Bank of England raises Interest Rate to 5%
 

:erm:

Bigger than expected. This is going be brutal for anyone whose mortgage is variable or their fixed term is about to expire.

Re: Bank of England raises Interest Rate to 5%
 

Having taken out a five-year fix this time last year, my smug-level is off the scale right now, though it is tempered by the knowledge that this is going to royally screw over a lot of people. I’m old enough to remember the news in the 1980s when similar events ruined a lot of people though thankfully not old enough to have had to have navigated it myself.

Re: Bank of England raises Interest Rate to 5%
 

Suspect these changes - and the next couple - are already priced in. Lenders I’ve looked at have added a full 1% onto the two year rates in the last few weeks. The fives fare slightly better only up about half that.

Re: Bank of England raises Interest Rate to 5%
 

Having paid off my mortgage last year, I'm even smugger. Our deal ended last year and I didn't like what was on offer, so we raided every account and any other thing we had.

Like wise I remember the early 90's, but more recently I remember pre-2008.

The problem is we have had too low interest rates for too long.

Re: Bank of England raises Interest Rate to 5%
 

Over many years, wages at the lower end of the employment market have been held down due the number of EU citizens prepared to accept pay levels that when compared to their home economy are high. Now that source of supply has effectively been stopped it is only natural that these industries to have to start paying more to attract workers. Also the UK rate of unemployment is currently 3.8% (source ONS), which in turn puts pressure on wages.

There are basically two instruments that can be used to control the economy, interest rates and taxation. The present government have nailed their colours to a low tax rate economy so all that is left is interest which is why we are at the moment.

As previous contributors have mentioned we have experienced a protracted period of low interest rates and this in itself has contributed to a staggering rise in property prices. It is certainly possible that there will be a drop, however that may prompt a return to "negative equity" very soon, which may lead to a repeat of the 2007/2008 crisis where many lending institutions ended up being insolvent and needed to use the Bank of England as a "lender of last resort".

So whilst a rise in income tax is never palatable it may be more equitable than base rate increases as there's evidence to show that those under 40 are more adversely affected by base rate increases as housing costs take a greater proportion of their disposable income than those in the over 40 age group.

Re: Bank of England raises Interest Rate to 5%
 

007stuart while your point is reasonable it’d be completely unpalatable to this Government and the next one that’s Labour nailing it’s flag to the mast vacated by the Tories since 2016.

There’s very little to suggest that inflation is wages driven - wages and living standards are falling in real terms and that trend only looks to continue. Essentially we are living in a housing market masquerading as a major economy. Cheap debt, bigger mortgages and longer mortgages have propped up the Ponzi scheme for decades now that chicken is coming home to roost.

Re: Bank of England raises Interest Rate to 5%
 

I did the same. 1.3% in March (the offer was in December of 2021) last year for 5 years. I have to stop myself from trying to find ways to shoehorn it into conversation with people :D, thanks for the opportunity.

Pure luck though. The mortgage application was in process when the first rate hike occurred but I still got the rate I initially applied for. It then took two and a bit months to complete so didn't start until March.

Re: Bank of England raises Interest Rate to 5%
 

Luck schmuck …. The writing was already on the wall at the beginning of last year for those willing to see it. Perhaps being old enough to remember high rates in the late 80s/early 90s gave me more perspective than those a few years younger but even so, it was pretty clear to me that the modest additional monthly cost of fixing for 5 years would be more than offset by not having to deal with rates as they will be this time next year.

What’s surprised me is that it has taken the bank so long to get rates back to what in the long term is only what ought to be seen as ‘near-normal’. It has undoubtedly contributed to the present state of affairs and moreover, it has further entrenched the idea that mortgage rates around 2% are something you should plan for when borrowing money over 25 years or more.

When I got my first mortgage almost 25 years ago the BoE base rate was 5.5% and less than a year later it had risen to 6%.

Re: Bank of England raises Interest Rate to 5%
 

I’m not sure the Government setting an inflation target and the bank working towards it counts as the bank entrenching an idea as much as Government doing so.

The low rates are what’s kept the Ponzi scheme afloat for the last 15 years, giving homeowners a nice boost in house prices too.

Of course anyone who genuinely saw the writing on the wall would have mortgaged themselves up to their eyeballs last year and slotted away what used to be their equity in nice 5%+ savings accounts now for the remainder of the term while being charged 2.something by the mortgage provider. I suspect those people are few and far between.

Re: Bank of England raises Interest Rate to 5%
 

There’s a big difference between seeing that rates are very likely to go up and having the resources in terms of time and money to simply rearrange all your financial affairs to take a punt on it. I have no idea what your personal circumstances are, but on our part ignoring the mortgage adviser who was heavily pushing 2-year fixes and insisting she present us with some 5-year options was as much as we could do. We were after all in the middle of moving house, which is quite a busy time as it is.

Re: Bank of England raises Interest Rate to 5%
 

I’m only pointing out an element of speculation involved. As you describe it’d be taking a punt.

Re: Bank of England raises Interest Rate to 5%
 

I'm an old lady. :D

Our mortgage started at 5.5% when we first bought our house in 1969 increasing to just under 13% when we cleared our mortgage in 1985.

Just saying.

Re: Bank of England raises Interest Rate to 5%
 

Probably 5-13% of a smaller number though. These days house prices mean the BoE probably can't go too much higher.

Re: Bank of England raises Interest Rate to 5%
 

Yup. Borrowed £2950 which doesn't sound much but at the time our combined weekly wage was around £16. So, although the amount we borrowd sounds very very low compared to to-day so were our wages.

Re: Bank of England raises Interest Rate to 5%
 

Sure but wages didn't keep up with house prices so even relative to wages it'll be worse.

House prices have gotten out of control and that's causing problems for everyone. It's obviously had for people that don't own a home made worse for them by rent which is also getting out of control as landlords leave the market but it's also made the economy as so much of it is being held up in housing costs.

It's crazy the Government won't do anything about it because it's undermining their own vote. People tend to vote Tory once they become homeowners but the average age of home ownership keeps going up and up.