The only possible way was up so if you wanted certainty you fixed for longer. I don't care what budforce or anyone else has to say on it really. The BoE have been stress testing in the 5-8% range so they knew it was possible.
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Mortgage Rate Rises
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Soldato
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They have punitive ERC fi you leave very early, product fee is almost always the exact same as any other fix.
Wasn't there talk of neative rates at some point?
Government lending was for a period negative on short durations.
The crazy increase in construction/labour wages is also terrible for the economy, because that drives up the price of infrastructure massively, which we all have to pay for. It also naturally increases house prices and development as well.
It's probably why Birmingham council has gone bust. Some of the prices you hear are councils paying for any sort of infrastructure work are barmy.
We are just ending up with a very topsy turvy/broken economy.
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Soldato
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For some lenders to avoid them depositing with BOE.
Specifically to encourage them to lend...
Most home mortgages would never have gone negative, still have costs to service.
A few people had trackers almost at base rate+ a tiny % or an even smaller amount base rate -x%
Depends. Santander (for example) is(or was at least) 5% at ANY point before it ends.
An ERC is a massive consideration, if it's a large mortgage over 10 years. A lot can change in 10 years.
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Soldato
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Well no, there are two possible directions from low, one is up, one is no change.
I'll have to check on my small print where my mortgage stress test gives a likelihood of occurrence... They can stress test to +100% it means nothing if they don't give a likelihood.
No one was forecasting this, so you can't expect people to overpay based on no evidence - that is poor value for money. Hindsight isn't a good reason to deride people for it.
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Soldato
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Yep. We became fixated on high skill high pay. Discouraged "honest" work and then complain when those who did go that way end up because of supply and demand making rich.
Welcome to capitalism.
IMO Santander are an outlier in that regard. They are the only one I have heard of that do that.
Every other bank and BS I have ever seen its a reducing % over term, or part term. But may be fixed for x years on very long.
Eg my last 10 year was 5% ERC until year 6, then 1% declining until end.
You could still pay 10% off annually anyway before any ERC. ERC could also be waived in some circumstances.
I paid mine off before the 10 years was up, but I still valued certainty over a lower monthly rate.
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It's still a major penalty though, even on yours. What if life circumstances meant you had to move at year 5 and you'd borrowed £250k. £12.5k gone *poof*.
I just don't like the insuation that it is all that poster's fault for not fixing for 10 years.
Taking a 10 year mortgage fixed could be seen as just as risky (in terms of money lost) as a 2 or 5 year fix with an expected interest rate rise.
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Soldato
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No. You pay the ERC on the outstanding, so all capital repayments would be deducted, then the annual allowance for overpayment (typically 10% of either original amount or outstanding varies by lender)
But yes, part of the trade off for a longer fix is accepting that your locking in for longer.
Its not risk though, its certainty. Its a known situation, you would know exactly what the impact would be.
If there was a high chance of you wanting to move before the fix ended then its a bad call to fix for a long time.
Edit to clarify,
5 years on a 25 year term at 5.3% is £223k left after 5 years. Less £25k for 10% in year allowed repayment would be £198k x 5% = £9.9k gone.
Years 6 onwards the number drops rapidly.
But consider if yu had taken a 10 year fix for 2.5% a couple of years ago you would be saving around £400 a month compared to 5.3% now. Plus you would also pay off more capital since lower rates mean you need to in order to clear at the same time with equal monthlies.
(£11k lower with 2.5% rate at 5 years)
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Yes i know, sorry i should have clarified that you had "£250k left/borrowed".
Also, yes it is still risk, and still no certainty in terms of how you end up financially. If you have to move home for circumstance beyond your control, you could end up paying a very large amount of money. The longer you fix for, the more this risk is.
I appreciate the certainty aspect. It is why i fixed for 5 years. However i would not consider 10 (especially as i am with Santander
), for the reasons above."Should have just fixed for 10 bro" is not a very helpful contribution from the other poster.
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Soldato
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Yes i know, sorry i should have clarified that you had "£250k left/borrowed".
Also, yes it is still risk, and still no certainty in terms of how you end up financially. If you have to move home for circumstance beyond your control, you could end up paying a very large amount of money. The longer you fix for, the more this risk is.
I appreciate the certainty aspect. It is why i fixed for 5 years. However i would not consider 10 (especially as i am with Santander
"Should have just fixed for 10 bro" is not a very helpful contribution from the other poster.
The ERC does have some getouts.
It of course varies by lender but most are portable and if they would not lend on your new property some will waive the fee.
It depends on some criteria so its difficult to say lender to lender, person to person.
Right now I bet most banks would waive in an instant on the condition you take a new fixed mortgage with them even if non portable.
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Exactly Jono.
Look we can all argue till the cows come home on what we should have done with the benefit of hindsight. The point is that hardly anyone was fixing for 10 or more. It is simply not common, and no evidence or professional advice was suggesting people should.
Look we can all argue till the cows come home on what we should have done with the benefit of hindsight. The point is that hardly anyone was fixing for 10 or more. It is simply not common, and no evidence or professional advice was suggesting people should.
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are you just London area ?? as i said round here as soon as there up there gone .. week to 10 days .. more the bigger houses 4 bed ..offset from road ect .. but the normal semi's are flying as well
That counts
To be fair though.. A lot of people would need an advisor to tell them that.
I was also never advised to fix for long. And never was a 10 year (wouldn't have taken it due to a joint mortgage) ever suggested back in 2020.
If I was presented and the pros and cons for each explained and I still chose a 3 year, that blame lays squarely with me.
As I said before, the advisor said if it was him he'd wait until no erc to renew, I put the phone down and went with that, a week later I got the fear back and paid the erc.
So even in the face of increasing base rate I was still given (in hindsight) poor advice.
I'm fairly financially savvy, what hope does the typical lemon have?
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one of the things I massively regret now is not taking a 10 year fixed.
we had a good mortgage advisor and he did well but we only got 2,3 and 5 year offers - ftb so was all new to us and while I did loads of research I somehow completely missed this.
looked at the last X years, got stress tested to 8% and thought surely it won't get that bad in the next 3 years.. well. Wish I fixed for 10.
If I had been single, committed to staying in the UK I'd have taken 10 year in 2022.
But a 5pc erc for the first 5 years?
A (at the time more rocky) relationship/joint mortgage
And a potential aim to emigrate..
10 was too long.
Took a few days to decide as rates were identical (1.9) on what to do. Even said to the advisor, I might regret this but I'm going with 5.
At least I was informed.. But again, it was off my own back. I wasn't advised well
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its frustrating.. but theres not much I can do, suck it up and hope come renewal that the rates drop and at worst I'll be paying what I do now without overpayment so the overall "hit" is going to be the same, we'll just sadly have to write off the overpayment we make each more and hopefully just do one bigger chunk, once a year if/when we can afford.