Interest Rate up a measly .25%

[Mr Bump]

Oh well it's start.

 

[cambsno]

Find this strange and agree with Vince Cables on this. We have uncertainty for the next year at least with Brexit, and according to many, we face economic hardship post brexit,. While inflation is a concern, interest rate increases will only lead to people being more cautious and hamper growth.

 

[MatBin]

While I appreciate it may boost saving returns I really feel for those with mortgages that they are just about managing to pay, especially if they have little or no chance of a pay increase.
Very odd this theory of curbing inflation by increasing the bank rate, if prices increase people will request a wage rise which surely puts up other costs which increases inflation and so it goes on.
I lived through the 70/80's when we had high inflation and record high mortgage rates, namely 14, yes 14% I wouldn't want a return to that even if it did boost my savings, even though I have no mortgage.
Matt

 

[cambsno]

While I appreciate it may boost saving returns I really feel for those with mortgages that they are just about managing to pay, especially if they have little or no chance of a pay increase.
Very odd this theory of curbing inflation by increasing the bank rate, if prices increase people will request a wage rise which surely puts up other costs which increases inflation and so it goes on.
I lived through the 70/80's when we had high inflation and record high mortgage rates, namely 14, yes 14% I wouldn't want a return to that even if it did boost my savings, even though I have no mortgage.
Matt

And the difference was that in the 80s you could buy a house on 3x income, not now! A 2 bed semi in a large village 7 miles from Cambridge will set you back £250k, so 2 people in their 20s earning 25k each would still need to get a mortgage around 5x joint income, tough enough at these record low rates.

 

[MatBin]

I sympathize but 14% meant you were paying more than 1/3 of your post tax earnings to satisfy the mortgage, it definitely required 2 incomes. I don't want to get into a contest but please remember many people got a mortgage at a much lower rate of interest and then saw the repayments rocket up, totally screwing their carefully budgeted plans. We have 'enjoyed' very low interest rates for nearly 10 years and allowed for a long period of stable budgeting. To be fair I don't think it has ever been easy, not then and not now, we had more than 7 years where interest rates were at or above 10%.
https://tradingeconomics.com/united-kingdom/interest-rate

 

[DG Phototraining]

You have a poor memory Matt - it was 15.4% for quite some time when we bought our first house in the 80s

But yes, I can't see how a .25% increase will do anything but cause people with sod all spare cash to have even less spare cash, and hence be more inclined to demand a pay rise; and people with savings accounts won't even notice a difference

 

[MatBin]

Mid to late 70's it was quite low and then steadily climbed and stayed there for quite a while, see the link above for graph.

 

[JonathanRyan]

And.........just in time for Christmas

I honestly thought they would wait until January when everybody was depressed anyway.

BTW, let's see if it filters to savings accounts as well as mortgages. I mean, unlike the last cut.

 

[andya700]

And the difference was that in the 80s you could buy a house on 3x income, not now! A 2 bed semi in a large village 7 miles from Cambridge will set you back £250k, so 2 people in their 20s earning 25k each would still need to get a mortgage around 5x joint income, tough enough at these record low rates.

That is also a fairly common price for a two or maybe three bed semi down in Kent.
The big problem is wages. Neither my OH or I are earning as much as we did ten years ago, despite doing the same kind of work at the same level. We are both earning under £24K a year, but there are people working in both our companies, who are educated to degree level, are in their thirties or forties, and are earning between £16K to £20K a year.
The vast majority of folks cannot afford to put down a deposit on a house, let alone afford a mortgage.
The people getting rich are the buy to let landlords.

 

[onomatopoeia]

Oh well it's start.

You should have said "Interest rate doubled!!!" Much more dramatic.

It'll be about an extra tenner a month on my mortgage, I'm not stressing.

 

[Mr Bump]

To much cheap money around at the moment encouraging to many people to build up debt especially credit cards.

 

[cambsno]

That is also a fairly common price for a two or maybe three bed semi down in Kent.
The big problem is wages. Neither my OH or I are earning as much as we did ten years ago, despite doing the same kind of work at the same level. We are both earning under £24K a year, but there are people working in both our companies, who are educated to degree level, are in their thirties or forties, and are earning between £16K to £20K a year.
The vast majority of folks cannot afford to put down a deposit on a house, let alone afford a mortgage.
The people getting rich are the buy to let landlords.

Yes, I really disagree with the BTL market which forces up house prices in this way. Have no probs with 2nd homes or holiday homes, 3+ houses IMO should be very heavily taxed or outlawed (probably impossible).

 

[Mr Bump]

Not sure how house prices got in here, this is just the north south divide, houses in Yorkshire are still well cheap.
if you want to live in the south you pay a lot for housing that's basically it.

 

[MatBin]

Not sure how house prices got in here, this is just the north south divide, houses in Yorkshire are still well cheap.
if you want to live in the south you pay a lot for housing that's basically it.

For some it isnt a want its a need to live in the South.

 

[Tringa]

Not strictly about the rate rise but this programme from last night is worth a look - https://www.bbc.co.uk/iplayer/episode/b04yn2yq/the-superrich-and-us-episode-2 . It has some interesting comments about how we got to where we are now.



Dave

 

[Cobra]

And the difference was that in the 80s you could buy a house on 3x income,

In the late 70's My 3 bed house was twice my yearly salary, ( +£1000 down) the house is in a reasonable area, but nothing special and needed "some" interior work.
My salary was nothing special either about or slightly above average.
I'm still here and on a average or slightly below average, and no way could I afford to by my own house!

Which leads me nicely on to the other point about interest rates, When I / we were buying the interest rates were sky high I can't remember exactly but it was around the 12% mark ( could have been more)
Obviously its all paid for, and now with little in the "bank" the interest rates are through the floor!
There are many of out there, that got ( are getting) hammered both ends!

 

[Mr Bump]

For some it isnt a want its a need to live in the South.

True but hose prices in the south have been this way for many decades this is not a new thing.
even back in the 80s when interest rates were sky high.

In many respects southerners have had it great for the last 10 years with mega low interest rates the ability to overpay has been massive with large interest savings to be had.

people need to understand as well that when they buy into a mortgage they are buying in to 20+ years. if they are calculating repayments when the market is at its cheapest and still spending at the top of their budget then they are stupid.

 

[tijuana taxi]

In the late 70's My 3 bed house was twice my yearly salary, ( +£1000 down) the house is in a reasonable area, but nothing special and needed "some" interior work.
My salary was nothing special either about or slightly above average.
I'm still here and on a average or slightly below average, and no way could I afford to by my own house!

Which leads me nicely on to the other point about interest rates, When I / we were buying the interest rates were sky high I can't remember exactly but it was around the 12% mark ( could have been more)
Obviously its all paid for, and now with little in the "bank" the interest rates are through the floor!
There are many of out there, that got ( are getting) hammered both ends!

Damn straight there Mr Cobra, also had the rather splendid poll tax of 600 quid each because we didn't live in a Tory London borough

If they had kept borrowing rules strict the housing market would never gone the way it has.
Prices would have been self regulating with 3 x salary and 10% deposit, all this interest only and 100% mortgages until you die have made matters far worse.

Also didn't help when first time buyers all of a sudden wanted houses that were traditionally larger/dearer ones you worked your way up to.
Their lives weren't complete without an ensuite bog for every room, multi turreted conservatory and red leather 3 piece from DFS that was buy now and pay when it had worn out

 

[Cobra]

people need to understand as well that when they buy into a mortgage they are buying in to 20+ years

As I understand it, there are now 60 year mortgages available (WTF?) that you can pass on to your children.
That assumes of course that "you" plan to have ( already have) children.

if they are calculating repayments when the market is at its cheapest and still spending at the top of their budget then they are stupid.

Unfortunately its a trap that many people fall into, and its probably easier these days these with companies throwing Credit cards at you, cheap loans for extortionately priced cars etc etc.
Some people are just in capable of looking to the future ..
But its no good sitting in judgement, for as the saying goes .. That but for the grace of god go I! ...

 

[Cobra]

Seems I was typing while you were posting

Also didn't help when first time buyers all of a sudden wanted houses that were traditionally larger/dearer ones you worked your way up to.

Yep, it's the "I want it now" culture

3 piece from DFS that was buy now and pay when it had worn out

That made me chuckle but its oh so true.

 

[RandomlySet]

What makes me laugh every time something comes on the news about interest rates is they (reporters) always start with "it's good news for savers, bad news for home owners".... (or the other way around) Are they saying you are either one or the other? What a load of crap. We have a house, and also save. So I'd imagine it'd balance itself out in some cases (not done the maths)....

Off topic a little: What I'm waiting for, once PPI is out of the way, is people claiming they were mi-sold "interest only mortgages" and that once it comes time to pay off the final balance, they won't have the cash.

 

[Cobra]

What makes me laugh every time something comes on the news about interest rates is they (reporters) always start with "it's good news for savers, bad news for home owners".... (or the other way around) Are they saying you are either one or the other?

As above, I suspect that they assume most of the population is one or the other.
Of course there will also be some "middle grounders" too, and that's what "We" were also, but of course I'd be lying if I said it was easy.. saving for the next car (or that leather suite from DFS )

 

[Cobra]

Off topic a little: What I'm waiting for, once PPI is out of the way, is people claiming they were mi-sold "interest only mortgages" and that once it comes time to pay off the final balance, they won't have the cash.

Actually thats a very good point! We started out like that,as on paper it was a great idea!
But after a few short years the reality was something totally different.
Despite all the initial claims of how much capital would be left after clearing the mortgage.
We "got out" of that scheme.

So, is / are the government / banks responsible, and people will sue for compensation?
Or is it about time people started taking responsibility for their actions?

 

[Mr Bump]

What makes me laugh every time something comes on the news about interest rates is they (reporters) always start with "it's good news for savers, bad news for home owners".... (or the other way around) Are they saying you are either one or the other? What a load of crap. We have a house, and also save. So I'd imagine it'd balance itself out in some cases (not done the maths)....

Off topic a little: What I'm waiting for, once PPI is out of the way, is people claiming they were mi-sold "interest only mortgages" and that once it comes time to pay off the final balance, they won't have the cash.

I suppose what they generally mean is it is bad news for younger people where their primary debt is a mortgage and
good news for older people who have paid the house of and are saving for retirement and pensions etc.

 

[RandomlySet]

So, is / are the government / banks responsible, and people will sue for compensation?
Or is it about time people started taking responsibility for their actions?

Don't get me started on that topic!

The latest with Brighthouse etc.... That's the individual's fault IMO! They have a reputation for extortinate pricing.... But as I was gonna post earlier (I deleted it), people seem to have a sense of entitlement these days. Partly because of Reality TV, Instagram, whatever, everyone thinks they deserve a 50" 4k TV, Xbox One, New car etc etc....

I bet when companies such as Brighthouse ask what the individual's outgoings are, they (the customer) either undervalue, or deliberately not mention other items they know they are paying for on the weekly! If you can't either save up, or afford it, don't buy it! A lot of what people get in debt for are luxury items they want not need. Food, clothes and shelter is all anyone needs IMO. Anything else is a luxury item.

 

[tijuana taxi]

Don't get me started on that topic!

The latest with Brighthouse etc.... That's the individual's fault IMO! They have a reputation for extortinate pricing.... But as I was gonna post earlier (I deleted it), people seem to have a sense of entitlement these days. Partly because of Reality TV, Instagram, whatever, everyone thinks they deserve a 50" 4k TV, Xbox One, New car etc etc....

I bet when companies such as Brighthouse ask what the individual's outgoings are, they (the customer) either undervalue, or deliberately not mention other items they know they are paying for on the weekly! If you can't either save up, or afford it, don't buy it! A lot of what people get in debt for are luxury items they want not need. Food, clothes and shelter is all anyone needs IMO. Anything else is a luxury item.

We termed it pools winner syndrome and it wasn't only the younger generation.

Some older people used the equity from their house to buy luxury cars and go on holiday to the third moon of Jupiter (nearly forgot the corner unit set from DFS)
Shock, horror you have to pay that remortgage money back so don't bleat on about you won't ever be able to retire

 

[stupar]

Its funny how peoples perception of money differs based upon their own circumstances.

Mrs Stupar and I have nothing on HP and the outgoings we have are deemed necessitys/things to make life comfortable.

When Mrs Stupar took a voluntary severance package with her last job we use the money to pay off a loan we took to get new windows fitted, put money in the kids savings accounts, had a wee holiday up north and did some house renovations.

Interestingly the mother in law thinks we squandered the cash on rubbish and instead should have bought a car with it.

We live in Edinburgh - we dont need a car right this minute, moreso with an ample bus service. Plus a car brings in its own additional costs.

I put her thinking down to being retired, mortgage free, good monthly income from her pension and ample savings. But i gaurantee if she wasnt so well off her thinking would be different!!!

Im trying to teach my kids that money is not infinite and to value it and that its not something you can just spunk up a tree.

If we cant afford something even if we want it, it doesnt get bought.

Catalogs, credit cards and the likes of brighthouse just open the flood gates for irresponsible spending for some people.

You have to be responsible for your own shortfalls in life rather than looking for someone else to blame especially when it comes to money.

 

[MatBin]

True but hose prices in the south have been this way for many decades this is not a new thing.
even back in the 80s when interest rates were sky high.

In many respects southerners have had it great for the last 10 years with mega low interest rates the ability to overpay has been massive with large interest savings to be had.

Those two sentences just dont go together, sky high house prices requiring 5x income dont leave a lot of spare cash to overpay a mortgage.
I have no desire for this to become a North vs South argument.

As an example of Southern prices though, where I live (just North of London) house prices are inflated partly because of London wages and also its proximity to excellent schools (I know other parts of the country have excellent schools too), easy commute and countryside close by (or at least what we call country side down here). I spent almost a year working for an estate agent last year and was amazed at how little you get for your cash/mortgage/bank of Mum & Dad, a small (1,000 sq ft) 3 bed semi near the town centre/school/railway would cost in excess of £800K on a main road or £950K on one of the smaller/quieter side streets, alternatively go further out of Town and risk not being able to get your kids into the local school (junior or senior) and you'll be looking at a £1m plus for a 4 bed semi or possibly detached with a small garden.

That requires a massive mortgage and even a 1/4 % rise has a huge impact on people's finances because of the size of the mortgage.

Many years ago when I had a large (for then) mortgage every 1% raised my payments by £100/month and it wasnt unusual to have a 1 or 2% increase in a short period, I truly hope we dont get anywhere near that ever again, we had people handing back their keys to building societies (remember them) and walking away from their property still owing the lenders money even after they were sold at auction. We had people unable to sell their houses and move down market because of negative equity brought on because house prices crashed due to unaffordability of mortgages. People in deep financial trouble because mortgages were taken out when interests were low (say 7 or 8%) and then hiked to 15%. I'm not bleating for myself as it didnt happen to me, well it did but that was because I lost my job and that's a different matter.

Can you image the social/financial unrest a mortgage/bank rate of 6/7/8% would have these days, so I truly hope that despite it possibly being great for savers, although price inflation would soon erode that benefit, I believe it would wreak more harm than good to see high interest rates again.

 

[Mr Bump]

@MatBin yes and I agree with most you say but the south and London is NOT the entire UK.
by all means complain about the price of housing etc but it is a personal choice where one lives.
We (The royal we) also have to curb expenditure which is what the interest rates are pegged to.
We as consumers spend more and/or inflation goes up. which is mainly at the moment linked to brexit and the higher cost of imports but the books need to be balanced.

I also hope interest rates don't go to 6% and I am sure nowadays they never will but personally for savers and pensioners I would like to see it back to about 3%.

 

[MatBin]

@MatBin yes and I agree with most you say but the south and London is NOT the entire UK.
by all means complain about the price of housing etc but it is a personal choice where one lives.
We (The royal we) also have to curb expenditure which is what the interest rates are pegged to.
We as consumers spend more and/or inflation goes up. which is mainly at the moment linked to brexit and the higher cost of imports but the books need to be balanced.

I also hope interest rates don't go to 6% and I am sure nowadays they never will but personally for savers and pensioners I would like to see it back to about 3%.

To an extent it's a personal choice but some people have to live down South because of job comitments or even opportunity not available in other parts of the country. Not much point being a London cabby and living in Leeds/Swansea/Glasgow
We have hospitals, schools etc that have to be staffed and it must be very worrying for those employed in those environments to see interest rates rising, but as you say hopefully they'll only go up a little and yes that would benefit pensioners (which incidentally I will be next year, with luck!)
Good discussion without it going awol and getting personal Thanks.

 

[andya700]

True but hose prices in the south have been this way for many decades this is not a new thing.
even back in the 80s when interest rates were sky high.

In many respects southerners have had it great for the last 10 years with mega low interest rates the ability to overpay has been massive with large interest savings to be had.

people need to understand as well that when they buy into a mortgage they are buying in to 20+ years. if they are calculating repayments when the market is at its cheapest and still spending at the top of their budget then they are stupid.

When we bought our two bed semi (in Kent) in the early nineties, it was 2.75 times my salary. Judging by today's valuations (Other houses sold in the past year), the house would be 10.4 times my current salary.

 

[onomatopoeia]

As an example of Southern prices though, where I live (just North of London) house prices are inflated partly because of London wages and also its proximity to excellent schools (I know other parts of the country have excellent schools too), easy commute and countryside close by (or at least what we call country side down here). I spent almost a year working for an estate agent last year and was amazed at how little you get for your cash/mortgage/bank of Mum & Dad, a small (1,000 sq ft) 3 bed semi near the town centre/school/railway would cost in excess of £800K on a main road or £950K on one of the smaller/quieter side streets, alternatively go further out of Town and risk not being able to get your kids into the local school (junior or senior) and you'll be looking at a £1m plus for a 4 bed semi or possibly detached with a small garden.

That sounds like Harpenden, especially as you threw in the "automatically double the house price" factor of the schools.

 

[tijuana taxi]

With all this talk of north and south think of all the working class Londoners forced from the area they were born because of crazy house prices

Utter madness in even less than great parts of East London (only bit I know well) its not a choice when you have grown up there.
Family, work and friends are there or at least were, no way the ordinary Londoner can afford those prices.

Places like Cambridge are equally crazy, can't see how it can continue and maybe a property crash is needed to reset things

 

[Cobra]

When we bought our two bed semi (in Kent) in the early nineties, it was 2.75 times my salary. Judging by today's valuations (Other houses sold in the past year), the house would be 10.4 times my current salary.

And so it continues

can't see how it can continue and maybe a property crash is needed to reset things

Trouble with the ones in the past, they soon recover and climb even higher, the kids of today, don't really stand a chance do they?

 

[Craigus]

@MatBin yes and I agree with most you say but the south and London is NOT the entire UK.
by all means complain about the price of housing etc but it is a personal choice where one lives.
.

This couldn't be further from the truth, Paul. Technically, maybe there is a choice, but it is far more complicated than that for the vast majority of people.

 

[tijuana taxi]

Trouble with the ones in the past, they soon recover and climb even higher, the kids of today, don't really stand a chance do they?

Always darkest before dawn, sure our parents thought that too, they will be fine and then worry for their offspring.

One thing we do need to deal with is the lack of decent pension availability, one of the main reasons individuals buy to let
Do wonder what the renter generation will do when they retire, rents won't be lowered for them on their reduced income.

 

[cambsno]

@MatBin yes and I agree with most you say but the south and London is NOT the entire UK.
by all means complain about the price of housing etc but it is a personal choice where one lives.
We (The royal we) also have to curb expenditure which is what the interest rates are pegged to.
We as consumers spend more and/or inflation goes up. which is mainly at the moment linked to brexit and the higher cost of imports but the books need to be balanced.

I also hope interest rates don't go to 6% and I am sure nowadays they never will but personally for savers and pensioners I would like to see it back to about 3%.

No we don't, what do you expect office cleaners, nurses, secretaries HR people, mechanics, shop workers etc... to do - commute in from Blackburn to the home counties or just cut down on luxury spending so that they can afford a £500k 2 bed house??

 

[Cobra]

Do wonder what the renter generation will do when they retire, rents won't be lowered for them on their reduced income

I never understood that, sure in my parents era, renting a council house was the thing to do ( mostly)
But these days, apparently, most of Europe are "renters" or so I'm led to believe, with only ( Mainly) the brits having a must buy culture.

This has never made any sense to me, I've never rented, so I can't really compare figures, but as I understand it, there is little difference in price,
and after 25 ( or whatever) years, you are still paying rent, and have nothing to show for it at the end.

 

[Craigus]

I never understood that, sure in my parents era, renting a council house was the thing to do ( mostly)
But these days, apparently, most of Europe are "renters" or so I'm led to believe, with only ( Mainly) the brits having a must buy culture.

This has never made any sense to me, I've never rented, so I can't really compare figures, but as I understand it, there is little difference in price,
and after 25 ( or whatever) years, you are still paying rent, and have nothing to show for it at the end.

I think renters know this, try saving for a deposit on a house when you have no spare income. My wife and I will be in a position to save for a deposit in a couple of years time, but most of our friends who own have been loaned or gifted the money for a deposit by their parents. Neither my Wife or I have that advantage so there isn't much we can do but through money away on rent at the moment.

I doubt it is a choice for 99% of people.

 

[MatBin]

I never understood that, sure in my parents era, renting a council house was the thing to do ( mostly)
But these days, apparently, most of Europe are "renters" or so I'm led to believe, with only ( Mainly) the brits having a must buy culture.

This has never made any sense to me, I've never rented, so I can't really compare figures, but as I understand it, there is little difference in price,
and after 25 ( or whatever) years, you are still paying rent, and have nothing to show for it at the end.

When I worked in Holland they told me that they would retire on 90% of working income so renting for ever or having a never ending mortgage makes more sense in some ways.
We dont have that "luxury".
Matt