. After what has been done in 2009 (QE, 0.5% IRs and mortgage support) - let's face it - it IS different this time.

Am I a recklass borrower then ? Bought in 06, near the top, 1 bed flat 83k on a 95% LTV, borrowed 18k from my parents to fund the deposit. and clear other debts. Damn I must be. Of course 8% interest rates would cost me another £315 per month. Wow, is that it ? I thought armegddon was on it's way!

Resigned to not selling my flat for years yet until I have paid it down to what it's worth, but in my calculations, even though this would be uncomfortable, it wouldn't make me have to sell. Why should I be punished ?? Not sure I understand.

Edited August 24, 2010 by digoutabook

[SarahBell]

How widely can we spread this? Share it on facebook etc.

[Lander]

There is clearly no chance of this. If Merv can keep the rates at 0.5% for so long and in the face of over-target CPI, what could possibly happen which would require the rates to increased to 5% let alone any higher?.

We lose our AAA credit rating

[PopGun]

We don't need 14 or even 8% my friends....anything above 5% & the "sheep" are toast!

Mike

Bang on.

Besides does anyone really think the days of 10%+ interest on savings will return?! Pure fantasy.

[Lander]

Am I a recklass borrower then ? Bought in 06, near the top, 1 bed flat 83k on a 95% LTV, borrowed 18k from my parents to fund the deposit.

Edited August 24, 2010 by Lander

[GordonBrownSpentMyFuture]

Am I a recklass borrower then ? Bought in 06, near the top, 1 bed flat 83k on a 95% LTV, borrowed 18k from my parents to fund the deposit. and clear other debts. Damn I must be.

Damn, sounds like you are.

Of course 8% interest rates would cost me another £315 per month. Wow, is that it ? I thought armegddon was on it's way!

Resigned to not selling my flat for years yet until I have paid it down to what it's worth, but in my calculations, even though this would be uncomfortable, it wouldn't make me have to sell. Why should I be punished ?? Not sure I understand.

I know, crazy isn't it. And yet they're still held at 0.5%. WTF's that all about?

8%? Make it 12%. Makes no difference. I bet you can borrow the shortfall from your parents, eh?

[tricksters]

Am I a recklass borrower then ? Bought in 06, near the top, 1 bed flat 83k on a 95% LTV, borrowed 18k from my parents to fund the deposit. and clear other debts. Damn I must be. Of course 8% interest rates would cost me another £315 per month. Wow, is that it ? I thought armegddon was on it's way!

Resigned to not selling my flat for years yet until I have paid it down to what it's worth, but in my calculations, even though this would be uncomfortable, it wouldn't make me have to sell. Why should I be punished ?? Not sure I understand.

Nobody is punishing you, you're just paying the price for folly. Been there in a slightly different way, and was my own damn fault.

You couldn't afford the place. What's not to understand?

[Pole]

Am I a recklass borrower then ? Bought in 06, near the top, 1 bed flat 83k on a 95% LTV, borrowed 18k from my parents to fund the deposit. and clear other debts. Damn I must be. Of course 8% interest rates would cost me another £315 per month. Wow, is that it ? I thought armegddon was on it's way!

Resigned to not selling my flat for years yet until I have paid it down to what it's worth, but in my calculations, even though this would be uncomfortable, it wouldn't make me have to sell. Why should I be punished ?? Not sure I understand.

I'm not sure if you realise but there are many people in the UK that bought properties that are even more expensive than your current £83k residence.

Therefore, if IRs changed to 8%, it would cost them more than £315. And indeed to some of them it would feel like facing the Mountain of Megiddo to which you refer.

Edited August 24, 2010 by Pole

[Mayalabeille]

I like these discussion on the % of the base rate that will go to the roof in the next few months. As a first time buyer who struggle to get onto the ladder I can clearly see the benefit of landlord losing their portfolio (notice I did not say: of family losing their home as I would not wish it on any good family). Yet I keep wondring the effect that it will have on the rate of the mortgage I will manage to get when I decide to buy:

In September 2007, apply for mortgage in principle, accepted 100% LTV at 6.39% (and what was the base rate at that time, sorry I don't know exactly but could it have been around 4%)

July 2010, applied for mortgage in principle (desperation can push you to crazy decision, yet I did NOT), accepted 90% LTV at 6.59% .

Hoooo wait base rate is at 0.5% how come the rate offered to me is higher than 3 years ago then, even if this time I have a deposit.

Do you see my point?

Yes the base rate might go up but how it is directly going to affect the mortgage rate of the mortgage I will chose, I don't know yet, the only hope I have is that with all the people forced to get rid of their properties, the prices will be pushed down and I will managed to buy a reasonable property reasonably priced (I am not even thinking about having a good deal!)

[PopGun]

Am I a recklass borrower then ? Bought in 06, near the top, 1 bed flat 83k on a 95% LTV, borrowed 18k from my parents to fund the deposit

You borrowed £18k to fund the 5% deposit on a £83k mortgage? Are you sure?

What did you spend the other £13/14k on?