Mortgage Rate Rises

[Jono8]

Therefore wage rises = greed?

Trying to maintain the same quality of life/level of wealth isn't greed....

Profiting from people's bad fortune/global events, and seeing how far you can push prices of things for more and more profit is.

 

[Foghorn Leghorn]

Shouldn't they? Thats quite literally what the rates are suggesting or am I missing your point here.

If long term rates are more expensive that short term they think that rates will rise and if its the opposite they expect rates to drop.

Its all a gamble but most people for the past 10-15 years have been well rewarded for taking short term mortgages. When you think back, it was stupid. We were the same. "Well, the 10 year fixed rate is 2.24% and 5 year fix is only 1.94% so we will go for the 5". And if we had been "lucky" and bought our house a few years earlier we would have won out and got at new rate of probably 1.5% ish. Instead we are up for renewal at the end of the year and will be looking at 6% or more.

The trouble with short term fixes when rates are low is you have the potential to gain a little by the slightly better fixed rate but you can lose a lot if the rate suddenly shifts. It's why I chose a ten year fix in 2018 when I moved house, I could have fixed below 2% for two years but chose 10 years at 2.49%, not because I knew what was going to happen but because I didn't know what was going to happen.

If I'd fixed for two years I'd be mid way through a third two year fix and I'd be out next year on to a considerably higher variable. As it is I've got another 5 years at 2.49% and the savings over the next five years are going to dwarf the 'loses' I've seen over the previous five compared to the lower rates I could have had on the short term fixes.

I agree with you on current short term rates, if I was looking to remortgage now I'd be going short term or even staying on the variable rate and taking the extra pain waiting for the rates to drop.

 

[taB]

Just me yeah I live alone. I have a cat who is my world if that counts haha

Great budgeting. No pet insurance though, surely would be a good plan.

 

[MatsyLR]

Apart from lego and host plants I also try not to aquire "things'.
My parents and grandparents have/had loads of ****.
My mums always saying "do you want this?"
No.. Its tat and I don't want more clutter to get on the way of cleaning.

75k of savings... Impressive!

I have a few plants around but not much else, clutter really annoys me.

Depends on your circumstances but was saving for a clear purpose (house deposit) since working. Had 87k or so in the bank by the time I came to buy a house kept £10k after solicitor fees and buying a couch, fridge etc in savings accounts.
Now it's at £14k after 7 months including buying a LG C2 (£1100) the other month as I thought why not

Will eventually be getting new flooring and the bathroom replaced. Just have not gotten around to it yet, but I can afford whatever I want.

Great budgeting. No pet insurance though, surely would be a good plan.

Always forget about that haha, I pay £18 for 7k lifetime, so my fur baby is fine.

 

[Mercenary Keyboard Warrior]

Trying to maintain the same quality of life/level of wealth isn't greed....

Profiting from people's bad fortune/global events, and seeing how far you can push prices of things for more and more profit is.

Sorry if unclear I was just joking

 

[danlightbulb]

No thats not what I said at all
FWIW I have had a 10 and a 15 year fix in my lifetime.
It very much IS within an individuals option to reduce their rate risk.

For every 20 people who have asked me my advice (they tend to as accountant) I would say 19 have gone with a short term fix, even though IMO they would have been better suited for a longer one.

Its worth considering that 15 years on a 25 year term is around half the capital repaid. It takes a long time to get to that point.
People almost always shy away from longer fixes due to higher rates.
Even now, with longer fixes generally cheaper than shorter ones people still go "I expect rates to drop"

It still doesn't protect you. What if someone was coming off a 10 year fix now, they'd still be screwed and they made the 'right' choice 10 years ago.

And up till now those products have been poorly priced and less available. As most people go for 2 or 5 years, there are far less deals on 10 and I've certainly not seen15 year deals when I was looking. The big banks didn't offer them and the mortgage brokers never advised them.

I havent followed most of your comments but I assume you took a 10 year fix right?

I took 5 so I'm ok for 4 more years. I looked at 10 year deals, they were poorly priced, not very available (no big banks offering) and the mortgage advisor didn't even mention them, not that I relied on the mortgage advisor. There was no indication that rates would jump from 1 to 6% in a matter of months. What would you say was the probability of that occuring now at this moment? And not in hindsight. no one was forecasting it (if they were forecasting it, banks would have been pricing it in sooner).

 

[danlightbulb]

Depends on your circumstances but was saving for a clear purpose (house deposit) since working. Had 87k or so in the bank by the time I came to buy a house kept £10k after

This isn't any criticism or comment of you personally, but with respect there aren't many people on min wage who will have had £87k savings in the bank. Without that, your mortgage would be double what it is and rate rises could add another third. Would you be able to absorb that if those were your circumstances? Would you have even got the mortgage in the first place without that deposit?

 

[gazref]

I have a few plants around but not much else, clutter really annoys me.

Depends on your circumstances but was saving for a clear purpose (house deposit) since working. Had 87k or so in the bank by the time I came to buy a house

You saved 87k on minium wage living by what age? Obviously your scenario is not applicable/replicable to majority but curious case study. Were you living at home during the deposit accumulation (indirectly bank of mum and dad)?

 

[Mercenary Keyboard Warrior]

It still doesn't protect you. What if someone was coming off a 10 year fix now, they'd still be screwed and they made the 'right' choice 10 years ago.

And up till now those products have been poorly priced and less available. As most people go for 2 or 5 years, there are far less deals on 10 and I've certainly not seen15 year deals when I was looking. The big banks didn't offer them and the mortgage brokers never advised them.



I took 5 so I'm ok for 4 more years. I looked at 10 year deals, they were poorly priced, not very available (no big banks offering) and the mortgage advisor didn't even mention them, not that I relied on the mortgage advisor. There was no indication that rates would jump from 1 to 6% in a matter of months. What would you say was the probability of that occuring now at this moment? And not in hindsight. no one was forecasting it (if they were forecasting it, banks would have been pricing it in sooner).

It protects you with more certainty. Its not perfect protection no.
Historically 10 years would see peoples pay rise in real terms compared to their mortgage by 25% minimum.

You answered your own reason why 10+ years are rare, most people don't want the certainty, they want the minimum monthly payments.
Hence why most of the time mortgage advisors won't even talk about them.

 

[Jono8]

Sorry if unclear I was just joking

-

I get what you were alluding too, but I think there is a large difference between keeping the same quality of life for the same amount of work, compared with profiteering to make yourself richer.

Just going back to my earlier point, here are some numbers from 2009 and 2023..

-Average house prices were £162k. Now they are £286k. That's a 76% rise.

-Elec cost per unit was 13.9p . It's now 34p . That's a 140% rise

-Petrol price in 2009 was 89p. It's now £1.50. that's a near 70% rise.

-Average pint of milk was 44p. It's now 70p. That's a 60% rise.

-The average NEW car from 2012 to 2022 (2012 as that was the first data I could find easily) is about 80%. A fiesta in 2012 started from just under £10k. They now start at 18k....


I could go on, but it's clear how extreme the price rises have been.

But when we look at the median household income, it's gone from £26k to £33k. A 27% rise..

The country is massively more poor as a whole compared to 14 years ago

 

[danlightbulb]

Historically 10 years would see peoples pay rise in real terms compared to their mortgage by 25% minimum.

Yep agreed. So this begs another question - why should your hard earned wage rises get sucked into nothing from mortgage rate increases? So much for improving QOL?

 

[Jono8]

Yep agreed. So this begs another question - why should your hard earned wage rises get sucked into nothing from mortgage rate increases? So much for improving QOL?

Because people need new furnishings for their yachts.

The whole world suffers from manufactured scarcity, so that the people who control the fuel that the world relies on can become more and more wealthy.

Opec: What is it and what is happening to oil prices?

Saudi Arabia is cutting output by one million barrels a day, and Opec+ is keeping past cuts in place

www.bbc.co.uk

 

[sigma]

-

I get what you were alluding too, but I think there is a large difference between keeping the same quality of life for the same amount of work, compared with profiteering to make yourself richer.

Just going back to my earlier point, here are some numbers from 2009 and 2023..

-Average house prices were £162k. Now they are £286k. That's a 76% rise.

-Elec cost per unit was 13.9p . It's now 34p . That's a 140% rise

-Petrol price in 2009 was 89p. It's now £1.50. that's a near 70% rise.

-Average pint of milk was 44p. It's now 70p. That's a 60% rise.

-The average NEW car from 2012 to 2022 (2012 as that was the first data I could find easily) is about 80%. A fiesta in 2012 started from just under £10k. They now start at 18k....


I could go on, but it's clear how extreme the price rises have been.

But when we look at the median household income, it's gone from £26k to £33k. A 27% rise..

The country is massively more poor as a whole compared to 14 years ago

The value of GBP doesn't look great either, against USD has hit some low points recently.

 

[200sols]

I took 5 so I'm ok for 4 more years. I looked at 10 year deals, they were poorly priced, not very available (no big banks offering) and the mortgage advisor didn't even mention them, not that I relied on the mortgage advisor. There was no indication that rates would jump from 1 to 6% in a matter of months. What would you say was the probability of that occuring now at this moment? And not in hindsight. no one was forecasting it (if they were forecasting it, banks would have been pricing it in sooner).

So you took the shorter fix that was slightly cheaper over the certainty of a longer fix. That's all I needed to know.

 

[200sols]

Because people need new furnishings for their yachts.

The whole world suffers from manufactured scarcity, so that the people who control the fuel that the world relies on can become more and more wealthy.

Opec: What is it and what is happening to oil prices?

Saudi Arabia is cutting output by one million barrels a day, and Opec+ is keeping past cuts in place

www.bbc.co.uk

You realise you didnt answer his question. Rising mortgage costs dont go to opec.

 

[Jono8]

The value of GBP doesn't look great either, against USD has hit some low points recently.

Oh absolutely. It was about 1.6 to the dollar. So that's made a lot of electronics more expensive, especially computer hardware like graphics cards.

 

[danlightbulb]

So you took the shorter fix that was slightly cheaper over the certainty of a longer fix. That's all I needed to know.

I took a 5 year fix over a 2 year fix for increased certainty when products at 10 years or more were priced poorly, not very widely available, not being recommended, and rate rises that we have seen would have laughed at if anyone credible had been forecasting it.

Only a few months ago that level of certainty was considered perfectly fine and a balanced choice.

 

[200sols]

I took a 5 year fix over a 2 year fix for increased certainty when products at 10 years or more were priced poorly, not very widely available, not being recommended, and rate rises that we have seen would have laughed at if anyone credible had been forecasting it.

Rates were on the floor, literally couldn't go any lower. The only way rates could possibly go was up. Didn't need an advisor to tell you that.

 

[danlightbulb]

Rates were on the floor, literally couldn't go any lower. The only way rates could possibly go was up. Didn't need an advisor to tell you that.

I'd be interested in any credible source you can find from 12-18 months ago that predicted rate rises of 5%.

@BUDFORCE is an actual mortgage advisor, what was the view on this in the mortgage world 18 months ago?

What was the view in the financial world, in the currency markets?

Also it's not just about rates - the 10+ year mortgages often have punitive ERC as well, or maybe high up front fees. I can't remember what I found when I was looking, but even beyond the headline rate these mortgages were not good products.

 

[Mercenary Keyboard Warrior]

-

I get what you were alluding too, but I think there is a large difference between keeping the same quality of life for the same amount of work, compared with profiteering to make yourself richer.

Just going back to my earlier point, here are some numbers from 2009 and 2023..

-Average house prices were £162k. Now they are £286k. That's a 76% rise.

-Elec cost per unit was 13.9p . It's now 34p . That's a 140% rise

-Petrol price in 2009 was 89p. It's now £1.50. that's a near 70% rise.

-Average pint of milk was 44p. It's now 70p. That's a 60% rise.

-The average NEW car from 2012 to 2022 (2012 as that was the first data I could find easily) is about 80%. A fiesta in 2012 started from just under £10k. They now start at 18k....


I could go on, but it's clear how extreme the price rises have been.

But when we look at the median household income, it's gone from £26k to £33k. A 27% rise..

The country is massively more poor as a whole compared to 14 years ago

Right so if you look at inflation from 2009 to 2023 its also listed as just over 70%.

So the costs we are in general agreement have gone up by 70% or so.

So the question is really why havent wages followed suit, in the UK, since as we know we are lagging behind the main large european countries.
You could blame europeans coming over here stealing the jerbs and pushing property prices up, whilst simultaneously living on benefits.

IMO the reality is we have wed ourselves to expecting lower rises with low inflation.

I am by no means an expert on wages and as such I feel its difficult to look at one stat as to if its really a good comparison.
Why the median has changed how it has, and compared to the other metrics such as mean would be interesting.
I mean for example are we replacing higher paid jobs with lower, have the relatively poor wage increases in some sectors pushed more of that sector below as opposed to above.
I mean in construction, that I left just after 2009 but still know many in have had massive increases. There is practically no jobs left in construction that would fall below the median now!