Interest rates

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Re: Interest rates

Postby il_martello_di_genovesi on Wed Oct 11, 2017 8:30 pm

mumbles87 wrote:
Coffee tho I'm glad I don't drink


I drink coffee daily, but after Starbucks near work had upped their prices, so a medium cup was costing £2.85, I started to re-evaluate.

Decided to buy a cafetiere from Sainsbury's for £10, and a pack of filter coffee which lasts the month at about £2 a packet. It actually comes out better. Instead of spending £60 per month on the stuff, it's now £2 per month, as water, milk, sugar etc all available at work.

Funny you mentioned coffee though. When I got my mortgage 2 years ago, it was the first thing the advisor said to stop buying, which at the time I thought was weird.
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Re: Interest rates

Postby mumbles87 on Wed Oct 11, 2017 8:39 pm

It's amazing how much the downfall of the local pub has sparked the rise of the coffee shop

It's almost like they have replaced them
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Re: Interest rates

Postby bubbles1966 on Wed Oct 11, 2017 8:45 pm

My dad always used to say, "Don't know they're born" about my generation.

It seems appropriate for people who fret about 0.25% rising to 0.5% or even 0.75%

Image

Now those are base rates...... Image

A house in zone 2 would cost well under £400k at those rates. Ludicrously low interest rates are one of the reasons London /M25prices are so daft.
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Re: Interest rates

Postby Hugh Jargon II on Wed Oct 11, 2017 9:14 pm

I played a game of volleyball once. At the start interest rates were about
8.95%....by the end of the game they were 15% and I was technically losing my home. True story. Black Wednesday.
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Re: Interest rates

Postby RichieRiv on Wed Oct 11, 2017 9:17 pm

It was brutal.

If interest rates hit 5% then this housing market would simply blow up.
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Re: Interest rates

Postby bubbles1966 on Wed Oct 11, 2017 9:50 pm

RichieRiv wrote:It was brutal.

If interest rates hit 5% then this housing market would simply blow up.


If my home, which I'd bought in 2005, had risen with normal inflation since it would cost £342,000, With 0% in interest rates it's £600k.

Nice for me, for sure - but it's really not fair to young people.

They really should start pushing rates up to give the young'uns a way in with far lower prices and deposits.
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Re: Interest rates

Postby Hugh Jargon II on Wed Oct 11, 2017 10:28 pm

I agree. Just 5% could render half of Billericay and Ingatestone homeless richie. On the positive there are some spare plots at crays hill coming up.
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Re: Interest rates

Postby RichieRiv on Wed Oct 11, 2017 10:36 pm

:D

Money has never been so cheap and people have never been so financially ignorant.
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Re: Interest rates

Postby mumbles87 on Thu Oct 12, 2017 6:41 am

3% increase would raise my mortgage by £450 a month

I'd could afford it but a few things would have to change
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Re: Interest rates

Postby westham,eggyandchips on Thu Oct 12, 2017 7:26 am

Iron-worx wrote:
Borrowers are far from the foremost consideration with view to rate rises, other factors outweigh them and indeed did in the late 1980s when the market crashed and two million went into negative equity, property repossessions galore.

Too long ago to feature highly in peoples memories but less than thirty years ago, Google negative equity 1980s, it happened.

A financial "crash" happened as recent as 10yrs ago. I don't need to go back as far as the 1980's to be in negative equity either.

But what happened then? Interest rates went down. I personally think borrowers are taken more into consideration than you think nowadays.
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Re: Interest rates

Postby westham,eggyandchips on Thu Oct 12, 2017 7:31 am

Hugh Jargon II wrote:by the end of the game they were 15% and I was technically losing my home.


.....and did you?
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Re: Interest rates

Postby mumbles87 on Thu Oct 12, 2017 7:36 am

Eggy I make you right

The Bank of England won't raise rates to levels of the past again because they won't want to make half of Britain homeless

Highest I see rates going is 2%
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Re: Interest rates

Postby Hugh Jargon II on Thu Oct 12, 2017 8:39 am

I didn't lose my home. By the next morning the gov't withdrew from a treaty that allowed rates to be cut significantly. However. Prices plummeted. I had a 1 bedroom starter home that I paid 54k for and sold it for 35k. I paid the 20k off (held 3 jobs and it nearly killed me). Managed to get a 4 bed in Billericay for 68k (a year before they were going for 120k). Most of my mates just handed there keys back to their lenders. I chose not to.

Just a little lesson for you younguns. When the housing bubble bursts....It's pretty grim.
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Re: Interest rates

Postby RichieRiv on Thu Oct 12, 2017 8:58 am

westham,eggyandchips wrote:.....and did you?


Hugh may not have, but plenty of my mates at school were moving having lost their houses. I also worked with a guy who because interest rates were simply going up and up, fixed his mortgage at 12% for the longest possible period - 20 years! He was still paying that rate in the late 90's.

The impact and severity of the late 1990's should not be underplayed and those who don't remember the early 90's, early 80's and possibly the entire 70's would do well to remember that this is nothing new.

westham,eggyandchips wrote:But what happened then? Interest rates went down.


There were different economic circumstances that drove us into recession in 1989/90 and then in 2008. In the early 90's interest rates were used to control inflation (running at just below 10%). Increasing rates reduces peoples disposal income, slows down spending and controls inflation (or that's the theory). Add into the mix that the UK withdrew from the ERM and George Soros was shorting Sterling, rate were increased to prop are sterling.

In 2008 the recession was caused by the lack of liquidity in the market i.e. lack of lending. That caused a slow down, so interest rates were lowered to increase peoples disposable income in the hope they'll go out and spend.

The reality is Interest Rates and Mortgages rates in the 1990's were inextricably linked. These days it's more a case of LIBOR that drives high street mortgage rates.
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Re: Interest rates

Postby sendô on Thu Oct 12, 2017 8:59 am

mumbles87 wrote:Eggy I make you right

The Bank of England won't raise rates to levels of the past again because they won't want to make half of Britain homeless

Highest I see rates going is 2%

They will if inflation starts to get out of control.

The base rate has been so low for so long because inflation has been so low - a low interest rate discourages people squirrelling their money away and encourages them to spend, thus driving the economy and inflation.

If inflation gets too high the rates go up to discourage spending accordingly.

They wont chuck the rates up fast as they wont want to cause thousands of mortgage defaults, but they'll creep up. Selfishly, I'd like them to stay low to keep my mortgage down and drive up the value of my home, but realistically they need to get to at least 2-3%.

At the least this should help slow down or reverse the rampant buy-to-let market, and make it worthwhile for people to save money again.
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Re: Interest rates

Postby mumbles87 on Thu Oct 12, 2017 9:05 am

sendô wrote:They will if inflation starts to get out of control.

The base rate has been so low for so long because inflation has been so low - a low interest rate discourages people squirrelling their money away and encourages them to spend, thus driving the economy and inflation.

If inflation gets too high the rates go up to discourage spending accordingly.

They wont chuck the rates up fast as they wont want to cause thousands of mortgage defaults, but they'll creep up. Selfishly, I'd like them to stay low to keep my mortgage down and drive up the value of my home, but realistically they need to get to at least 2-3%.

At the least this should help slow down or reverse the rampant buy-to-let market, and make it worthwhile for people to save money again.


the worse thing they can do with brexit round the corner is discourage spending though , they need this bubble to continue
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Re: Interest rates

Postby jastons on Thu Oct 12, 2017 9:16 am

Hugh Jargon II wrote:Just a little lesson for you younguns. When the housing bubble bursts....It's pretty grim.


What about for non home owners? We currently pay £450 a month to a private landlord for a two bedroom flat. To 'upgrade' to a three bedroom house in this area would cost about double that

I say 'upgrade' because the few we viewed 18 months ago had smaller rooms than our current two bed. Dining rooms advertised as a third bedroom which means a small living room and a kitchen so small that you can stand in the centre and touch all four walls.
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Re: Interest rates

Postby mumbles87 on Thu Oct 12, 2017 9:22 am

jastons wrote:
What about for non home owners? We currently pay £450 a month to a private landlord for a two bedroom flat. To 'upgrade' to a three bedroom house in this area would cost about double that

I say 'upgrade' because the few we viewed 18 months ago had smaller rooms than our current two bed. Dining rooms advertised as a third bedroom which means a small living room and a kitchen so small that you can stand in the centre and touch all four walls.


rent will go through the roof however you could benefit from the market crash
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Re: Interest rates

Postby Mega Ron on Thu Oct 12, 2017 9:29 am

Hugh Jargon II wrote:I didn't lose my home. By the next morning the gov't withdrew from a treaty that allowed rates to be cut significantly. However. Prices plummeted. I had a 1 bedroom starter home that I paid 54k for and sold it for 35k. I paid the 20k off (held 3 jobs and it nearly killed me). Managed to get a 4 bed in Billericay for 68k (a year before they were going for 120k). Most of my mates just handed there keys back to their lenders. I chose not to.

Just a little lesson for you younguns. When the housing bubble bursts....It's pretty grim.


Not for everyone. Lots of people make a fortune out of crashes if they have the wealth to take advantage of them.
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Re: Interest rates

Postby EastBrisHammer on Thu Oct 12, 2017 10:29 am

This whole 15% interest rate in the late 80s and "they don't know they are born these days" does my head in. My parents are no high fliers but still managed to afford a 3-bed detached house in Bushey when in their early 30s. There is no way I could afford to live in that area now even if our household income tripled and I'm heading towards my 50s. They got the biggest mortgage they could and when the interest rates hit 15% it did cripple them for a bit but they made it through. If they had been a bit more modest in their outgoings then they would have sailed through that period. Most of their friends that had negative equity just sat it out and soon made a killing on their property once the market recovered.

Seeing what the young lads (late 20s) that work for me can afford makes me feel really sorry for them. They earn pretty good money but still have to start off in a crap area and then hope to make it out to somewhere better later. Even in the crap areas they can only afford flats and 2 bed terraces. The previous generations had far more choice in the areas that they could live, bigger properties and quite often done off one salary. My parents and their friends had nice cars, mod cons and foreign holidays. They had it good and I think many are beginning to realise that.
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