Topic: UK interest rates

[PaulF]

Announcement due in an hour.

Who thinks they will stick or twist? My guess is one last hike to truly dampen down the ecomony.

I know there's a quite a few people that look at macro economics (most of you are in the fuel prices thread) and thought it would be good to tease you into a new area.

I suspect a reasonable number of people \ businesses are already hurting, but plenty more have fixes ending next year which will really hurt (self confessed, that includes me).

Do businesses have similar fixes for borrowing?

[west_london_red]

There will be one more rise today I think.

My suspicion is that rates will start to come down sooner then people think, next Summer is my guess. Growth will be shit as it’s been for the last 13 years and I can’t see that changing anytime soon so rates will need to come down soonish.

Personally the rates themselves ain’t hurting me yet as my mortgage is fixed until May 2026 at 1.5% but I’m stacking as much as I can now so I can pay off a chunk of the mortgage when our fix ends, otherwise the increase in payments will be horrendous.

[PaulF]

There will be one more rise today I think.

My suspicion is that rates will start to come down sooner then people think, next Summer is my guess. Growth will be shit as it’s been for the last 13 years and I can’t see that changing anytime soon so rates will need to come down soonish.

Personally the rates themselves ain’t hurting me yet as my mortgage is fixed until May 2026 at 1.5% but I’m stacking as much as I can now so I can pay off a chunk of the mortgage when our fix ends, otherwise the increase in payments will be horrendous.

Good job we aren't investment bankers!  Rates held.

[filopastry]

Hold on a very tight 5-4 vote.

Feels like the right decision to me, although I could see the arguments both ways.

[killer-heels]

Fuck off Andrew Bailey, you useless c*nt.

[Elmo!]

From a selfish point of view, been benefitting from the increased rates on savings, but with less than a year to go on my mortgage deal... could do with rates to start dropping soon.

[filopastry]

From a selfish point of view, been benefitting from the increased rates on savings, but with less than a year to go on my mortgage deal... could do with rates to start dropping soon.

Not sure we will see them falling anytime soon, we are probably one set of bad numbers from inflation or wage growth away from a further rise

[jonnypb]

About time after 14 successive rises!  People with mortgages who haven't got a decent fix deal, or for those coming out of one need a bit of a break.

Personally the rates themselves ain’t hurting me yet as my mortgage is fixed until May 2026 at 1.5% but I’m stacking as much as I can now so I can pay off a chunk of the mortgage when our fix ends, otherwise the increase in payments will be horrendous.

Nice, hopefully by then the interest rates will be at a more 'normal' level of around 3%.  A friend is in a similar position, mortgage rate of 1.8% fixed for another 18 months but they were overpaying the mortgage.  Told them that was daft when savings rates are higher than their mortgage rate.  They've since opened an instant access account paying over 5% interest and putting as much money as they can into it and then also drip feeding into regular saver accounts that are paying 6% and 7% interest. Can then use that money to pay off a chunk when the fix deal ends.

From a selfish point of view, been benefitting from the increased rates on savings, but with less than a year to go on my mortgage deal... could do with rates to start dropping soon.

Most banks have already forecast their saving accounts to reflect the interest rates for into next year.  Probably not going to be much movement on any savings rates, or nothing noticeable anyway if you've got one of the decent rates on offer at the minute.  Not sure the rates will start dropping anytime soon though if your mortgage ends in less than a year    If inflation continues to drop and the BoE rate stablises, then maybe in 12-18 months we'll see better mortgage rates and offers.

Not sure we will see them falling anytime soon, we are probably one set of bad numbers from inflation or wage growth away from a further rise

I'd be very surpised if we don't see another couple of 0.25% rises in the near future.

[west_london_red]

Nice, hopefully by then the interest rates will be at a more 'normal' level of around 3%.  A friend is in a similar position, mortgage rate of 1.8% fixed for another 18 months but they were overpaying the mortgage.  Told them that was daft when savings rates are higher than their mortgage rate.  They've since opened an instant access account paying over 5% interest and putting as much money as they can into it and then also drip feeding into regular saver accounts that are paying 6% and 7% interest. Can then use that money to pay off a chunk when the fix deal ends.

Yeah, that’s exactly what I’m doing. Prior to this deal when my mortgage was at 2.5% and savings rates were like 1% I had next to nothing saved, whatever extra I had I used to overpay my mortgage but right now it makes zero sense.

[Red-Soldier]

Not sure we will see them falling anytime soon, we are probably one set of bad numbers from inflation or wage growth away from a further rise

Agree.

A couple of my friends are selling up and downsizing, rather than pay the extortionate rates.

[PaulF]

Agree.

A couple of my friends are selling up and downsizing, rather than pay the extortionate rates.

How are they finding house prices behaving? They seem to be coming down a bit, or at least not rocketing like they were.

[Nobby Reserve]

I'm paying over £700 more a month in mortgage (tracker of 1.25% over base). It's fucking crippling us.

No government help available, though 

As Martin Lewis explained a few weeks back, it's a small proportion of the population being massively fucked-over by the interest rate rises. A big chunk have no mortgages and of the ones who do, over half are on fixed rates. These are all untouched and spending freely. Those on trackers or SVR's are being [hugely] disproportionately hammered.

It's why interest rates are too blunt a tool to control inflation (and why Keynesian theory of economic control pisses all over Freidmanite monetarism)

[Kalito]

I'm paying over £700 more a month in mortgage (tracker of 1.25% over base). It's fucking crippling us.

No government help available, though 

As Martin Lewis explained a few weeks back, it's a small proportion of the population being massively fucked-over by the interest rate rises. A big chunk have no mortgages and of the ones who do, over half are on fixed rates. These are all untouched and spending freely. Those on trackers or SVR's are being [hugely] disproportionately hammered.

It's why interest rates are too blunt a tool to control inflation (and why Keynesian theory of economic control pisses all over Freidmanite monetarism)

That's fucking scandalous. 

[jonnypb]

I'm paying over £700 more a month in mortgage (tracker of 1.25% over base). It's fucking crippling us.

No government help available, though 

As Martin Lewis explained a few weeks back, it's a small proportion of the population being massively fucked-over by the interest rate rises. A big chunk have no mortgages and of the ones who do, over half are on fixed rates. These are all untouched and spending freely. Those on trackers or SVR's are being [hugely] disproportionately hammered.

It's why interest rates are too blunt a tool to control inflation (and why Keynesian theory of economic control pisses all over Freidmanite monetarism)

My fixed mortgage ended earlier this year and I wasn't sure what to do.  I ended up going onto a tracker which was 0.3% above the base rate.  At the time that seemed the right thing to do, the BoE rate at the time was 3.5% and the best fix was 4.8%.  Things seemed to have settled after the truss fiasco and they were predicting that the rates would peak around 4.5% which was down from what they said after Truss destroyed everything overnight.  I'm sure the Government and Financial institutes gave this false sense of security on purpose for a few months to get as many people onto tracker mortgages so that when they raise the rates it will help inflation more.  Like you say too many people are unaffected by the rate rises which doesn't help bring inflation down.

[PaulF]

I think they are saying over a million people's fixed rate ends next year. I suppose that's still a fairly small proportion of the population.
I think some are already trying to save in the hope that  will see them through the worst of it.

[west_london_red]

I'm paying over £700 more a month in mortgage (tracker of 1.25% over base). It's fucking crippling us.

No government help available, though 

As Martin Lewis explained a few weeks back, it's a small proportion of the population being massively fucked-over by the interest rate rises. A big chunk have no mortgages and of the ones who do, over half are on fixed rates. These are all untouched and spending freely. Those on trackers or SVR's are being [hugely] disproportionately hammered.

It's why interest rates are too blunt a tool to control inflation (and why Keynesian theory of economic control pisses all over Freidmanite monetarism)

Those of us on fixed rates will get hit eventually don’t forget, but as with most things these days it disproportionately hits younger and working aged people while older folk get off relatively lightly.

[buttersstotch]

Those of us on fixed rates will get hit eventually don’t forget, but as with most things these days it disproportionately hits younger and working aged people while older folk get off relatively lightly.

Yeah it's coming for all of us over the next 2-3 years. My fix as a FTB ends at the end of the year and I'm looking at £250-300 increase a month. You'd imagine BoE rates will stay at circa 5% for a couple of years. Not sure we will any mortgage rates beginning with a 3 for a while. When you factor in most people remortgaging will have inetrested rates under 2% there's going to be a big shock factor for a lot of households.

Imo the bigger problem in our economy is we have a nation addicted to credit living lifestyles and luxuries lots of people can't afford, especially in the middle earning bracket. I'm probably slightly guilty of this too tbf.

[west_london_red]

Yeah it's coming for all of us over the next 2-3 years. My fix as a FTB ends at the end of the year and I'm looking at £250-300 increase a month. You'd imagine BoE rates will stay at circa 5% for a couple of years. Not sure we will any mortgage rates beginning with a 3 for a while. When you factor in most people remortgaging will have inetrested rates under 2% there's going to be a big shock factor for a lot of households.

Imo the bigger problem in our economy is we have a nation addicted to credit living lifestyles and luxuries lots of people can't afford, especially in the middle earning bracket. I'm probably slightly guilty of this too tbf.

Obviously it depends on how much equity you have, that plays a big part in what interest rate you pay too but I wouldn’t be surprised if we see mortgage rates starting with a 3 within two years. Once this bout of inflation is over I can’t see economic growth being at the level that it can support 5% interest rates and they will have to come down to something lower.

And completely agree on the last point, we want everything now as a country, can’t afford it so we put it on credit. New cars used to rare and something only wealthy people bought, now every person in their 20’s seems to be driving around in a new car they have on either credit or a lease. Then you have things like Klarna where even small purchases can be bought using credit. The days when people only borrowed money to buy a house seem to be long gone.

[Riquende]

New cars used to rare and something only wealthy people bought, now every person in their 20’s seems to be driving around in a new car they have on either credit or a lease.

I work in the car industry. We had one of the group's financial auditors in the office the other day and he was saying that there's no movement on Used cars across the group, as they can get lower payments on New cars. I don't understand it myself, I'm just a techie, but I do sometimes wonder where all the £500 rustbuckets that new drivers used to own as a first car have gone.

The wider point is very valid. People have gotten used to lifestyles that are perhaps no longer sustainable. New clothes & shoes, expensive holidays, all that. It's tough to give up.

[reddebs]

I work in the car industry. We had one of the group's financial auditors in the office the other day and he was saying that there's no movement on Used cars across the group, as they can get lower payments on New cars. I don't understand it myself, I'm just a techie, but I do sometimes wonder where all the £500 rustbuckets that new drivers used to own as a first car have gone.

The wider point is very valid. People have gotten used to lifestyles that are perhaps no longer sustainable. New clothes & shoes, expensive holidays, all that. It's tough to give up.

At least it can be given up if needs must but when you're barely scraping the absolute minimum there's nothing left to give up bar life itself 😕

[buttersstotch]

I work in the car industry. We had one of the group's financial auditors in the office the other day and he was saying that there's no movement on Used cars across the group, as they can get lower payments on New cars. I don't understand it myself, I'm just a techie, but I do sometimes wonder where all the £500 rustbuckets that new drivers used to own as a first car have gone.

The wider point is very valid. People have gotten used to lifestyles that are perhaps no longer sustainable. New clothes & shoes, expensive holidays, all that. It's tough to give up.

It's PCP deals surely on the car industry. People can get a brand new car every 3 years, or you can lease a model via a 3rd Party. You can pretty much pay the same vs the full cost of a new car if getting a loan out etc. - it's a slight trap as it creates a bit of a false economy.

[Wabaloolah]

It's PCP deals surely on the car industry. People can get a brand new car every 3 years, or you can lease a model via a 3rd Party. You can pretty much pay the same vs the full cost of a new car if getting a loan out etc. - it's a slight trap as it creates a bit of a false economy.

that's what I've done for my last two cars, took out two 2 year leases, the first one cost me £130 a month for a Citroen C4 Aircross - 10,000 miles per year, CoVid hit 6 months into the deal so only ended up doing about 9000 across the two years.

That one went back and took out another, best deal I could get on a similar car was on a DS3 Crossback, 2 years and 8000 miles per year and it cost me £220 a month. Deal is up in November and it's going back and I'm not bothering with another as can't really justify it based on the mileage I now do for work and the missus inherited her Dad's Vauxhall earlier this year.

It's timed quite well as my mortgage is increasing by a similar amount next month.

[PaulF]

Fun fact*
Ford motor company make more money out of finance than actually selling cars.

*Not fact checked. I did read it a while ago too, so may have been true at one point . Not even sure how you split the two things up.  I've never really been tempted with new cars (other than when I had a work incentive that more or less paid for it) due to the massive depreciation, some of the offers do look highly tempting, but that little fact has helped me .  I wonder if cars are now priced in a way to help the finance arms make money.

[west_london_red]

I remember being told the same fact at university by a lecturer 20 years ago (I think he was specifically talking about Ford) so I’d say there’s some truth to it, German manufacturers made money regardless because of the premium they charge I remember him also saying.

[PaulF]

Imf saying we're looking likely to have the highest rates for the longest of any of the G7 .  Winning without winning .

[thejbs]

It's PCP deals surely on the car industry. People can get a brand new car every 3 years, or you can lease a model via a 3rd Party. You can pretty much pay the same vs the full cost of a new car if getting a loan out etc. - it's a slight trap as it creates a bit of a false economy.

Last PCP we did they were going to offer me nothing towards my next deal even though my car was well under the mileage they based the balloon payment. The dealer said to my face, ‘the secondhand market is tough and my car was ‘niche and difficult to sell.’

I disagreed and bought out the car. I listed it privately and it sold in a week for 3k more than the final payment. Bought the next car on private finance.

I’ve also since read that converse to popular opinion, niche cars (less common colours and body types) are easier to sell and hold their value better. So if anyone tries to put you off an outrageous colour because ‘you’ll never be able to sell it on’ they’re wrong.

[PaulF]

Unless you are trying to sell a red car in Everton.

[west_london_red]

Imf saying we're looking likely to have the highest rates for the longest of any of the G7 .  Winning without winning .

I don’t personally buy the IMF report on our rates being this high for another 5 years, the damage that would cause would kill off inflation sooner than that.

[PaulF]

I don’t personally buy the IMF report on our rates being this high for another 5 years, the damage that would cause would kill off inflation sooner than that.

Did they say that though?  I think they are saying they are at a high now, and will come down (not by much admittedly). But will remain high (5% ish) for about 5 years.
Compared to 4% ish for 3 years for other economies .  Admittedly those figures are from memory.

[Red-Soldier]

Did they say that though?  I think they are saying they are at a high now, and will come down (not by much admittedly). But will remain high (5% ish) for about 5 years.
Compared to 4% ish for 3 years for other economies .  Admittedly those figures are from memory.

Yep.

Things are going to be like this, for a while.  People need to adjust to the new reality.

[thaddeus]

Yep.

Things are going to be like this, for a while.  People need to adjust to the new reality.

I don't think interest rates of 4-5% should be particularly problematic.  The problem is that we've arrived at them through desperation and on the back of property prices (and mortgages and rents) being wildly out of sync with average earnings.  If there'd been a gradual rise from the post-Global financial crash levels of 0% to 5% then it would have naturally kept the property market more in check and allowed people to build up that financial resilience.

As it stands I'm not sure a significant proportion of people can adjust to the new reality.  Cutting back, putting things off, making essential purchases on credit, borrowing from usury loan providers etc. is only sustainable for so long.  Home owners without mortgages are sheltered to some extent but everyone else is either getting hammered or will do in the next few years.

Sunak and Hunt will be thanking their lucky stars when they lose the next election as they're clueless on how to sort this one out.

[Red-Soldier]

I don't think interest rates of 4-5% should be particularly problematic.  The problem is that we've arrived at them through desperation and on the back of property prices (and mortgages and rents) being wildly out of sync with average earnings.  If there'd been a gradual rise from the post-Global financial crash levels of 0% to 5% then it would have naturally kept the property market more in check and allowed people to build up that financial resilience.

As it stands I'm not sure a significant proportion of people can adjust to the new reality.  Cutting back, putting things off, making essential purchases on credit, borrowing from usury loan providers etc. is only sustainable for so long.  Home owners without mortgages are sheltered to some extent but everyone else is either getting hammered or will do in the next few years.

Sunak and Hunt will be thanking their lucky stars when they lose the next election as they're clueless on how to sort this one out.

Tell that to the people on trackers and who are due to remortgage soon 

I agree people are going to be struggling for many years.  It'll be interesting to see how Labour deals with it.

[PaulF]

No change again today , not really a surprise.

I read something the other day, suggesting we should look at the value of our houses in dollars. As that's the benchmark by which everything should be measured. And as the pound has weakened significantly over the past few years, our houses have lost a lot of value.

Personally, I don't think of that as a sensible argument.  The value of my house as a multiple of my income seems a more useful metric, although income obviously fluctuates.  The value of the house in multiples of McCheesburgers might be a better way to look at it from an inflation linked perspective.  Just curious to see how other people view these things.  *McCheesburgers is interesting as they are fairly stable, inflation linked. And should be US influenced, but I am not convinced they are particularly.

[thaddeus]

No change again today , not really a surprise.

I read something the other day, suggesting we should look at the value of our houses in dollars. As that's the benchmark by which everything should be measured. And as the pound has weakened significantly over the past few years, our houses have lost a lot of value.

Personally, I don't think of that as a sensible argument.  The value of my house as a multiple of my income seems a more useful metric, although income obviously fluctuates.  The value of the house in multiples of McCheesburgers might be a better way to look at it from an inflation linked perspective.  Just curious to see how other people view these things.  *McCheesburgers is interesting as they are fairly stable, inflation linked. And should be US influenced, but I am not convinced they are particularly.

Be careful, you're in danger of pulling back the curtain on the grand illusion!  Homeowners in the UK like to think they're better off as their homes have increased in value almost endlessly for decades but they're not really.

They are relatively speaking better off than renters, or people trying to get onto the ladder with worse wage to house price ratios.

[west_london_red]

Be careful, you're in danger of pulling back the curtain on the grand illusion!  Homeowners in the UK like to think they're better off as their homes have increased in value almost endlessly for decades but they're not really.

They are relatively speaking better off than renters, or people trying to get onto the ladder with worse wage to house price ratios.

Your better off as a home owner when prices are rising until you want or need to move house, then your no better off because the house your buying has gone up as much as the one you own.

And if you have kids you actually care about and they are looking to buy their first house, then they are obviously screwed.

[Fruity]

bit of relief it didn't go up again today. I'm on a tracker which is .99 above base rate so I am at 6.24%. I am interest only which is good as I don't think I would have been able to afford the monthly payments otherwise.

The tracker has been decent for me for the most part so didn't want to fix when I had the chance but probably should have with hindsight.

[PaulF]

Be careful, you're in danger of pulling back the curtain on the grand illusion!  Homeowners in the UK like to think they're better off as their homes have increased in value almost endlessly for decades but they're not really.

They are relatively speaking better off than renters, or people trying to get onto the ladder with worse wage to house price ratios.

I'm not trying to figure out if it's better to rent or to own. And I guess it's obvious house price movements don't affect what you can afford if you move. Great for downsizing I suppose.
It's just whether measureing the value in dollars makes any sense. I know I brought it up, but now I can't really see it does.

[Only Me]

I'm not trying to figure out if it's better to rent or to own. And I guess it's obvious house price movements don't affect what you can afford if you move. Great for downsizing I suppose.
It's just whether measureing the value in dollars makes any sense. I know I brought it up, but now I can't really see it does.

I don’t think it does either.

Unless you are going to buy your next house outside of the uk market. Otherwise the relative (possible $ loss) value of yours won’t matter, as the property you’re buying will have suffered a similar relative loss (or gain).

[PaulF]

Yeah. Not so much thinking in terms of value should I move house. More how much of it is an illusion. Typically I don't give two hoots. But I get dragged into conversations about property prices and if doing work adds value. Just interested that there might be a batter way to view it . But I don't think there is. Inflation linked price is probably the only interesting thing.  And could money used on an upgrade be invested better elsewhere.  Which is tricky as there. Is generally utility associated with the upgrade.  Anyway. Way off topic. Thanks for putting my mind at ease folks .

[thejbs]

We did about £35k of improvement to our house since buying in 2019. Latest valuation put it at 75k over what we paid. Though, we got it cheaper than market as we bought it off our landlords.