BOE 3rd November Rate Announcement

[OutInTheShed]

Leicester Loyal said:

The original post was mortgage rates back in the day vs. now. I think 1980 had almost the highest ever mortgage rates which were 15% at the start of 1980.

All I'm posting is that we spend a lot more of our disposible income on a mortgage now than we did 40 years ago.

Back then, as in the late 80s, mortgage rates went over 15%.
I've posted before that interest was a very big slice of take home salary, if you had a 3.5x mortgage which was the biggest you could easily get.

Then as now, it's not the average homeowner or mortgage payer who was badly affected, it is a small minority who bought late in the boom at peak prices and maxed their borrowing. Those worst affected were unlucky on top of that, like losing some income or splitting from a relationship.
Some people were in negative equity for 5 years or more.
Some houses were repossessed.

Personally it wasn't disastrous for me, I was able to do overtime, had a few part time second jobs and rented out the spare room.
For some people i was much worse.

People whining because their mortgage has gone up from £200 to £600 don't really impress me very much..

[Ari]

Edible Roadkill said:

I’m doing exactly the same, decided to use savings and a 25k bank loan I got for 3.6% over 3yrs (£1.3k interest) instead of 5.89% and around £35k interest over the term.

I know people are against paying it off but I see it as perfect sense raiding the savings to get the house paid off.

Who is against paying it off? It's the obvious thing to do, surely?

If you had no mortgage and no savings, would you borrow £25K on a mortgage and put it in a savings account? That's more or less what you're doing if you owe more on your mortgage than you have in savings.

[jamiedimonBTClover]

Ari said:

Who is against paying it off? It's the obvious thing to do, surely?

If he timed it right, its doable. If you had a year to run on a fix at say 2% (for arguments sake) and 100k excess cash (or borrowed at 3.5% as he suggests), you could term that at 4.5% in deposit with AA rated banks and be between 1-2k up. It's faffy, but fairly riskless way to a return. To spend on an Mx5. Or something.

[Edible Roadkill]

I meant generally speaking the financial minded people advise you not to repay your mortgage in favour of investing.

But fkit I just want it done the earlier the better. Supposing I held 75% of my outstanding mortgage balance in cash, I’ve borrowed the remaining 25% on a personal loan which I’ll aim to repay in 12-24 months.

[*Fletch*]

Edible Roadkill said:

I meant generally speaking the financial minded people advise you not to repay your mortgage in favour of investing.

No only that but inflation devalues the debt for you over time. e.g. 200k in 25 years time will probably be the price of a Ford Focus. I can understand some people wanting to pay down the debt for peace of mind. However once you're comfortable with inflation being your friend when you own appreciating assets using leverage, it opens up a whole new way of thinking.

[OutInTheShed]

Edible Roadkill said:

I meant generally speaking the financial minded people advise you not to repay your mortgage in favour of investing.

But fkit I just want it done the earlier the better. Supposing I held 75% of my outstanding mortgage balance in cash, I’ve borrowed the remaining 25% on a personal loan which I’ll aim to repay in 12-24 months.

I've paid off the mortgage early.

But I would think out all the possibilities first.
If you have a sensible sized mortgage and a pile of cash that's roughly the same, you have a lot more options than if you annihilate one with the other.

The trap for some is that having paid off their mortgage at say 50, they arrive at 65 with less savings than if they'd invested the money and kept paying the mortgage. Not because investment yields will always spank the mortgage interest, but because they've spent the cash.
You have to use your own personal view of whether arriving at e.g. 65 in the best state is what matters.

Personally, I can't see taking a personal loan to pay the last bit being right for many people.
Everyone needs an O-shyt fund. In case your job goes bad, you need a new car, your family needs something etc etc.

Otherwise many people are only two bits of bad luck from paying a lot of credit card interest or something.
It's not a bad deal to pay 5% interest on a modest mortgage to have the facility of a small pile of savings you can access at will without asking.

All just my opinion, I suggest looking at all the angles from your own point of view.

OTOH having no savings is the right anwswer if you want to get benefits.....

AIUI.

[Mr Whippy]

rossub said:

Bannock said:

Well done for proving my point.

Even the Governor of the Bank of England, who is proving himself to be an utter liability and was only appointed because he had been in favour of the B-word (what a surprise that such a person should turn out to be mainly economically illiterate), said yesterday on Channel 4 News that it's a uniquely UK problem we have, but obviously can't mention the B-word:

https://twitter.com/PippaCrerar/status/15882507933...

Have your right back.

You were in the minority and you lost, get over it. All your moaning isn’t going to change anything.

Brexit caused all political parties who’ve been having a go for the last 20 years to underinvest, mismanage and ignore the risks of our energy policy?

All topped off by telling the supplier of the bulk of Europes energy needs to bugger off, again because of brexit?


I can see we’d be in exactly the same mess now had we remained in the EU, because every other EU country is facing the exact same issues for exactly the same reasons.

Useless politicians.

[G-wiz]

Could we see a 0.5% increase this week?

0.25% seems certain.

[Terminator X]

G-wiz said:

Could we see a 0.5% increase this week?

0.25% seems certain.

Odd times. Current rate should see people stop buying stuff and wait it out yet yesterday in town I had to park on the roof level as the car park was stacked out with shoppers.

TX.

[anonymous-user]

Hard to stop people spending with the “jam today” spending habits, money’s been cheap and they don’t know how it feels to be skint.

So long as you’ve got a fixed or 0% credit card in your pocket and a 1% mortgage deal, life’s still good. This will take another 6-12m to start to unwind, then we will have the instability of a new, probably incompetent government to deal with. I cannot see our return to prosperity coming any time soon.

[Jawls]

Terminator X said:

G-wiz said:

Could we see a 0.5% increase this week?

0.25% seems certain.

Odd times. Current rate should see people stop buying stuff and wait it out yet yesterday in town I had to park on the roof level as the car park was stacked out with shoppers.

TX.

Plenty of people own their home outright. They aren’t directly affected by rates.

And there’s another set of people who can comfortably afford the increased costs.

So plenty of folks to fill shopping centers etc.

The problems hit the people you don’t see.

[Catastrophic Poo]

Jawls said:

The problems hit the people you don’t see.

The key part right here.

[Frimley111R]

Catastrophic Poo said:

Jawls said:

The problems hit the people you don’t see.

The key part right here.

100%. The media always talk about people as if we are all in the same financial situation. I live in Surrey and I don't see any changes in anything. People moan about how much stuff costs (£500 p/m electricity bill next door) but it's rarely enough to make them change their ways simply because they don't need to and can afford the rises.

[anonymous-user]

Jawls said:

Plenty of people own their home outright. They aren’t directly affected by rates.

And there’s another set of people who can comfortably afford the increased costs.

So plenty of folks to fill shopping centers etc.

The problems hit the people you don’t see.

Totally agree, here is the breakdown :

8.8 million (36%) were owned outright

6.8 million (28%) were owned with a mortgage or a loan

4.8 million (19%) were privately rented

4.2 million (17%) were in social rent, mainly rented from housing associations and local authorities

Going by these figures 28% of houses have a mortgage, so that means 72% of people are basically unaffected by these rate increases. The rich people have got far richer since Covid, and from my experience they are out spending money like there is no tomorrow.

Want to buy a car? a years waiting list, want to buy a Rolex? no chance, want to go to a restaurant in London? fully booked. As soon as a new supercar is announced, it is sold out in 2 minutes. The rich have tons and tons of money, mortgage rates are of no concern to them.

Raising interest rates is going to make little difference to inflation as the people who are spending all the money are not affected by interest rates.

The only people it affects are those with a mortgage and those who are coming off a fixed rate deal. Most likely people in the middle who are neither rich nor poor, but are getting utterly screwed by the BoE continually putting up rates.

I personally don't think raising rates is going to make any difference to inflation, it certainly hasn't so far.

[Frimley111R]

Yep, so glad I am in the 28%

Not sure the rich have got richer though?

[okgo]

When you also consider the average mortgage is pretty small, you can see that it narrows those hurt the most even more. Couple that with new childcare schemes coming in and actually I’d imagine many people might be better off! Lots of things to consider.

I think the rich being richer is maybe not a thing outside of the very wealthy who will always be able to dodge and take advantage or situations. But for your PAYE person there’s not a lot that’s made me richer.

[Scootersp]

Things might change if peoples employers start to struggle and layoffs increase.

There aren't so many that can operate as normal if they lose their job and so far job losses have been relatively low. High interest rates do start squeezing companies as well as individual mortgage holders.

It's all on a lag, you can still 0% transfer creditcard balances and get reasonable rate loans, plates can still be spun, and commercially it's my experience that banks are trying everything to do the same ie extending terms, giving leeway for as long as poss.

[Petrus1983]

Frimley111R said:

Yep, so glad I am in the 28%

Not sure the rich have got richer though?

Snap - the vivid memories of my parents over extending themselves in the late 80's/ early 90's meant I never had a desire for a bigger and bigger property - just a comfortable property which was mortgage free.

I do think things have been abnormally low in the last decade based on this graph -

[The Leaper]

You need the rich to get richer to continue to feed HMRC and MPs' vanity projects etc. Nobody seems to indicate how "rich" is assessed/determined, so I assume it's whatever is in the mind of the person raising the subject. Maybe when Labour win the next election we'll discover how low they determine richness...the current government seems to have done Labour a big favour in this regard anyway.

R.

[BoRED S2upid]

wormus said:

Hard to stop people spending with the “jam today” spending habits, money’s been cheap and they don’t know how it feels to be skint.

So long as you’ve got a fixed or 0% credit card in your pocket and a 1% mortgage deal, life’s still good. This will take another 6-12m to start to unwind, then we will have the instability of a new, probably incompetent government to deal with. I cannot see our return to prosperity coming any time soon.

This. Definitely this. I’m pretty certain (I’ve not tried) I could go out tomorrow and spend £5000 on goodies at 0%. Plenty of free money still out there. The pain hasn’t kicked in yet.