Interest Rates up to 2.25% from 1.75%

gramercy

Member
Trouble with a long fix is you have no opportunity to get some paid off / benefit from increase in value and hit 90% or 85% ltv bands which would then reduce their monthly costs. We lost 20k on our old house so we had to stretch ourselves a bit, taking a 2 year fix initially meant that by the time we remortgaged onto a 5 year, we were at 85% LTV and our payments dropped a lot and that now goes into extra overpayments as we do about £600 a month over
Agreed, but if I was getting close to my limit of affordability just to get on the ladder I’d be more interested in keeping my payment at an affordable level than I would in gambling somewhat on the rate in order to get it cheaper sooner. Especially when the rate only really had one direction in which it could go. Great if it pays off, terrible if it doesn’t.

In fact when I bought my first house back in 2006. I fixed for five years at somewhere around 5.5%, as I didn’t have much left over at the end of the month. Looking back at what happened in 2008, I now know that if I’d have gambled it would have paid off. But had things been different and rates gone up a couple percentage points, I’d have been up the creek without a paddle.

If it’s someone who’s stretched for something they just simply wanted. Then they could have achieved what you suggest by lowering their buying price, leaving them with more meat on the bone each month to take that gamble with.
 

sherlock1969

Well-known member
Don’t forget this rate rise will massively improve profits for banks. There’s the driver and screw the public. No coincidence this is happening at the same time the cap on banker bonuses will be removed.
 

Glover_elbow

Well-known member
The Bank of England have literally one tool at their disposal and that is the control of interest rates.

So, in theory, raising the rate of inflation will stem consumer spending and prices will fall as a consequence.

That's the theory, but inflation is being driven by supply chain issues, worker shortages and the war in Ukraine.

I'm not an expert, not by any measure, but surely if a record number of people are living in poverty - and those figures rising daily - this BofE move will only compound the problem?

I can only conclude that the first world is now a slave to unregulated, open market capitalism.

It's a dystopian financial nightmare.
Agree consumer spending cant be driving inflation most people are skint.
 

B_G

Active member
Agree consumer spending cant be driving inflation most people are skint.
A lot of people found themselves with more disposable income during Covid. Even if their pay was reduced by furlough. Couldn't spend it on leisure / social events like they normally would. Also people's every day spending was reduced by working from home. No longer spending on lunches out, coffees, petrol, parking etc. Couldn't go on holiday.

This meant a lot of people spent on home upgrades and bought appliances/white goods that were maybe a "nice to have" rather than a necessity. I can see how consumer spending could have definitely increased in the last 18 months.
 

ThatFragranceGuy

Well-known member
A lot of people found themselves with more disposable income during Covid. Even if their pay was reduced by furlough. Couldn't spend it on leisure / social events like they normally would. Also people's every day spending was reduced by working from home. No longer spending on lunches out, coffees, petrol, parking etc. Couldn't go on holiday.

This meant a lot of people spent on home upgrades and bought appliances/white goods that were maybe a "nice to have" rather than a necessity. I can see how consumer spending could have definitely increased in the last 18 months.

100%

Our builder and plumber are booked up until next year - our builder until august. Am sure will be some cancellations but people have been spending like no tomorrow. Even with gas and electric going up, many work from home now. This saves me personally 3 hours car travel a day and we got rid of our second vehicle. If people have been smart they'll have paid things off during this lull but I imagine many have hammered cheap credit

People definitely still spending money and taking out finance. Games consoles, graphics cards, raw materials etc all still in short supply which keeps pricess high
 

B_G

Active member
100%

Our builder and plumber are booked up until next year - our builder until august. Am sure will be some cancellations but people have been spending like no tomorrow. Even with gas and electric going up, many work from home now. This saves me personally 3 hours car travel a day and we got rid of our second vehicle. If people have been smart they'll have paid things off during this lull but I imagine many have hammered cheap credit

People definitely still spending money and taking out finance. Games consoles, graphics cards, raw materials etc all still in short supply which keeps pricess high
I just think people's habits have changed as well. People have got used to not spending on hospitality and are spending that money elsewhere.

I'm trying to get my garden landscaped and I've tried 3 recommended landscaping firms, all booked up till May at the earliest. All saying they've never been as busy as what they've been in the last 2 years.

It's not great for the hospitality industry but money is definitely being spent.

Everybody driving round in new cars, whether it be PCP or finance. Lead times on cars are outrageous at the moment. Many exceeding a year.
 

Millbrook

Well-known member
The affordability test in place until August this year factored in a 3% rise in interest rates so those who mortgaged before that should not be under the cosh with this rise if other spending is under control.
 

London_Boro

Well-known member
I have managed to fix all of my mortgages (initial loan, then a move, then extra borrowing for improvements) all on a 10 year fixed earlier this year at about 2%.

That'll leave me with 2 years on my mortgage. Seems I've done the right thing, I think?
 
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B_G

Active member
The affordability test in place until August this year factored in a 3% rise in interest rates so those who mortgaged before that should not be under the cosh with this rise if other spending is under control.
The affordability tests are by no means fail safe. They rely on peoples honesty first up but also don't take into account changes in peoples spending habits.
 

Nano

Well-known member
The Bank of England have literally one tool at their disposal and that is the control of interest rates.

So, in theory, raising the rate of inflation will stem consumer spending and prices will fall as a consequence.

That's the theory, but inflation is being driven by supply chain issues, worker shortages and the war in Ukraine.

I'm not an expert, not by any measure, but surely if a record number of people are living in poverty - and those figures rising daily - this BofE move will only compound the problem?

I can only conclude that the first world is now a slave to unregulated, open market capitalism.

It's a dystopian financial nightmare.
This is true mostly but one thing that raising the interest rate does is strengthen the £. We buy global commodities in $ so as well as the price of oil/gas increasing in $ we would also be paying more on top of that if the £ was weaker.

Other countries are putting their rates up so we have to. Us put theirs up yesterday to 3-3.25%. Eurozone have already increased their rates this month.
 

GazC_MFC

Well-known member
The affordability tests are by no means fail safe. They rely on peoples honesty first up but also don't take into account changes in peoples spending habits.
Peoples honesty? Most companies have things in the background that will adjust understated outgoings
 

GazC_MFC

Well-known member
This is true mostly but one thing that raising the interest rate does is strengthen the £. We buy global commodities in $ so as well as the price of oil/gas increasing in $ we would also be paying more on top of that if the £ was weaker.

Other countries are putting their rates up so we have to. Us put theirs up yesterday to 3-3.25%. Eurozone have already increased their rates this month.
The pound of performnaing as it worse for decades against the dollar…..
 

B_G

Active member
Peoples honesty? Most companies have things in the background that will adjust understated outgoings
No computer is system is going to know if you are planning on changing jobs that will affect your income or whether you plan on taking out a £500/month PCP the week after your mortgage is approved.
 

GazC_MFC

Well-known member
No computer is system is going to know if you are planning on changing jobs that will affect your income or whether you plan on taking out a £500/month PCP the week after your mortgage is approved.
That could happen at any point in the full term of the mortgage. In mortgages you can’t work on hypothetical events that haven’t happened
 

B_G

Active member
That could happen at any point in the full term of the mortgage. In mortgages you can’t work on hypothetical events that haven’t happened
I am aware of that, which is why I said affordability tests aren't fail safe. It was in response to Millbrooks comment:

The affordability test in place until August this year factored in a 3% rise in interest rates so those who mortgaged before that should not be under the cosh with this rise if other spending is under control.

Just because someone passed an affordability test, doesn't mean they will be OK if interest rates increase to 3%. Their affordability test will have been based on fuel prices far lower than they are now as well as petrol costs being far lower than they are now as well.
 

Jonny Ingbar

Well-known member
This is true mostly but one thing that raising the interest rate does is strengthen the £. We buy global commodities in $ so as well as the price of oil/gas increasing in $ we would also be paying more on top of that if the £ was weaker.

Other countries are putting their rates up so we have to. Us put theirs up yesterday to 3-3.25%. Eurozone have already increased their rates this month.
This is a good point to be fair and some economist's were predicting a run on pound sterling, so there is an element of that at play.
 
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