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Interest Rates...


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pre-2008 they still had MEW.

Also food and energy inflation since 2008 has been massive thanks to GBP dying on it's ars3:

pHK5B.png

I can sympathise with the OPs view that the carnage is being played upon as a fear factor for other policies, but I do believe increasing rates by even 2% would cause big problems.

If someone is paying say 4% index linked, if rates rise to 2.5% most of that 2% rise would be passed on. This would see the interest portion of people's payments rise by a big wedge, taking the total repayment up by 20%.

This assumes this site is correct: http://www.mortgagecalculator.org.uk/

ps I just have to put this somewhere. BBC boxing correspondent: Ben Dirs. I shit you not.

Edited by bmf
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I think rates need to rise a fair bit before any real pain is felt.

You are mistaken. The economy is highly sensitive to interest rates and becoming more so each passing year.

The low rates are intended to appease voters and maintain prices at just below peak.

No they are not.

I see no real evidence of a real recession type economy for most people .

The economy is in recession.

I recall the 80's and 90's

Then you will know this economic situation is nothing like it.

and the spendthrift nature of today is off the scales compared to even recovery and boom in those decades.

Utter ******** - have you walked down the average UK High St lately?

Try booking a holiday

Why? Who "books" holidays these days?

, getting decent service , articulating a specific bespoke delivery of common goods and services and you are still struggling as a customer.

Ah, so the mass unemployment is not down to economic conditions, it is down to people just not trying ruddy well hard enough to accommodate Victorian shopping practices.

That's not what a recession feels like at all.

This is ********. We are in one QED.

The issue is that if rates remain at zero then prices rises will do the trick slowly instead of a quick rate hike.

It will be inflation that causes the crash . It always does .

No it doesn't. Forgetting all those house prices crashes that have occurred in deflationary periods, cast your mind back to the 90s. That crash was not caused by inflation. Apart from all these points, I agree with everything you say - very wise...

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Yeah, it did implode and it will again if rates rise a few percent. Why do you think the BoE is pushing on string? Or do you think they fiddle the inflation figures like the numpties on the gold thread?

This is complete b****cks - and if you want to walk through the numbers, I would be happy to hold your hand (after you have carried out your initial analysis - start by obtaining numbers for cash on deposit and mortgages outstanding and go from there.)

Also, are we really expected to have sympathy for the creditor class? That usurious bunch of scumbags who expect to receive money for just having money in the bank? Savers are worse than BTLers IMHO - at least BTLers provide accomodation services. Same too with people who buy shares or other assets - at least they are taking a risk. What do savers provide? Nothing. They just leech off of working people all the while having their precious money insured for free by the government. Bunch of Saga-holidaying, telegraph-reading misers!

:lol::lol::lol::lol::lol::lol:

+1

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This is how I think it will pan out.

One day house prices will hit the bottom and start going up again.

when the trend has been established the rate of increase will be monitored.

If the increase starts to get to fast interest rate will increase to keep them under control.

There will be no interest rates increases until that day.

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And how much was a liter of petrol and a loaf of bread five years ago and how much have wages gone up?

Inflation on the necessities in life have made up for the difference in IR`s ,most of the people I know who have mortgages and are in the same job as they were in 07 are only getting by when in 07 they had far more disposable income

IMO 0.5% IR`s is the only thing keeping there heads above water

Quite right - it's a three hander.

Interest Rates - 0.5% never passed on to the punter (trackers excepted) and SVRs now drifting towards 5%. (personal loans, overdrafts, credit cards all still high - considering)

Inflation - way above wages for the past few years

Income - flat or reducing

Banks can practice forbearance (extend term, payment holiday, go IO) but for the most part, people must eat, heat, travel and, further, have little say in salaries (or job retention for that matter). It's got to be painful for most.

Look where we are with £375 billion QE, 0.5% interest rates and 25% Sterling devaluation - double dip with the bulk of cuts yet to materialise.

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I think rates need to rise a fair bit before any real pain is felt. The low rates are intended to appease voters and maintain prices at just below peak.

I see no real evidence of a real recession type economy for most people . I recall the 80's and 90's and the spendthrift nature of today is off the scales compared to even recovery and boom in those decades.

Try booking a holiday , getting decent service , articulating a specific bespoke delivery of common goods and services and you are still struggling as a customer.

That's not what a recession feels like at all.

The issue is that if rates remain at zero then prices rises will do the trick slowly instead of a quick rate hike.

It will be inflation that causes the crash . It always does .

Good post. Everyone I know is still spending like nutters. Low IR has put cash in their pockets and some are using it to btl. Look round and there's still loads of expensive metal on the roads. BOE must keep rates low as they know they'll have carnage on their hands otherwise with forced sales flooding the market and pretty much every bank needing bailouts.

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Yeah, it did implode and it will again if rates rise a few percent. Why do you think the BoE is pushing on string? Or do you think they fiddle the inflation figures like the numpties on the gold thread?

This is complete b****cks - and if you want to walk through the numbers, I would be happy to hold your hand (after you have carried out your initial analysis - start by obtaining numbers for cash on deposit and mortgages outstanding and go from there.)

Also, are we really expected to have sympathy for the creditor class? That usurious bunch of scumbags who expect to receive money for just having money in the bank? Savers are worse than BTLers IMHO - at least BTLers provide accomodation services. Same too with people who buy shares or other assets - at least they are taking a risk. What do savers provide? Nothing. They just leech off of working people all the while having their precious money insured for free by the government. Bunch of Saga-holidaying, telegraph-reading misers!

We got through the 90's though didn't we? And what happened meant that lots of people could buy houses at reasonable prices and have less debt to service.

So it doesn't matter how you earned it, whether it was creating a business and jobs etc., just having money in the bank and trying to support yourself from the fruits of your labour is evil. People shouldn't bother saving they should just live on the edge and then turn to the state for help, leeching from the labour of other taxpayers. Savers pay 20% or 40% tax on money they have saved after tax was initially applied so contribute more than people who don't save and just leech.

Though I suppose we really don't need savers now do we? They are expendable as recent events have shown. With fractional reserve banking and QE, it doesn't matter if nobody works or saves to support themselves. No matter what burden is put on the state we can just print more magic money to fund any deficit.

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If some of the press reports about many people being down to £20 at the end of each month a tiny rate raise would cause massive problems.

I don't think the central bank rate is going anywhere soon.

The bigger question is the SVR, which is now clearly detached from the base rate. How many with poor LTV will be stuck on the banks SVR which I'll guess is already starting to stretch many borrowers.

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We got through the 90's though didn't we? And what happened meant that lots of people could buy houses at reasonable prices and have less debt to service.

The 90's was a smaller crash, the values of houses wasn't as great and at that point there wasn't a global economic crash. It's a whole new ball game now.

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We got through the 90's though didn't we? And what happened meant that lots of people could buy houses at reasonable prices and have less debt to service.

So it doesn't matter how you earned it, whether it was creating a business and jobs etc., just having money in the bank and trying to support yourself from the fruits of your labour is evil. People shouldn't bother saving they should just live on the edge and then turn to the state for help, leeching from the labour of other taxpayers. Savers pay 20% or 40% tax on money they have saved after tax was initially applied so contribute more than people who don't save and just leech.

Though I suppose we really don't need savers now do we? They are expendable as recent events have shown. With fractional reserve banking and QE, it doesn't matter if nobody works or saves to support themselves. No matter what burden is put on the state we can just print more magic money to fund any deficit.

Yep

When people find that the cost of living is going up they will start defaulting on their rent.

The land lord will have a choice. evict them and hope some one will come along that can pay the high rent or reduce the rent.

Rents are set at how much money a person has left over after survival costs have been paid.

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If some of the press reports about many people being down to £20 at the end of each month a tiny rate raise would cause massive problems.

I don't think the central bank rate is going anywhere soon.

The bigger question is the SVR, which is now clearly detached from the base rate. How many with poor LTV will be stuck on the banks SVR which I'll guess is already starting to stretch many borrowers.

SVR is the rate demanded by the market!

The BoE never controls the cost of money, Mervo can lean into the wind for a time but ultimately the market determines where IRs should be. QE can give him a bit more latitude but carries with it an implicit inflationary hazard.

Osborne spending 125% of govt income every year is doing more for ho moanerz than ZIRP ever will.

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Even a small rise in the IR could spook things - not because of the financial impact but more due to the fact that people have assumed that the government will always protect them with low IRs.

Exactly and interest rates are going nowhere near causing a problem to your typical in debt up to their tits f**kwit, hence their not concerned about savers, in the same way they don't give a flyin f**k about smokers, they don't do it.. Save that is so popular politics for the next god knows how many years is going to be low, low and I mean LOW interest rates, if you've got savings or a pension you are fooked get used to it pull your money out and do something with it. Younger (under 25) generation are very happy to rent, agreed their not happy about the high cost of accomodation but more than happy to rent cars and iphones.

TBTB can do much more than us poor mortals think this is gunna roll on for years no euro crash no Greek exit no nothing, get used to it this is the normal.

keep smilin :lol:

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Yep I agree. However I am actually interested in the general thinking of this Forum. I know family and friends that would not be able to service the mortgage if rates hit 2% or close to it.. One of these is a close member of family. They seem to have very similar friends and they all seem to be in a similar boat. They followed each other with car purchases, Disney Holidays, Plasmas (back in the day)...All with MEW. Now they will possibly follow each other to Shit street.. That`s why 2.5% is a tipping point in my small world.

I think there are alot of fixed mortgages around these days. If rates did look to be on a proper rising pattern then fixing would become a frenzy. We must also add that the banks are currently on the biggest margins in history, for the excuse they must rebuild their capital bases. They are paying ultra low rates to borrow funds themselves but actually still charging several % more on almost all mortgages. They start at about 2.95% for a 40% deposit mortgage and soon reach 4.5% for lesser deposits.

I think base rates of 4-5% are required to properly see the cart tipped up. Lower than that and banks may decide to absorb it by lowering their margins. This is why the policy is SO wrong and simply the biggest rape of savers in history. It is not even helping, in the broad brush sense - your examples aside, the market is stagnant and held back from functioning and falling to normal income multiples; rents remain too high; housing benefit bills are huge; the cost of living is driven by housing costs and these are too high for our wages making us feel very poor, particularly young people AND yet they want to prop it all up. Lots of people with paid up or small mortgages could easily put up with 5% base rates and 6.5% mortgage rates. So, although a small rise would have an effect, it would only cause a definite and lasting change at the 3-4% mark where banks could not afford absorption.

Edited by plummet expert
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Imagine there were two islands both with 100 family units.

Island A) has 99 houses to rent island B ) has 101 houses to rent.

What would be the rents like on these two islands?

If the government on both Island cut the tax so every body was £100 a month better off what would happen to the standard of living on A and B

Edited by gf3
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SVR is the rate demanded by the market!

The BoE never controls the cost of money, Mervo can lean into the wind for a time but ultimately the market determines where IRs should be. QE can give him a bit more latitude but carries with it an implicit inflationary hazard.

Osborne spending 125% of govt income every year is doing more for ho moanerz than ZIRP ever will.

That is why the BofE is doing the money for lending thingy.

To bring SVR down closer to BofE base rates.

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ten year fixed at 4.7% must be the way to go if your can't be bothered to STR. Which i can't

http://www.skipton.co.uk/mortgages/fixed_rate_mortgages/10yr_75ltv.aspx

That said i reakon it's more likily very low intrest rates will be a feature of the economy for the next 10 years maybe longer, Japan style

every .25 intrest rate raise takes 8 billion from the spenders to the savers and we cant have that we need more consumption (I'll find a linky to back that one up)

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Ten year fixed at 4.7% must be the way to go if your can't be bothered to STR. Which i can't:

http://www.skipton.co.uk/mortgages/fixed_rate_mortgages/10yr_75ltv.aspx

That said i reakon it's more likily very low intrest rates will be a feature of the economy for the next 10 years maybe longer, Japan style. Every .25 intrest rate raise moves 8 billion from the spenders to the savers and we cant have that! We need more consumption

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Ten year fixed at 4.7% must be the way to go if your can't be bothered to STR. Which i can't:

http://www.skipton.co.uk/mortgages/fixed_rate_mortgages/10yr_75ltv.aspx

That said i reakon it's more likily very low intrest rates will be a feature of the economy for the next 10 years maybe longer, Japan style. Every .25 intrest rate raise moves 8 billion from the spenders to the savers and we cant have that! We need more consumption

Quite right.

To get out of a recession some one some where is going to have to start spending.

Now who is it going to be. Those who are already up to their necks in debt or the savers?

cause lets face it.

WE ARE ALL SAVERS NOW

Edited by gf3
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hahahhahaha

Really?!?

goes up a little? to you maybe, but not for millions of mortgagers.

not one person in my generation that i personally know (25-35) who took out mortgage in the last 10 years, and benifitted from the IR's going down, thought and actually did save the "extra". they saw it as a payrise and spent accordingly.

the people who have taken a mortgage out since 2008 went upto and over their afordability limit based on the lowest IR in history. this is being replicated across the country day after day.

no the UK didnt explode at 15%, as that was the reaction to the last bubble.

people have massivly overleveraged themselves this time, and more so than any other time. self cert I/O's were the norm upto last year.

Really, no one? Well I'm in that category, and we are paying down like there is no tomorrow. I know others around my age who are also being prudent and paying down there mortgage

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Really, no one? Well I'm in that category, and we are paying down like there is no tomorrow. I know others around my age who are also being prudent and paying down there mortgage

You're very lucky. I fixed for 5 years in May 2009, having been on Bank of Ireland's SVR of 2.99%, but I didn't believe it could possibly last much longer :(

Now I'm 'stuck' until May 2014, and I can't make any overpayments lower than £2000 at a time. Tried to do the right thing and got hammered.

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You're very lucky. I fixed for 5 years in May 2009, having been on Bank of Ireland's SVR of 2.99%, but I didn't believe it could possibly last much longer :(

Now I'm 'stuck' until May 2014, and I can't make any overpayments lower than £2000 at a time. Tried to do the right thing and got hammered.

I consider myself lucky getting on the last lifetime tracker BoE+2.9 from HSBC shortly before it dissapeared last year. I though at the time hard on the type of mg required and was aiming at offset ones. I wanted something which was immune from the frivolity of the bank to raise their SVR as and when they feel like. I am on repayment terms with no penalties for any overpayment.

the actual interest + principal turned out to be less than my rent (which was going up anyways) but I set the payment at the rent price plus a regular overpayment by standing order. When doing my maths (as advocated here) I worked out for my loan amount (120k) I need a rate of above 8% to start feeling unconfortable and then we will have to cut back on luxuries and I will have to quit smoking. By this time though I hope my young one will be out of nursery (at 1000£/month) and into full education so there will be a margin for some more overpayments. I am driving company car, my wife is with a lovely 13 years old BMW with personal mechanic (me) at 0 £/hour, aint got I-anything as i despise being told what I can use on my equipment and believe it or not still use a Cathode ray television.

I believe there are many more in my position who are not brand and trend obsessed. But I am also aware of many who are .

Recently I was looking for a replacement car for the wife as someone expressed interest in getting her old one. Looked at various cars and finance options. I think I will go with second hand upto 5 years old Mazda 3 purchased for cash. Can not justify the new car prices or the funny terms like 5000 deposit, monthly payments of 200 and final payment of 5000. better pile them on the mg me thinks. Looking all around new plates all over the place. How and why ppl afford this is beyond me.

Edited by bulboy
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Forgive my little missive but I found the OP question intriguing since it is the first thing I ask BTL daisy chain leveraged owners. I am a little more direct though “What would interest rates have to be to blow you out of the water”, diplomat I aint. Two things are worth noting 1) that they produce a figure without batting an eye (obviously having considered this quite a bit); and 2) that the figure is invariably around 2%.

My tuppence worth.

As for the Zirpy trappy Zombie doodah I know not when to lock and load, but I do know it's undead.

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