Reply With QuoteWell I'm certainly not concerned, but then I don't own a house, have no chance of ever being able to afford to own a house, and don't borrow on credit cards, so I guess interest rates don't affect me that much.
I dont know about you - but financial people always seem to be warning of impending doom for the nation. Of course, sometimes they are quite right (remember the crashes in 1980s and 1990s) - but then, you would be if you are predicting it all the time.
OK, interest rates have risen over recent months - but should we be worried about this? Is the current financial climate even the same as the one in the 1990s where such rises may mean the same thing?
Have you purchased a house and are now thinking twice? Or is it a storm in a tea cup? Things like this often happen - but the housing market always seems to bounce back higher than the period before the crash. I am just interested in your thoughts on this one. I have a mortage like anyone else - but have locked everything into a fixed rate over a year ago (just to be on the safe side). At the moment it seems like the right choice - but you never know what is around the corner. If interest rates drop like a lead balloon I will be out of pocket.
Do you think interest rates will rise some more, will remain stable, will drop off? If so, when and why? Is it the housing market or credit card borrowing that you think might need addressing.
Do you think the government should have a more elegant tool for controlling these factors like a two-level interest rate structure - one for homes and one for everything else? At least that way you can raise the interest on everything else and people wont lose their homes.
Am I the only one getting mixed messages from the financial world? Should we be concerned?
Well I'm certainly not concerned, but then I don't own a house, have no chance of ever being able to afford to own a house, and don't borrow on credit cards, so I guess interest rates don't affect me that much.
Rate rises are having an effect. Anyone who is not on a fixed rate mortgage is paying more per month each time the interest rate rises. Mortgages become less affordable each time the rates rise and people thinking of moving or buying for the first time see the amount they can afford to borrow diminish each time the rates go up. This is leading to reduction of property market activity as buyers are unable to borrow enough to pay the high house prices that sellers are asking.
This has already happened and I can testify to this as I am in the coveyancing business. The level of market activity we are recording is a good 20% down on the previous 3 years.
Unless rates start to drop again I would expect to see stagnation of prices and maybe adjustment downwards. As soon as this downward adjustment happens the market activity will start to pick up again.
The main difference with the late 1980's/early 1990s scenario is that the interest rate at the moment is still historically quite low, nothing like as high as it was then. There has not been the same wave of default and repossession that there was then. The Bank of England are playing it quite safe at the moment using gradual small rises and not going in for "shock therapy".
I am no economist, but I can't see the logic in them dropping the rates again now because surely this would just re-ignite the overheated credit spending sector that they have been trying to slow down. I would have thought they would need to keep the interest rates at these levels or higher for a sustained period to achieve this objective. But I may be wrong.
It's certainly having an effect on me. I own two properties, one of which I rent out. Two years ago I mortgaged the rental property to get access to the equity, using an interest-only, buy-to-let mortgage at variable rate.
The repayment is now £100 more then the rental income, eating any profit I once made and making my investment less profitable by the day.
I've decided to sell up rather than remortgage because the property is of a type which can't be rented out for much more than it is now and at current interest rates I still wouldn't cover my costs.
The other mortgage (a repayment mortgage for our main home) came out of its fixed-interest period two months ago and we promptly went back to our broker to remortgage. She has access to deals the individual consumer can't get, and has played a blinder once again. Not only have we shaved two percent off the average (which is 5.5percent), our monthly repayments are lower, we've taken five years off the loan terms, have been able to borrow an extra £10,000 to extend our lease, and are saving around £7000 in total through overpayments. Oh, and we got free legals.
If anyone wants her number, let me know, she's a genius!
But without her, we would seriously struggle with high street rates. I don't envy first-time-buyers one bit.
Well I have a mortgage (from 1991 so it's no problem) and I don't borrow money so I'm pretty much immune to interest rate changes.
I think there is cause for concern if you've maxed out on your mortgage and have other borrowing. Interest rates have been quite low in recent years so if there's going to be any change they're only going to go up.
A big danger is that a 1% change from, say, 4% to 5% has a far bigger impact than a change from 10% to 11%. One is a 25% increase the other is a 10% increase.
In my experience, people tend to match their expenditure to their income. i.e. a pay rise means a new car or better holiday rather than more savings. It would be better to have a 10% margin where 10% of income goes towards savings. This builds up a savings fund (helps for rainy day scenarios) and also acts as a buffer for when things like rising interest rates hit.
So, it all depends on how we tackle our finances really.
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http://news.bbc.co.uk/1/hi/business/6244024.stm
Looks like interest rates could be rising again. ???
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I think it will get worse before it gets better - but i hope it does not go beyond - lets say - 7% - 8% as this would be really bad.
It seems that credit card borrowing is driving this more than the housing market - which does make interest rates a rather clumsy (though often effective) tool.
If people stopped borrowing so much on credit cards - things would improve.
Both my mortages are fixed for five years (and i did this some time ago and so got a good rate) so I am ok and have no worries along these lines (at least for now
I am not a financial expert by any means - but if you are on a budget - fixing the rate and this uncertain time would be a good thing to do.
I dont believe all the doom-stories of an impending major collapse - but it is going to hurt people before it gets better.
There will probably be one or two more rises in interest rates - going up to 6% or so. But with some people borrowing up to 8 times their annual salary, or even more, this could mean big problems.
I feel myself lucky that my mortgage is paid - the house is mine. Yippee.
I also remember 1993, I think it was, when the wonderful Mr Lamont put rates up to 15% to try to keep the pound in the ERM. Now that really was a punishing rate of interest, even though it was only for a matter of days.
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