Mungler Posted September 17, 2012 Report Share Posted September 17, 2012 I think interest rates will stay low for at least 5 years and the government will actually embrace a bit of inflation to inflate away that massive debt that won't go away. Europe won't sought itself out anytime soon, so there's no immediate worry of not keeping up / down with the neighbours. Interest rates of just say 8 or 9% will kill everything stone dead - there is just too much lent out to people who shouldn't have made the lending criteria, who are over stretched and how are facing shrinking household budgets because the cost of living is still going up. Mungler's tip - don't go silly but now is the time to take debt and fix a rate. Sticking money in the bank / markets = F-all return. Quote Link to comment Share on other sites More sharing options...
Thunderbird Posted September 17, 2012 Report Share Posted September 17, 2012 I agree with a lot of that, also we're finding that our mortgage balance is going down loads every month proportionally to our payment as the interest element is so low. It's quite nice watching it drop like a stone. Quote Link to comment Share on other sites More sharing options...
Kes Posted September 17, 2012 Report Share Posted September 17, 2012 Interesting read and one thing above all it tells you is that you can blame no-one but yourself for your decisions. I was lucky and bought a house for circa 100K as the rate was looking like it was rising. Back then the 'general' mortgage rate was about 6% when we bought. 1984? We took out a fixed interest rate of 7% for 5 years with the Midland Bank as it was then. The rate rose steadily to about 15.4% and then fell back as the loan moved back to more 'normal' market rate levels. We would have been in deep trouble if we had not had a fixed rate and having a young family we decided that certainty was more important then the (then) lower rate available. Perfect, one decision we got right. Now retired and mortgage largely paid off I still have to get a bit of money back from the property to add to retirement pensions but I absolutely sypathise with anyone struggling - I've done that. However, I think the basic premise mentioned before is correct - if you are struggling now with mortgage costs I would re-evalute now, as these costs will increase slowly and inevitably and with certain house price sectors falling, you need to be 'wise' to the effects on you. I feel (only my view)that house prices will continue to 'restructure' with more reasonably priced houses continuing to sell but slowly, but with prices hardening in this area first. (Support for the housing industry will harden the market at lower levels first (First time buyers) then there will be a more general recovery and with that an inevitable and cynical increase in the rate. The trick is to be slightly ahead of the trends and dont look to anyone else for advice, take every bit you can and make your own decision, (financial advisors included). The next key component is when - again just my view but I think prices will gradually stabilise as mentioned above, over the next 2/3 years, reach bottom by year 3/4 and start to harden and the recovery begin in about 4/5 years. Thats just my view - one I will be acting on, but constantly reviewing. Where there is money the market is hard - London e.g. Buying now (if you have the cash or a good knowledge of the buy to let scene) seems wise, provided you can obtain price reductions of maybe 5-7% for the couple of years fall left to go. If the Euro goes belly up then all bets will be off (in my view). Quote Link to comment Share on other sites More sharing options...
al4x Posted September 17, 2012 Report Share Posted September 17, 2012 same here Thunderbird the nice thing with keeping your payments the same with an offset or tracker mortgage and ploughing the rest in as an overpayment. I'm with Munglers view and if i could be ***** to trawl back through Vipas posts I'm sure I'd find one warning of impending doom and gloom and 15% rates back when this financial issue started, must be good for business fixing at decent rates Ultimately we shall see how it all pans out when the euro goes tits up will be the moment of truth but at the moment we are stuck in a situation of people reducing personal debt rather than spending and that is what is making things pretty much stagnate. In the long term it is for the best but its clobbering the government plans as tax receipts are so far down it screws all predictions. Quote Link to comment Share on other sites More sharing options...
dougall Posted September 17, 2012 Report Share Posted September 17, 2012 Most industry experts (and I don't count myself in there.. I'm talking analysts, economists..) are bracing themselves for double digit base rate at some point in the mear future, no one knows when... It is very much a case of when, not if! ?? Look at forward prices ie mid long term gilts..........not a chance in hell of double digit interest rates.which analysts/economists?With low inflation/interest rates which we now have long term in my view,it is not servicing loans it is repaying the capital that hurts,anyone with a mortgage should be using these low rates to make capital overpayments as good old inflation is not going to assist in reducing the 'real debt'. Quote Link to comment Share on other sites More sharing options...
storme37 Posted September 17, 2012 Report Share Posted September 17, 2012 we got another so we can do buy to let Quote Link to comment Share on other sites More sharing options...
leeds chimp Posted September 17, 2012 Report Share Posted September 17, 2012 i have just fixed ours at 3.19 for 5 years and extended it by 2 years to give up a bit of breathing space each month Quote Link to comment Share on other sites More sharing options...
955i Posted September 17, 2012 Report Share Posted September 17, 2012 Well if you can't afford it with interest rates as low as they are then you are ******. They will rise. Perhaps not double digit but they will rise. Were things so bad when you took out your mortgage or have your circumstances changed? We made the mistake of signing the papers 2 weeks before Northern Rock went down and since then me and the missus have split so struggling on single income but house not worth enough to sell without coming out in debt to the tune of around 10,000 Quote Link to comment Share on other sites More sharing options...
storme37 Posted September 17, 2012 Report Share Posted September 17, 2012 try putting it on interest only for a while Quote Link to comment Share on other sites More sharing options...
Vipa Posted September 17, 2012 Report Share Posted September 17, 2012 (edited) Interesting read and one thing above all it tells you is that you can blame no-one but yourself for your decisions. I was lucky and bought a house for circa 100K as the rate was looking like it was rising. Back then the 'general' mortgage rate was about 6% when we bought. 1984? We took out a fixed interest rate of 7% for 5 years with the Midland Bank as it was then. The rate rose steadily to about 15.4% and then fell back as the loan moved back to more 'normal' market rate levels. We would have been in deep trouble if we had not had a fixed rate and having a young family we decided that certainty was more important then the (then) lower rate available. Perfect, one decision we got right. Now retired and mortgage largely paid off I still have to get a bit of money back from the property to add to retirement pensions but I absolutely sypathise with anyone struggling - I've done that. However, I think the basic premise mentioned before is correct - if you are struggling now with mortgage costs I would re-evalute now, as these costs will increase slowly and inevitably and with certain house price sectors falling, you need to be 'wise' to the effects on you. I feel (only my view)that house prices will continue to 'restructure' with more reasonably priced houses continuing to sell but slowly, but with prices hardening in this area first. (Support for the housing industry will harden the market at lower levels first (First time buyers) then there will be a more general recovery and with that an inevitable and cynical increase in the rate. The trick is to be slightly ahead of the trends and dont look to anyone else for advice, take every bit you can and make your own decision, (financial advisors included). The next key component is when - again just my view but I think prices will gradually stabilise as mentioned above, over the next 2/3 years, reach bottom by year 3/4 and start to harden and the recovery begin in about 4/5 years. Thats just my view - one I will be acting on, but constantly reviewing. Where there is money the market is hard - London e.g. Buying now (if you have the cash or a good knowledge of the buy to let scene) seems wise, provided you can obtain price reductions of maybe 5-7% for the couple of years fall left to go. If the Euro goes belly up then all bets will be off (in my view). Prices in london are actually rising nicely.. 2.7% in July alone! http://www.standard....le-8092319.html The rest of the country is not so lucky! Edited September 17, 2012 by Vipa Quote Link to comment Share on other sites More sharing options...
Vipa Posted September 17, 2012 Report Share Posted September 17, 2012 same here Thunderbird the nice thing with keeping your payments the same with an offset or tracker mortgage and ploughing the rest in as an overpayment. I'm with Munglers view and if i could be ***** to trawl back through Vipas posts I'm sure I'd find one warning of impending doom and gloom and 15% rates back when this financial issue started, must be good for business fixing at decent rates Ultimately we shall see how it all pans out when the euro goes tits up will be the moment of truth but at the moment we are stuck in a situation of people reducing personal debt rather than spending and that is what is making things pretty much stagnate. In the long term it is for the best but its clobbering the government plans as tax receipts are so far down it screws all predictions. Don't need the threat of rising interest rates to sell good fixed rates, at marginally over 3% for 5 years, why on earth would anyone choose to go variable? it would be a pointless and quite possibly, suicidal move unless they intended to get out within the 5 years! You are unfortunately hiding with the sheep, some very prominent idustry figures were expecting BBR to reach 8% this year, that, thankfully hasn't materialised but it is only a postponement, not a cancellation... All of the stimulus thrown at the economy WILL have an effect at some point, it will probably sneak up and take everyone by surprise, but, when it does, it will take VERY big brakes to bring that ship back under control.. As for looking at long term Gilts... again, a slightly 'ostrich' way of predicting the future of inflation and interest rates... If studying GILTS worked we shouldn't ahve interest rates where they are now, interest rates wouldn't have hit 15%+ in the early 90s. Greece, Spain, Portugal, Ireland and Italy I'm pretty sure, would have laughed at anyone suggesting their GILT yeilds would be at a point where a bailout was neccessary not too many years ago! And, don't forget, the cost of government borrowing (GILTS) affects the borrowing costs of everyone in that country, not just the government... add that to potential inflationary pressures and double digit interest rates are more than a possibility, far sooner than anyone would like to imagine.. The usual rubbish spouted is that the government wouldn't dare put rates up... well, a. it's not up to the government and b. Central banks don't have much choice if inflation starts to rise. The next one is 'we are in a recession (heading for a depression) so how is inflation going to rise?' well.. the cost of borrowing can and will rise significantly if the Euro fails as spectacularly as it probably will! that not onle has a direct effect on the rates paid but also adds to inflationary pressures which mean rate rises are possibly more necessary, then there are other things... the cost of insurance is set to rise more than 30% next year, that will have a massive effect on inflation as it affects almost everyone. We are (possibly) in for a short term Oil Glut thanks to shale fraking technology finally coming on stream BUT... it is only cost effective if the price of a barrel stays at £100+, the west is so addicted to the black stuff so it will make sure it stays where it needs to, that will force the cost of fuel and therefore EVERYTHING up. China is heading into dangerous territory, there is a widening gap between rich and poor and the population is demanding western style lifestyles, that is forcing Chinese companies to increase wages and therefore put prices up to compensate.. Also, as there is falling demand for Chinese goods due to the Wests continuing economic problems, we will start to see the effects of cost-push inflation forcing import costs up in the UK.... yada, yada, yada There is so much going on in the world that could have HUGE economic implications for us here in the UK without even starting on geo-political and strategic aspects which could pop up and give us a slap with no warning! Anyone who says... 'nahhh won't happen' is burrying thier heads in the sand and not looking at the bigger picture... Sure, if we take a snapshot of Britain's current economic position, it looks like there is little chance of anything happening to make rates rise, however, none of the things above, and most everything else that could cause us a headache, are happening within our shores... even the rediculous rise in insurance costs is all down to our wonderful 'friends' in Brussels! Quote Link to comment Share on other sites More sharing options...
al4x Posted September 17, 2012 Report Share Posted September 17, 2012 can we have a bet Vipa £200 says we won't have rates of 8% plus at this time next year. I'm sure Mungler will be round in a bit to put an offer to you as well if you're that confident. Quote Link to comment Share on other sites More sharing options...
Vipa Posted September 17, 2012 Report Share Posted September 17, 2012 can we have a bet Vipa £200 says we won't have rates of 8% plus at this time next year. I'm sure Mungler will be round in a bit to put an offer to you as well if you're that confident. Where on earth did I say next year? Quote Link to comment Share on other sites More sharing options...
al4x Posted September 17, 2012 Report Share Posted September 17, 2012 or the year after :whistle Quote Link to comment Share on other sites More sharing options...
Vipa Posted September 17, 2012 Report Share Posted September 17, 2012 (edited) or the year after :whistle I expect to see interest rates start to creep within 3 years... When I'm sat with clients my timeframe is 5-10 years as that is as far ahead most people can realistically imagine. I'm pretty sure we will see significantly higher interest rates within 5 years and quite probably double digit within 10, possibly sooner if Europe collapses. As I said earlier, it's not a case of if but when, unfotunately my crystal ball needs some new dilithium so can only work with what it can see! Edited September 17, 2012 by Vipa Quote Link to comment Share on other sites More sharing options...
al4x Posted September 17, 2012 Report Share Posted September 17, 2012 to be fair creeping rates within 3 years is hardly to be unexpected but it shows the level of stagnation out there that doom and gloom is now pushed well ahead, the double digit bit is the interesting claim as personally I can see it being in most peoples interest getting it back to 5% or there abouts savers get a half decent return and it won't kill the housing market. Double digits would send a good 50% of people with mortgages into severe trouble and the number of repos through the roof prevent anyone getting on the ladder as a first time buyer and kill the building market and a lot of the industry the government are looking to to get us out of this. At the point where the end of this is no where near its very hard to suggest the powers that be would sink the ship by throwing rates through the roof Quote Link to comment Share on other sites More sharing options...
Vipa Posted September 17, 2012 Report Share Posted September 17, 2012 to be fair creeping rates within 3 years is hardly to be unexpected but it shows the level of stagnation out there that doom and gloom is now pushed well ahead, the double digit bit is the interesting claim as personally I can see it being in most peoples interest getting it back to 5% or there abouts savers get a half decent return and it won't kill the housing market. Double digits would send a good 50% of people with mortgages into severe trouble and the number of repos through the roof prevent anyone getting on the ladder as a first time buyer and kill the building market and a lot of the industry the government are looking to to get us out of this. At the point where the end of this is no where near its very hard to suggest the powers that be would sink the ship by throwing rates through the roof You are missing the point... Whilst the MPC do take as much as possible into account when making decisions, everything comes secondary to controling inflation... at they end of the day, they don't care if 2 million are repo'd, they do care about inflation getting out of hand, and let us not forget that there are more savers out there than borrowers who would benefit grately from higher rates... in fact, increase rates, give the baby boomer retirees a better return on thier pensions and therefore more disposably income... they could spark a resurgence in high street spending and buy us all out of the poo!!!!!! This is also quite interesting... the video doesn't work but the writing is still there... yes, this is scaremongering as it is trying to sell you something and the target dates are out.. but the scenario is explained quite well... http://www.goldonomic.com/hyperinflation.htm Quote Link to comment Share on other sites More sharing options...
al4x Posted September 17, 2012 Report Share Posted September 17, 2012 You are missing the point... Whilst the MPC do take as much as possible into account when making decisions, everything comes secondary to controling inflation... you see you fall at the first statement, while watching inflation they have very much been letting inflation run a lot higher than their targets to keep rates down to both protect the housing market and also stimulate spending. It obviously hasn't worked that well but what it has done is stopped the collapse of the market as in Ireland and we are weathering the storm reasonably well. So to have this bet what are you up to now 10 years before you are confident enough to put your money where your mouth is on double digit rates Quote Link to comment Share on other sites More sharing options...
Vipa Posted September 17, 2012 Report Share Posted September 17, 2012 you see you fall at the first statement, while watching inflation they have very much been letting inflation run a lot higher than their targets to keep rates down to both protect the housing market and also stimulate spending. It obviously hasn't worked that well but what it has done is stopped the collapse of the market as in Ireland and we are weathering the storm reasonably well. So to have this bet what are you up to now 10 years before you are confident enough to put your money where your mouth is on double digit rates Ehhh? Inflation in Ireland hasn't gone through the roof... in fact it went through a period of deflation and is currently bobbing along at or near to target... if you look at the collapse in the property market in Ireland, you will realise that they will never repair it.. they have but a band aid over a waterfall... it's holding and giving a sense of security however, Ireland's national debt is rising again... and fast... how long can that continue? Let's see what happens when Europe collapses... should make for a great Hollywood blockbuster in a couple of decades! Money where mouth is? If i've learned one thing from 2 decades in this industry.... one never knows what's around the corner and it's usually not what one expected... I've never been a risk taker nor a gambler which is why I am/will never be rich. When I talk with clients it's my job to help them put a roof over thier heads AND make sure they can keep it there... It is not my job to make them loads of cash... I leave that to the poker players and IFAs. Quote Link to comment Share on other sites More sharing options...
dougall Posted September 17, 2012 Report Share Posted September 17, 2012 Vipa, Read the last6/7 quarterly inflation reports from Merv the Swerve.....if as he is suppossed to predominantly raise rates to dampen inflation he has found about 8 different excuses not to......why because he knows UK economy is flatlining. Govt don't mind infaltion(but would never state so publicly) because it is good for eroding the mega debt overhanging. To dismiss the Gilt market as a forerunner of interest rates is um.....bizarre for someone who implies they advise clients on mortgages do you charge much for your expertise? Quote Link to comment Share on other sites More sharing options...
Vipa Posted September 17, 2012 Report Share Posted September 17, 2012 (edited) Your average mortgage client would glaze over if presented with an economics lesson... they want to know they can afford it now and in thier perceivable future and that they will be safe if something unexpected were to happen. GILT futures change all the time... If I look at a current 5 or 10 year GILT yield it would be no different to me looking at a specific companies 5 or 10 year forcast... it gives me an indication of what the yield will be today but not tomorrow or next month or next year... i.e. I could look at a 10 year GILT yield of say 4% but, if I then looked at a 5 year GILT yield in 5 years it may be 8%, in other words, the price of a GILT is based on it's future value.... today, nothing more. things change.. quite often significantly and severely... just have a look at the last 4 years! As an example, last year, Italy's 10 year bond yields went up to over 7 percent before falling back to under 5... Here's something else to have a listen to whilst doing your day job...... I love doom and gloom me http://www.financialsensenewshour.com/broadcast/fsn2012-0120-1.mp3 Edited September 17, 2012 by Vipa Quote Link to comment Share on other sites More sharing options...
AVB Posted September 17, 2012 Report Share Posted September 17, 2012 In defence of Vipa he is right wrt cost of wholesesale funds. However I do disagree with him regards to double digit rates. I believe he is overplaying the independance of MPC and that inflation overrides all other considerations. Inflation will go up but not due to increased lending. Sterling will remain strong and hence will offset the pressure to increase rates. Quote Link to comment Share on other sites More sharing options...
dougall Posted September 17, 2012 Report Share Posted September 17, 2012 ''never a lender or a borrower be''.......banks don't offer fixed rates because they love their customers!!They do it to make money..simples yes historically 3% is v.cheap and a fixed rate for those maxxed out/needing upside protection make sense for part/all of loan.,but never believe banks do it for love. Gilts are the predicted future rates dictated by inflation expectation.Over bought and distorted to some degree by fear/QE.BUT the Gilt market is the price of money market simples. A 5 year gilt in 5 years time would redeem.At any given time they are the markets anticipation of future money costs and DIRECTLY dictate fixed rate money costs,...still tricky times to give mortgage advice,not many lenders are there to chose from?? atb Quote Link to comment Share on other sites More sharing options...
Vipa Posted September 17, 2012 Report Share Posted September 17, 2012 (edited) In defence of Vipa he is right wrt cost of wholesesale funds. However I do disagree with him regards to double digit rates. I believe he is overplaying the independance of MPC and that inflation overrides all other considerations. Inflation will go up but not due to increased lending. Sterling will remain strong and hence will offset the pressure to increase rates. Hope so... I'm stuck on a BIG, LOW variable rate.... the last thing I need is double digit rates... Edited September 17, 2012 by Vipa Quote Link to comment Share on other sites More sharing options...
rocksaplenty Posted September 17, 2012 Report Share Posted September 17, 2012 A cynical person could think that the gap between the financial crash and crash in house prices has been so that the government could re capitalise and test the banks so that they can survive the hit. Sometimes we forget that while government policy can create breathing spaces, capitalism will always rule the economy. Quote Link to comment Share on other sites More sharing options...
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