Mortgage Rate Rises

[Caracus2k]

People love to be captain hindsight but please tell me who on earth foresaw mortgage rates hitting nearly 7%.

Having had multiple mortgages in my adult life I can confirm they all came with paperwork which included an illustration of what the payments would be at rates often quite a few base points *above* 7%.

So that thoose considerint taking on the mortgagea would have some advance warning of where thry could be if interest rates surged, as they have done in the past.

 

[danlightbulb]

Having had multiple mortgages in my adult life I can confirm they all came with paperwork which included an illustration of what the payments would be at rates often quite a few base points *above* 7%.

So that thoose considerint taking on the mortgagea would have some advance warning of where thry could be if interest rates surged, as they have done in the past.

Irrelevant largely, because a lot of people especially first time buyers don't have much choice in the first place. Every house is expensive, renting is expensive. What choice do people have but to take on this risk if they don't want to rent for the rest of their lives?

Plus just because they warn you in the small print doesn't mean that the risk was likely to occur, at least not to the scale it has in conjunction with huge inflation. What has played out is beyond the scenario that would have been considered feasible.

 

[tonys]

Having had multiple mortgages in my adult life I can confirm they all came with paperwork which included an illustration of what the payments would be at rates often quite a few base points *above* 7%.

So that thoose considerint taking on the mortgagea would have some advance warning of where thry could be if interest rates surged, as they have done in the past.

They could look at the mortgage rate for previous years to see the boom and bust cycle.

 

[HangTime]

Pretty nice profit for 4 months if they can get it, even now. But I bet the mortgage for that when vacant for the whole amount must be juicy.

I don't think it's mortgaged, I think it's owned by a housebuilder because the blurb about asking the agent about part exchange wouldn't make much sense for a private seller. I think what's happened is the previous owners will have agreed to buy a new build and p/x this house on a lowball offer, the housebuilder then instructed an agent to get it on the market before they move out (marketed in Feb at £500k), there's then the land registry transaction for £367500 in April when they complete on the new build, and it's price-dropped/remarketed at £490k in April.

To be honest, I'm kinda surprised they would offer p/x towards a 'used' house anyway as stock just sitting around like this uses up capital and in a falling market it's not great. Like, they get rid of this one and then they now own a cheaper property that someone has part exchanged for it.

 

[413x]

They could look at the mortgage rate for previous years to see the boom and bust cycle.

But it's unpredictable at a consumer level.
Even as the prices were rising my previous mortgage brokers suggested not paying the erc and waiting was better. They were wrong

I didn't think rates would go Above 4.5pc..I was wrong

Who even 3 years ago would see rates go from 1pc to nearly 6pc in sequential rises?

You know rates will go up.. But when? It's a lottery.

 

[tonys]

But it's unpredictable at a consumer level.
Even as the prices were rising my previous mortgage brokers suggested not paying the erc and waiting was better. They were wrong

I didn't think rates would go Above 4.5pc..I was wrong

Who even 3 years ago would see rates go from 1pc to nearly 6pc in sequential rises?

You know rates will go up.. But when? It's a lottery.

You may only see the cycle, up and down. When we bought our first house it was £12,000 probably at about 5-6% don't remember off hand, what I do remember was the rate went up to 16%. Glad it hasn't gone that far this time.

 

[413x]

You may only see the cycle, up and down. When we bought our first house it was £12,000 probably at about 5-6% don't remember off hand, what I do remember was the rate went up to 16%. Glad it hasn't gone that far this time.

In relative terms.. I think it has.

 

[tonys]

In relative terms.. I think it has.

If it had gone to 9% I would probably agree with you. Luckily the extra payments on mine now have only gone up £40pm

 

[413x]

If it had gone to 9% I would probably agree with you. Luckily the extra payments on mine now have only gone up £40pm

There's a graph somewhere that shows this.
Because now the average house is so much more Expensive than it was back then relative to earnings. The impact is significantly more. I think we are near equivalent of those times.

My mortgage would jump from 900 to 1300 if I was exposed to the base rate

 

[danlightbulb]

If it had gone to 9% I would probably agree with you. Luckily the extra payments on mine now have only gone up £40pm

People who are halfway through their mortgages would likely be fine with these rising rates. They likely bought 10 -15 years ago when prices were lower and will have had many years of pay growth, low rates and rising equity. Like with you, a jump from 2% to 6% on a mortgage of a couple hundred a month is easily manageable.

The ones who will see far bigger, poverty/repossession creating jumps, are those not long on the market. Those people will have bought high, with big mortgages, most of the term left, low equity, and haven't had the benefit of wage growth to offset the repayments.

 

[tonys]

People who are halfway through their mortgages would likely be fine with these rising rates. They likely bought 10 -15 years ago when prices were lower and will have had many years of pay growth, low rates and rising equity. Like with you, a jump from 2% to 6% on a mortgage of a couple hundred a month is easily manageable.

The ones who will see far bigger, poverty/repossession creating jumps, are those not long on the market. Those people will have bought high, with big mortgages, most of the term left, low equity, and haven't had the benefit of wage growth to offset the repayments.

When it went that high there were record repossessions because there wasn't any help for anyone. You either paid tour mortgage or you lost your home. At the time we had two small children and the mortgage lender was not helpful, it was don't pay the gas, electric and don't eat basically.

 

[BUDFORCE]

Well, at least you are spending your time wisely.

9am - 9:15am Starfield

9:15am - 9:30am morning meeting*

9:30am - 12pm Starfield

12pm - 1pm walk around the fields

1pm - 3pm sunbathing in the garden

3pm -5:30pm Starfield

* to be fair still had Starfield on anyway



We are so gonna get sacked off soon, surprised we haven't already.

 

[Mercenary Keyboard Warrior]

Many of us have said for some years that rates were crazy low, by historical UK rates they were.
Many people said yeah but they cannot put up cos people will go bust. Can't remember how many times this was said.
It was simply a coping mechanism.

I think too many were convinced if they go up they will only go to 3% or something, which would still be low for UK rates historically.
Those people were fooling themselves.
They needed to be 3-4% minimum already, pre Truss.
Add Truss and events since and we are probably about where we should be. IMO.

Look at the history of rates, when they need to change for a macro event they change fast.

No one in the UK should ever have considered 6-8% as anything unusual.

If you thought they couldn't hit those within a year you were fooling yourself.
How likely that was no one could predict.

 

[danlightbulb]

Many of us have said for some years that rates were crazy low, by historical UK rates they were.
Many people said yeah but they cannot put up cos people will go bust. Can't remember how many times this was said.
It was simply a coping mechanism.

I think too many were convinced if they go up they will only go to 3% or something, which would still be low for UK rates historically.
Those people were fooling themselves.
They needed to be 3-4% minimum already, pre Truss.
Add Truss and events since and we are probably about where we should be. IMO.

Look at the history of rates, when they need to change for a macro event they change fast.

No one in the UK should ever have considered 6-8% as anything unusual.

If you thought they couldn't hit those within a year you were fooling yourself.
How likely that was no one could predict.

But I ask the same question again. You're a renter needing home, otherwise you face private renting into retirement. The prices are what they are, what is that person supposed to do about rate risk?

You are right that rates were too low for too long. How many of us have been saying that for years yet nothing was done, forcing people now into this high risk situation. It is almost as if it's deliberate...

 

[tonys]

Over our mortgages (45yrs) I would say about 6-7% would have been average. My old boss had a mortgage in the 1920-30's time and their rate didn't go up or down for the whole term.

 

[GordyR]

Over our mortgages (45yrs) I would say about 6-7% would have been average. My old boss had a mortgage in the 1920-30's time and their rate didn't go up or down for the whole term.

Now compare your line of work at the time, your household income at the time, and your mortgage size versus that income, to the average today.

Apologies if I've misunderstood you, but you appear to be looking at headline rates in isolation and not accounting for any of the other parts of the affordability equation, all of which have changed dramatically since then.

 

[potatolord]

9am - 9:15am Starfield

9:15am - 9:30am morning meeting*

9:30am - 12pm Starfield

12pm - 1pm walk around the fields

1pm - 3pm sunbathing in the garden

3pm -5:30pm Starfield

* to be fair still had Starfield on anyway



We are so gonna get sacked off soon, surprised we haven't already.

I'm very ompressed you managed to stay out in the sun for two hours yesterday!

 

[GordyR]

There's a graph somewhere that shows this.

I've seen several reasonably comprehensive comparison attempts undertaken by housing analysts and economists and they all approximately land around these sort's of figures:

But there's still more factors to consider, like MIRAS back then and the rising cost of living in other areas now.

It's definitely not an easy thing to reliably calculate; but in terms of pure affordability, it's fairly safe to say that mortgaged homeowners today are about as stretched as they've ever been.

I think the thing to remember is that we're likely still very early on in this correction. There are significant differences now versus 1989 that should see things play out very differently, but we can't compare the entire historic fallout that took place over several years back then, and all of the unemployment and repossessions that followed, to this early stage correction which very well may only just be getting started. I think the next two years is going to be very rough for a lot of people.

Edit: This is another good graphic that helps to illustrate the problem:

Now consider the 20%+ rises that were seen during covid, up to the peak in October 2022; that's not even visible on the chart.

If my memory serves me correctly, it peaked at around 10-11 times average earnings.

 

[Uther]

I'm very ompressed you managed to stay out in the sun for two hours yesterday!

 

[BUDFORCE]

I'm very ompressed you managed to stay out in the sun for two hours yesterday!

Years of practice.

I normally do the 11am - 1pm shift in the sun, then go for my walk, as it tends to be a little cooler then plus the sun is higher so more effecient, but it was quite hazy here yesterday until about 11:30am.

Just logged on and 3 applications in today.............thats for everyone I mean. We should be doing at least 50 a day, ideally 80-100.

I don't work those anymore I hasten to add, I am a bit more senior like a point of referral but as you can imagine if the troops on the floor are not doing much then there isnt much that gets referred.

Well, time to fire up Starfield.