Big inflation coming 2017 – stop borrowing, start repaying. Urgent!

[BankFodder]

UK inflation will quadruple to about 4% in the second half of next year and cut disposable income, a leading think tank has forecast.

 

The rise in prices will "accelerate rapidly" during 2017 as the fall in sterling is passed on to consumers, according to the National Institute for Economic and Social Research (NIESR).

 

The revised figure is sharply higher than the 3% it forecast in August.

 

The economy also faces "significant risks" that could restrict growth.

http://www.bbc.com/news/business-37838087

 

Most loan agreements are tied to variable interest rates. This is certainly true of mortgages, credit cards and overdraft.

 

A dramatic rise in inflation is forecast for the second half of 2017 and will likely continue right through until 2020.

 

If you have an agreement with a variable interest rate then the cost of your loan and therefore the size of your required repayments are going to increase dramatically.

 

If you have calculated your ability to repay based on the record low interest rates which we have experienced over the past few years, then you better sit down and start having a serious think about your position.

 

The good days are all coming to an end.

Next year, you will receive notification from your lenders that they are putting up the interest rates and that your payments will be increased from the next 30 or so days time.

 

This sudden increase in your loan payment outgoings will have a dramatic effect on your disposable income for paying for things such as food, clothes, heating, lighting et cetera for you and your children.

 

If you want to protect yourself then the only solution is to start making accelerated payments now so that you can reduce or get rid of your liability before June/July/August next year and also to stop borrowing.

 

The situation is fairly simple.

Would you rather be paying your hard earned cash to your bank or some disreputable payday lender?

Or would you rather be spending it on yourself and things which make a difference to you and your family?

 

 

 

Stop borrowing.

Next year, you may not be able to afford to pay it back.

[fletch70]

This is also going to royally screw all students who have relied on student finance as interest charged is RPI based . A typical student will come out with say 50K of debt

 

If they start eating 22 K they will repay 90 a year BUT if Inflation hits 4% there loan will attract 4% interest which is £2000

 

If they earn 41K they will pay £1800 back but will be charged 7% interest which is £3500 . In effect most students will be trapped in a cycle of debt for 30 years - no doubt the government will use this to alter the terms of repayments so that students will have to pay significantly more back

[unclebulgaria67]

Wise advise. Over the last few years there has been an increase in people taking up credit, encouraged by Banks and government. When the economy starts to suffer, then the Banks will look to secure their positions by increasing rates.

[king12345]

I blame Brexit

[WarrenBuffet]

People will just bankrupt themselves and banks will then ask for another taxpayer bail out .....De JaVu!

[king12345]

Thing is that people live well beyond their means.

I see some colleagues driving brand new £50k+ cars and moaning about having debts.

In my days you only bought what you can afford in cash, apart from your home.

Nowadays we're encouraged to maximise our credit and be in debt for the rest of our life.

[fletch70]

Thing is that people live well beyond their means.

I see some colleagues driving brand new £50k+ cars and moaning about having debts.

In my days you only bought what you can afford in cash, apart from your home.

Nowadays we're encouraged to maximise our credit and be in debt for the rest of our life.

And that is what our economy and growth has been built on.

[WarrenBuffet]

And that is what our economy and growth has been built on.

 

Debt!

[citizenB]

It would be nice if people were to heed this message this time round. Sadly there will still be families who will either miss out their CT or mortgage payment or take out PDLs or even resort to Brighthouse ! over Christmas/January because they give into their children for expensive toys/technology.

[king12345]

Yesterday a colleague was moaning that he hasn't got money until payday (20th nov), yet he used his cc to by a £500 console to his 5 year old son for Christmas.

My reaction: What you gonna buy him when he turns 18? A house???

 

He also mentioned that he is bored with his 18 month old car on finance and looking to get a BMW which would work out "only" £450 a month.

Doesn't make any sense to me...

[colin11]

And friends said i was silly to fix my mortgage for 5 years in may

 

Glad i did now

[BankFodder]

And now this BBC article http://www.bbc.com/news/uk-37873825 says the same thing

 

"But with interest rates so low at the moment, it's easy to think that high levels of debt are manageable.

"On Thursday, Mark Carney claimed inflation will rise to 2.7% next year.

"More inflation means higher interest rates, which we'll all have to pay on our mortgages, loans and credit cards.

"If you're in debt, particularly if you have a variable mortgage, it's time to prepare by taking control of your finances."

 

 

– except that you heard it on the CAG first.

[BankFodder]

And friends said i was silly to fix my mortgage for 5 years in may

 

Glad i did now

 

Yes, it was a very good move. Well done. Your friends will regret that they didn't do it themselves.

[fletch70]

If interest rates go up and I am sure they will what does this mean for the economy and the building trade in particular

 

Will it just lead to a spiral of inflation and interest rate hikes that we saw under Thatcher followed by mass unemployment. For all her efforts to reduce the role of the state she was not able to reduce welfare spending because of all the people she threw on the scrapheap

[EndoftheTunnel]

I've been saving up for a good few years now, I almost had enough to afford the down payment on a house, but now with this inflation... looks like we'll still be renting for a while I'm quite clueless in this area though, not sure how to figure out what's best to do. Is it likely at all that the sterling will go up again within the next few years, or should I just accept the inflation and take out a mortgage?

 

I can't help feeling I was just born a few years too late!

[unclebulgaria67]

I've been saving up for a good few years now, I almost had enough to afford the down payment on a house, but now with this inflation... looks like we'll still be renting for a while I'm quite clueless in this area though, not sure how to figure out what's best to do. Is it likely at all that the sterling will go up again within the next few years, or should I just accept the inflation and take out a mortgage?

 

I can't help feeling I was just born a few years too late!

 

Property prices are a reflection of not enough supply compared to demand. UK population will grow by about 2 million within the next 5 years, so even more demand. Prices will keep increasing until there is enough new properties to cater for the demand. This is very unlikely. I can't see there being a price crash due to economics. If the UK economy is affected, causing repossessions to happen, then this just means those with cash getting cheaper properties to make money from by selling on or renting out.

 

If you are in stable employment and can afford to get on the property ladder, then it is worth doing. When a flat sold in my road for £155k about 4 years ago, i thought the buyers were mad. But now the same flat in good condition would sell for £200k. There is a new development of similar sized new build flats for retired people not to far away selling for over £300k. I can't see any reduction in property prices and rental prices increasing. If people buying buy to let properties are paying more, then this will be reflected in the rents they want to charge.

 

The UK is not in a unique situation. They have the same problems in Australia, New Zealand and US. You would have to be on a fantastic salary to live anywhere near Sydney.

 

If you speak languages, have qualifications/skills you are better living somewhere else, if you can get a good job.

[fletch70]

Something to think about is , if interest rates rose by 1 or 2 % could you afford the increased repayments, It really isn't that many years ago that interest rates were at 15 % (ok 25 years but doesn't seem that long). Of course no one can force what will happen and remember that while the Euro may or may not collapse it is the value of the £ against other major currencies that matters. Oil will increase in price next year due to the cap put in place by OPEC , well thats if the world economy carries on as it is now , if the $ gets stronger , oil goes up even more to us which will push inflation up, most analysts believe inflation will increase next year anyway.

 

I'm sorry but no crystal ball here

[EndoftheTunnel]

Property prices are a reflection of not enough supply compared to demand. UK population will grow by about 2 million within the next 5 years, so even more demand. Prices will keep increasing until there is enough new properties to cater for the demand. This is very unlikely. I can't see there being a price crash due to economics. If the UK economy is affected, causing repossessions to happen, then this just means those with cash getting cheaper properties to make money from by selling on or renting out.

 

If you are in stable employment and can afford to get on the property ladder, then it is worth doing. When a flat sold in my road for £155k about 4 years ago, i thought the buyers were mad. But now the same flat in good condition would sell for £200k. There is a new development of similar sized new build flats for retired people not to far away selling for over £300k. I can't see any reduction in property prices and rental prices increasing. If people buying buy to let properties are paying more, then this will be reflected in the rents they want to charge.

 

The UK is not in a unique situation. They have the same problems in Australia, New Zealand and US. You would have to be on a fantastic salary to live anywhere near Sydney.

 

If you speak languages, have qualifications/skills you are better living somewhere else, if you can get a good job.

 

 

I am actually thinking about moving abroad - the company I work for has an office in Israel, I speak the language... but all my savings are in sterling! Before the Brexit vote, I almost had enough money. Now, when I convert it to shekel, I get 20% less.

 

 

I have very little understanding of the market at all, economics are NOT my strong point. Or even a point at all. So should I convert it and buy something smaller, or keep saving and risk my savings being worth even less... I don't know!

[colin11]

I've been saving up for a good few years now, I almost had enough to afford the down payment on a house, but now with this inflation... looks like we'll still be renting for a while I'm quite clueless in this area though, not sure how to figure out what's best to do. Is it likely at all that the sterling will go up again within the next few years, or should I just accept the inflation and take out a mortgage?

 

I can't help feeling I was just born a few years too late!

 

4 years ago I had split up with my ex, And was paying half a small mortgage which i still pay to this day

 

I was renting a house and it was costing me £650 a month in rent

 

I decided that i had to buy another house as i hate renting, So i worked 60-80 hours a week until i have my 10% deposit, Couldn't do help to buy as i owned another house

 

I bought this house 2.5 years ago on an 18 year mortgage, And i still pay £20 a month less than i paid in rent back then, And now fixed for 5 years

 

Rents are climbing rapidly these days, It is nearly always better to own than to rent

 

I have a great final salary pension, And i really didn't want to retire and have to pay out big rent from it

Edited December 11, 2016 by colin11
added to

[EndoftheTunnel]

4 years ago I had split up with my ex was paying half a small mortgage which i still pay to this day

 

I was renting a house and it was costing me £650 a month in rent

 

I decided that i had to buy another house as i hate renting, So i worked 60-80 hours a week until i have my 10% deposit, Couldn't do help to buy as i owned another house

 

I bought this house 2.5 years ago on an 18 year mortgage, And i still pay £20 a month less than i paid in rent back then, And now fixed for 5 years

 

Rents are climbing rapidly these days, It is nearly always better to own than to rent

 

 

True - thanks for this. The problem is that I don't quite have enough yet, because of the fall of the sterling. Buying on paper is quite a popular option, as it's quite a bit cheaper, but it also means that I would have to pay rent as well as mortgage until it's built. Part of me is saying - go for it, you'll figure out where the money is coming from - and part of me want to hold back, waiting until I have a bit more saved up.

 

 

On the bright side, I got a raise today!! I'm celebrating!!!

[unclebulgaria67]

I am actually thinking about moving abroad - the company I work for has an office in Israel, I speak the language... but all my savings are in sterling! Before the Brexit vote, I almost had enough money. Now, when I convert it to shekel, I get 20% less.

 

 

I have very little understanding of the market at all, economics are NOT my strong point. Or even a point at all. So should I convert it and buy something smaller, or keep saving and risk my savings being worth even less... I don't know!

 

Move to Israel where it is cheaper to rent. If you can get a good salary, you might save more. You can keep a UK savings account, if you use a relatives address for bank record/communication purposes. When Sterling picks up in value you can transfer money to Israel if you wished and to buy a property there.

 

Worth looking into.

 

The UK is going to become a very overcrowded country ( more than now), as immigration controls after Brexit are unlikely to reduce net migration numbers. Brexit might deal with EU migration, but instead UK will offer visas to people from outside the EU. Building of new houses will never keep up with the demand there is for places to live. Therefore prices will keep increasing, as will the rent.

[EndoftheTunnel]

When Sterling picks up in value you can transfer money to Israel if you wished and to buy a property there.

Any idea how long that will be?

 

 

Most of my savings are in Santandar's 123 so I'm getting good interest, but I don't want to have to rent for a few years before buying. As I mentioned, buying on paper is an option - but then I'd still be paying rent... why can't life be simple?!!!

[unclebulgaria67]

Any idea how long that will be?

 

 

Most of my savings are in Santandar's 123 so I'm getting good interest, but I don't want to have to rent for a few years before buying. As I mentioned, buying on paper is an option - but then I'd still be paying rent... why can't life be simple?!!!

 

No expert and i think experts would find it difficult to predict, given the uncertain circumstances.

 

But i think Sterling will gradually increase over the next year against both Euro and US Dollar. I can't see the current value of Sterling being maintained for too long. You have elections in some EU countries, EU mainland Banks weaker than most UK Banks and UK economy is outperforming many. Investors will therefore look to the UK and i can see Sterling rise by at least 10% against other currencies.

 

If you search online you will find predictions on currency levels over the next 12 months.

[EndoftheTunnel]

No expert and i think experts would find it difficult to predict, given the uncertain circumstances.

 

But i think Sterling will gradually increase over the next year against both Euro and US Dollar. I can't see the current value of Sterling being maintained for too long. You have elections in some EU countries, EU mainland Banks weaker than most UK Banks and UK economy is outperforming many. Investors will therefore look to the UK and i can see Sterling rise by at least 10% against other currencies.

 

If you search online you will find predictions on currency levels over the next 12 months.

 

 

 

Ok, thanks for your advice

 

 

Your sage words have filled me with confidence!

 

 

 

 

(and I love your elephant, she's hypnotic!)

[Albert Smith]

And friends said i was silly to fix my mortgage for 5 years in may

 

Glad i did now

Colin, IMHO your absolutly on the button. If you can borrow on the present low rates, are able to get fixed rates and inflation takes off you would be quids in. The winners at the momement are those with fixed rate low interest loans and the losers are the carefull one's with loads of savings and earning next to nowt interest rates waiting whilst inflation erodes the buying power of their cash. Or worse still, they end up in a care home. House and cash gone.