Interest rate rise?

Question

How do you feel about a rise in the interest rate? How much do you think it will contue rising and do you have any facts and predictions on it?

Thanks for your answers. The thing with me is that my parents are determined to buy a house now. and I just don't know what to do with the mortgage they are getting. They have a DIP for an offset racker. May be a fixed rate will be better now. Also I am affraid that the housing market is gonna go down becase of he rate increase. What do you think?

Answer 1

The interest rate rise is due to inflation (I am sure we will find out in the next few days that inflation is not looking good, the Bank of England is clearly hoping to control this by the increase in the interest rate).

Buying a home is always a risk - it is a huge responsibility but I think we all forget that it is a RISK and that there are never any guarantees and that our security is all dependent on the interest rate being affordable - and if it continued to rise each month most of us would not be able to afford it after it passed 14%+ unless you have small mortgages and big savings! Basically if interest rates were to rise as they did in the 90's you would see a faster default process than then due to the inflated house prices and hence the huge mortgages that average house buyers have taken on over the last 8 years to purchase just 'ordinary' homes.

I hope we don't see a repeat of the 1990s rates - but the housing market is all about risk and speculation - you have to speculate to accumulate. Economists argue that there is a pattern/cycle and it has been predicted that we will have another crash in housing prices in the next 7 years.

All you can do is weigh up the pros and cons of buying a house i.e. is it cheaper than renting and will the home be nicer than you could afford to rent, secondly work out how many interest rate increases you could afford on the mortgage you intend to take out, and even when you couldn't afford it, are there ways you could earn extra cash - a spare room to have a lodger? Make sure that the price you pay for a property is what you feel to be good value for the area - this is important and the areas facilities: transport, health facilities all add value - so lots of homework.

No one can guarantee you house values won't go down (they are definately more than 2 times what they should be at the moment in my opinion!), nor that interest rates wont keep going up - but if your parents do decide to buy after having done their homework then you just forget the frightening stuff and work to pay the bills!

What will be, will be as they say! Good luck and I hope whatever decision is made it is the right one for your family.

Answer 2

Everything goes in about 7 to 8 year cycles. They will go up and they will go down.

Interest rate rises are not a bad thing if you are not in debt. If you have saving interest rate rises make you more money.

Just try and make sure you are the right side of the wave. In Australia interest rates are quite good. Close to 7% is a far cry better then the 14%'s of 25 years ago.

I consider them all low if they are below 9%. Try and budget for that kind of interest rate in your business decisions.

Answer 3

According to the news they are expecting at least 1 more rise in the next few months.
They are also warning that many people are going to get there houses repossessed as a result of this.

Answer 4

i would recommend to ask for a shariah complainted financing option, if it's offered in banks around u, financing a house the Islamic way is good for the fact, u don have to worry abt fluctuation in interest rate, if it goes up, which it will, u will pay less than the interests amonut. i would recommend to look up the term "musharak" and "mudarabah".

Answer 5

Interest rates will continue to rise...

Answer 6

Yes.