[Finance] Interest Rates - Review

[Uncle Spielberg]

In the news again

The 12th rise in 12 months and possibly a 13th next month

When will it end ? I have no crystal ball but it is a good time to review your mortgage rates if you are on a variable rate, tracker rate or a fixed rate that ends anytime from next month to 9 months ahead to have time to get things right. Also compare with your present lender with the whole market

This is the same for Residential and Buy to Let properties

Also if anyone wants help and advice on the new 100%, renters mortgage

I am happy to help in anyway I can via PM or my Website

US/Gareth

 

[Giraffe]

It feels like we are at the top or very close to it now. The issues they have with inflation are slowly edging away albeit the food inflation continues supposedly due to Ukraine, although I have my suspicions that the major supermarkets are also taking advantage of this as supported by many of them making record profit levels.

Personally I think you've missed the boat to remortgage and try and avoid the rate hike. It's already happened and current mortgage rates had already expected another hike today a couple of weeks back so shouldn't make any material difference now.

Hard to ever predict the future but general consensus is mortgage rates will stablise soon and start edging down a little in 12-18 months.

 

[Uncle Spielberg]

I think you are right

 

[Nobby Cybergoat]

Rate rises predictably having no effect on inflation.

Almost as if the inflation isn't being caused by the people of the UK having way too much money to spend

 

[Machiavelli]

Rate rises predictably having no effect on inflation.

Almost as if the inflation isn't being caused by the people of the UK having way too much money to spend

They do. They just take a while to filter though

 

[Tom Hark Preston Park]

Can I be first of doubtless many to remind @Uncle Spielberg of the basics in times like these ie clear his inbox

 

[beorhthelm]

It feels like we are at the top or very close to it now. The issues they have with inflation are slowly edging away albeit the food inflation continues supposedly due to Ukraine, although I have my suspicions that the major supermarkets are also taking advantage of this as supported by many of them making record profit levels.

as i recall, supermarkets reported falling profits, albeit on increased revenues. that would be consistent with inflation, more money coming through but costs increasing so margin reduced.

more importantly for interest rates, looks like US Fed is done raising their rates , below expected inflation yesturday, so everything pointing to this being the top.

 

[Westdene Seagull]

They do. They just take a while to filter though

No they don't - rises have been going on for 12 months yet inflation has hardly budged. The BoE are too stupid to realise that inflation caused by mainly energy prices can't be controlled by interest increases. Just wish mortgages costs were included in the inflation calculation - then every time the archaic BoE increased the interest rate the inflation rate would increase too.

 

[Herr Tubthumper]

No they don't - rises have been going on for 12 months yet inflation has hardly budged. The BoE are too stupid to realise that inflation caused by mainly energy prices can't be controlled by interest increases. Just wish mortgages costs were included in the inflation calculation - then every time the archaic BoE increased the interest rate the inflation rate would increase too.

I’m sure @Machiavelli has a good response BUT with every increase more and more people with mortgages will be turning down the heating and buying less food surely? It’s incremental but there will surely come a point where it’s more noticeabl?

 

[Westdene Seagull]

I’m sure @Machiavelli has a good response BUT with every increase more and more people with mortgages will be turning down the heating and buying less food surely? It’s incremental but there will surely come a point where it’s more noticeabl?

But by transferring their spending from say food to mortgages they are not cutting their spending which is the point of interest rate increases - to encourage less expenditure and more saving. Sod the poor people it pushes under though. It's an entirely unproven process and quite clearly hasn't worked for the last 12 months. But you know the saying about repeating the same process and hoping for a different outcome .... yep .... stupidity.

 

[Machiavelli]

I was making a general point. Westdene offered a specific one. What needs to be factored into that is whether inflation would now be even higher if interest rates hadn't started to rise. We've now had 12 rises in a row (I think over a period of c18 months), so the effect ought to have worked into the system for a while by now.

 

[WATFORD zero]

Whether interest rates effect inflation or not, the BOE are tasked with managing inflation to a Government target and are given one tool to achieve this (all other 'tools' being rather appropriately in Government)

And unfortunately, even if energy costs drop, with a further hike on an already huge food inflation figure due in October this year and no sign of a solution to this, I really can't see any decreases in interest rates for at least another 18 months. Whether they have topped out or not I really couldn't speculate

 

[beorhthelm]

But by transferring their spending from say food to mortgages they are not cutting their spending which is the point of interest rate increases - to encourage less expenditure and more saving. Sod the poor people it pushes under though. It's an entirely unproven process and quite clearly hasn't worked for the last 12 months. But you know the saying about repeating the same process and hoping for a different outcome .... yep .... stupidity.

it does transfer demand away from consumer goods by paying down debt instead. wider impact of reducing new loans, which reduces cash available for demand. thats the theory anyway, there's a few hundred years and many boom/bust cycles to support it. we know the current inflation is largely from other factors, if BoE dont use interest rates and inflation stay high, they aren't doing limited task asked of them. its reasonable to expect inflation would be higher if there were no rate rises, partially because the £ would have sunk, and because people could spend more, demand would be higher.

 

[Herr Tubthumper]

But by transferring their spending from say food to mortgages they are not cutting their spending which is the point of interest rate increases - to encourage less expenditure and more saving. Sod the poor people it pushes under though. It's an entirely unproven process and quite clearly hasn't worked for the last 12 months. But you know the saying about repeating the same process and hoping for a different outcome .... yep .... stupidity.

True, people will be swopping food and heating for their mortgage interest but
1) I thought the idea of increasing interest rates to curb inflation was to reduce spending i.e. not neccessarily encourage saving.
2) I do not think mortgages are included in the inflation estimate.

 

[LamieRobertson]

Whether interest rates effect inflation or not, the BOE are tasked with managing inflation to a Government target and are given one tool to achieve this (all other 'tools' being rather appropriately in Government)

And unfortunately, even if energy costs drop, with a further hike on an already huge food inflation figure due in October this year and no sign of a solution to this, I really can't see any decreases in interest rates for at least another 18 months. Whether they have topped out or not I really couldn't speculate

Well you could speculate…..but perhaps it’s best not to

 

[The Grockle]

Feel very fortunate we locked in for 2 years when the base rate was at 4% but feel less confident the rate will have dropped in July 2025 when we have to remortgage. Very worrying time for many I'd imagine.

A question for those who have buy to let's, is there incredible pressure to hike rents? The rental market in this corner of Dorset is mental. Very little available and rents are eyewatering.

A 3 bed house we rented in 2018 for 1.1k a month is now close to 2k!

 

[WATFORD zero]

Well you could speculate…..but perhaps it’s best not to

Unfortunately my son is looking to buy a flat and has therefor been forcing me to speculate, but that is between me and him. As you know, I certainly wouldn't commit my speculations to print on anything I wasn't confident that I understood fully

 

[Herr Tubthumper]

A question for those who have buy to let's, is there incredible pressure to hike rents? The rental market in this corner of Dorset is mental. Very little available and rents are eyewatering.

A 3 bed house we rented in 2018 for 1.1k a month is now close to 2k!

I think most landlords will appreciate it's better to keep tenants and keep them happy as opposed to pass on interst rate increases. Void periods are costly. That said, when tenants leave of their own accord I imagine most landlords will re-let at the going market rate.....this is probably the moment to increase rents to cover extra interest. Like Dorset, Brighton and Hove is crazy as well.

 

[LamieRobertson]

Feel very fortunate we locked in for 2 years when the base rate was at 4% but feel less confident the rate will have dropped in July 2025 when we have to remortgage. Very worrying time for many I'd imagine.

A question for those who have buy to let's, is there incredible pressure to hike rents? The rental market in this corner of Dorset is mental. Very little available and rents are eyewatering.

A 3 bed house we rented in 2018 for 1.1k a month is now close to 2k!

One view ……but ask another and I bet they come up with a different answer

Capital Economics said that we are closing in on the peak in interest rates, if we haven't reached them already. It said:

Today’s 25 basis point rise in interest rates from 4.25pc to 4.50pc takes rates to our long-held forecast and may be the last hike, although one or two more hikes are possible.
We suspect the subsequent holding phase will be fairly long, lasting until the first half of next year. But we think the future cutting phase will be more aggressive than market pricing with rates falling to 3.00pc by end-2024 rather than to 4.00pc.

Rental markets not been helped by a lot of buy to letters either getting out of the market new entrants deciding not to enter it

 

[Goldstone Guy]

Interest rate rises strengthen the currency of the country raising them, do they not? A stronger currency reduces the prices of imports (eg food), so presumably it would help reduce inflation. Happy to have it explained to me why this is wrong.