BoE Base Rate, What if...

[Efbe]

What would happen if the Bank of England base rate would go up?

We have had a 0.5% rate for the past 10 years now. There is a huge swathe of the country that bought their house on this low rate, and have never seen the likes of a 6% or 10% rate.

If the rate would increase up to 5% I would see massive problems for the UK.

Firstly, people wouldn't be able to pay off their mortgages. a £500 a month mortgage would go to £825.
Then rental prices would go up to meet the landlords mortgages
people would no longer be able to get mortgages, so surely the bottom would fall out of the housing market.

Would there be a way out of this, is there actually a possibility that the BoE could raise it's rates more than a few percent?

[Efbe]

Hadn't really considered it going down, but I suppose it could quite as easily, and could well be instigated by a further downturn in the economy, which could quite possibly happen with the uncertainty over the EU vote.

[Efbe]

Murph7355 said:

sidicks said:

...
More likely the need for higher margins is a result of the massive amount of additional regulation and capital requirements that have been foisted on banks since the crisis.
...!

This.

Plus a dose of "because they can".

I would largely put it down to PPI tbh.

they have to make back the billions paid out, so high mortgage rates and low interest rates will foot the bill.

[Efbe]

Jockman said:

Efbe said:

Murph7355 said:

sidicks said:

...
More likely the need for higher margins is a result of the massive amount of additional regulation and capital requirements that have been foisted on banks since the crisis.
...!

This.

Plus a dose of "because they can".

I would largely put it down to PPI tbh.

they have to make back the billions paid out, so high mortgage rates and low interest rates will foot the bill.

Perhaps a bit of both - regulatory costs and a modicum of profiteering? Lenders are businesses after all.

naturally

just a bit of fag packet maths here;
-£14bn for Lloyds PPI
-1/3 people mortgages with LBG
-24mn houses with mortgages in uk, so 8mn with LBG
-If limited to Mortgages only, then £1750 to make back from each customer

That is if they only tried to gain money back through mortgages though, so...
-30mn total customers with LBG,
-spread across all these, would be £466 per customer.

so somewhere around that is what the additional fees will be for customers that LBG needs to reclaim from PPI.