Bank of England Interest rate increase Aug 18?

[Dashers]

I am in the middle of remortgaging and have been wondering the same thing. I think the consensus opinion by the people who know more about it than I is, the economy is (in the short-medium term) going to be screwed. Brexit might work for the better in 50-100 years, but it'll be bad for this generation.

Unfortunately this doesn't answer the question about base rates. We've seen them keep base rates down to stimulate the economy, but conventional thinking is that if inflation goes up (which with no trade deals, we can expect to see all our food etc go through the roof) then putting interest rates up combats this.

So it could stay low, or go high. And it's gone very high before. 15% in the eighties to try and curb inflation - it worked, but I wouldn't fancy paying 15% on my mortgage.

After umming and ahhing for a while we've decided to fix for 5 years. We might lose out, but lets face it, interest rates aren't going to go down (or by much), but there is a reasonably high chance they could go up significantly. We did the sums and it works out at a loss of about £3K to us if rates don't go up over that time - but given we've been fixing for two years the last few times, that is actually wiped out by saving on setup fees etc.

[cheesemp]

I fixed my mortgage at 1.91% for 5 years 6 months ago. Very pleased with that decision. Also have all debt on 0% (New kitchen, carpets and credit cards following building work and new child) so wouldn't affect me if they did. I can see it causing lots of issues for some not so fixed as me...

(Just got to concentrate on clearing the cards before my rates rise in 2 1/2 years to stay safe )

[bazooka]

That doesn't seem right... :\

[Hoonigan]

So, from my understanding, as someone who's currently saving up for a mortgage (we're around half way to a decent deposit), this is going to make it even harder to get a property.

Another example of the rich becoming richer?

[Smudger]

We've just fixed our mortgage for 5 years, also around 1.91%, basically cos I don't think we're going to get screwed by interest rates going down, and I think it's pretty likely they will go up, so at least we know what our outgoings are for a long period.

[Smudger]

So, from my understanding, as someone who's currently saving up for a mortgage (we're around half way to a decent deposit), this is going to make it even harder to get a property.

Another example of the rich becoming richer?

Yes and no. More people will not be able to afford current prices, so we'll probably get a bit of a crash in house prices, meaning your deposit will go further. Although you'll also probably have higher interest rates on your mortgage.

[kalniel]

Also you'll be able to build up a deposit more easily. On the whole, it should be easier to get a property if interest rates increase, however the mortgage will have to be more affordable in order to cover the added interest. This is probably a good thing too, as it will stop people getting a mortgage they can't afford and having the banks rely (and thus encourage) house price increases to get their money back.

[Hoonigan]

Also you'll be able to build up a deposit more easily. On the whole, it should be easier to get a property if interest rates increase, however the mortgage will have to be more affordable in order to cover the added interest. This is probably a good thing too, as it will stop people getting a mortgage they can't afford and having the banks rely (and thus encourage) house price increases to get their money back.

We're both working a full time job and yet it's taking an age to save up a deposit of around £15,000. Just to get a 2 bedroom house somewhere in Renfrew near Glasgow. House prices are ridiculous enough without making things even harder.

It's getting me more and more worked up, the more I think about it.

[Corky34]

It kind of works the other way around - if the pound falls further you'll need to increase interest rates to offset inflation. Yes, it will dampen GDP growth, which is why you only do it a little at a time. You also want to have the brakes on a little bit all the time, so that you can release them when you need to give a more urgent stimulus. At 0.5% we've got very little room to maneuver when we crash out of the EU.

Yea and no, increasing interest rates doesn't directly effect inflation it just controls the supply of money and it's that change in the supply of money that offsets inflation, the more money in the system the lower value it has and vice versa, because the government is fixated on 'balancing' the budget it's down to the BoE to control the flow of money in the system.

Because the government thinks it must 'balance' the books all the heavy lifting is being left to the BoE and unfortunately it can only do so much, it can't stimulate GDP growth directly by creating and spending money on specific things, it can only hope the extra money that it's putting into the system is used in projects that increase GDP as was seen when it embarked on QE and then moaned (did they do more than moan?) that the new money the put into the system wasn't going to the right people.

[kalniel]

At the time, wasn't the sole remit of the BoE to control inflation? QE was a tool to help increase inflation and stave off deflation.

[Zak33]

We're both working a full time job and yet it's taking an age to save up a deposit of around £15,000. Just to get a 2 bedroom house somewhere in Renfrew near Glasgow. House prices are ridiculous enough without making things even harder.

It's getting me more and more worked up, the more I think about it.

didn't you just buy/pcp/lease a new car?

[Zak33]

yeah you did, you little monkey...

My 2018 MK. 7.5 Golf GTD is serving me perfectly up to now. Excellent motor, truly excellent.

can't have your cake and eat it ...wel you can..but you might need to stop moaning about having a bad stomach ache

[TheAnimus]

can't have your cake and eat it ...wel you can..but you might need to stop moaning about having a bad stomach ache

Isn't that car almost twice the value of that deposit?

I can't imagine how anyone buys such expensive toys.

[Corky34]

At the time, wasn't the sole remit of the BoE to control inflation? QE was a tool to help increase inflation and stave off deflation.

I can't remember, either way the BoE can only do so much, if the government refuses to use fiscal levers it puts the BoE between a rock and a hard place, it's like trying to fly a helicopter when you've lost control of one side of your body.

[kalniel]

yeah you did, you little monkey...


can't have your cake and eat it ...wel you can..but you might need to stop moaning about having a bad stomach ache

Ouch.. yes. And the depreciation of a 2018 GTD over three years.. almost exactly £15k..

[Hoonigan]

The Golf is a company car and only costs me in tax, which when worked out over the 15,000 miles it's done since December in tyres and repairs, works out cheaper than purchasing and running my own car.

A mortgage still shouldn't take the lions share of a wage to save up for, and then 25-35 years to pay off, when only 30 years ago they were done on a single wage with children.

Proportionally speaking, my generation is being heavily shafted compared to previous generations when it comes to buying just about anything.