Soldato
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And sell a child off!
Mortgage Rate Rises
- Thread starter glenimp617
- Start date
And sell a child off!
Only ever borrow the minimum you can get away with unless it's to make money. Even then it's often a risk. Fix the interest rates on debts where you are able. Make sure you can keep a roof over your head and pay your bills, everything else is a bonus, you are not owed a "standard of living". Basic stuff but so often I see people who don't follow this.
I moved, borrowed the least I could, fixed the rate for 10 years at which point the mortgage is paid off. The rates were at 300 year lows, they could only drop a couple of percentage points but had the potential to go much higher. Play the odds if you can. The bank would have lent us another £100k+ easily but I'd rather be debt free. Economies and interest rates ebb and flow, always have, timing is everything, and a little dose of luck
Can yo run me through the home ownership journey you have had? times and prices etc?
You obviously missed the "minimum you can get away with" and "a bit of luck". The context was an economy with people over borrowing, that obviously doesn't apply to you but doesn't make it any less valid. There are huge number of people who have overextended assuming the conditions wouldn't change because of irresponsible lending. No arrogance, just did the sensible thing when my peers were splurging on the overpriced shiny new builds.
I'm not "clearing a mortgage" in 10 years. I moved, not bought my first house, I only borrowed the least I could to move up and bought a house that needed a lot of modernising rather than a new build that was substantially more expensive. I also elected to increase the payments a lot of shorten the term and fixed it against the advice of the mortgage advisor. That also meant our disposable income has been reduced a lot for those 10 years. We don't eat out, run 10 year old cars and are sensible with our spending, not fashionable but prudent.
Bought a flat in the late 90's as I knew I needed to get on the ladder, pretty well broke on one salary £48k, nearly four times my salary. Fixed the rate, it was the right decision as I was in the market, others I knew didn't buy and got caught napping . Got divorced moved mid 2000's bought a semi for £125k, got a nice tracker at 0.5% above base rate, kept an eye on the rates and stuck with it. Mortgage increased and salary very slightly. Moved 2017 and borrowed a further £60k, looked like it was time to move as I got the feeling the market was moving up. You don't want to move up when the market is moving upwards, the gap gets larger.
As I said, you have to time your moves to the market as well as you can and the type of mortgage deal to mitigate the risk. There is some luck but you have to play the odds in your favour too. You can't blame it on luck as I know people of a similar age, with better incomes who have made much poorer choices. Yes if I was buying right now with zero cash I'd be screwed. I have a friend who is much younger who is it that situation, renting but they've been saving and waiting ready to time their purchase. Bear in mind I had to move 130miles away to find something I could afford in the first place before moving back 8 years later. I never said any of this is easy
I read earlier in the week one of the big lenders (Halifax/Nationwide) is forecasting continuing house price falls next year before flattening out in 2025. Timing the dip is awkward because of the interest rate factor, ideally I'd guess we should look to move in 2025 Q1 but if we decide we want a mortgage then you have to take into consideration that the cost of borrowing has the potential to be higher. And that's even assuming accurate forecasts, last year Halifax predicted at 8% fall in 2023, but now they are saying it will be under 5%. Feels like the collapse in house prices some had feared/hoped for is still a pipe dream as price are still massively higher than when covid hit, even allowing for the fact there's usually a lag relative to interest rates / job market.
As you say it's a tricky one to call. My rule of thumb is you don't need to get it perfectly right just make sure it's affordable and give yourself some wiggle room. Ideally fix your rate or leave some spare to cover rises should they happen. I think a number of factors played into this. Lenders lending too much money, foreign investors buying up a lot of property, buy to let and an increased population in the last 10+ years and more single households. More money in the market is the biggest issue rather than more bidders, if buyers don't have it they can't bid each other up. I don't buy the housebuilding as an issue, it's not like builders, landowners or estate agents are going to say we've built 500,000 more house let's sell them all below market rate! You might have a shortage of properties but they wouldn't be unaffordable for some if there wasn't too much cash being injected into the market.
Soldato
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It's been very hard to time buying in dips lately, if you bought anytime in the last decade or so it's basically "only up" in terms of prices. People that have been sat off the ladder waiting to join it would have been making a mistake.
Yup.
We need 2 cars because we live in a rural area, but mine is 10 years old, the Mrs 14 years old, both are looked after.
We don't eat out often, we don't go on expensive holidays basically ever, we went camping in North Yorkshire this year, for example.
I service the cars to save money, we invested money in solar panels and battery system that dramatically reduces our electricity bill.
I could afford a new car, or to go out and eat more often, or go on holidays but I choose not to, we have no debt at all, other than a mortgage we got roughly 5 years left on that.
We both work, and ideally not, but if one of us lost our jobs, we could probably just about manage on one salary although it would be tight, but if the other picked up even a minimum wage job we'd get by, we wouldn't starve put it that way.
Fair play to those that are rich and can truly afford to live in luxury, but I know for a fact by looking at people's financial circumstances in detail (what I do for a living) most people are living on the edge.
So yes, as you say on the face of it, it may look like these people that go eating out, fancy holidays or driving Tesla's around are better off, but really it might bite then in the ass pretty hard the way things are going.
You obviously missed the "minimum you can get away with" and "a bit of luck". The context was an economy with people over borrowing, that obviously doesn't apply to you but doesn't make it any less valid. There are huge number of people who have overextended assuming the conditions wouldn't change because of irresponsible lending. No arrogance, just did the sensible thing when my peers were splurging on the overpriced shiny new builds.
I'm not "clearing a mortgage" in 10 years. I moved, not bought my first house, I only borrowed the least I could to move up and bought a house that needed a lot of modernising rather than a new build that was substantially more expensive. I also elected to increase the payments a lot of shorten the term and fixed it against the advice of the mortgage advisor. That also meant our disposable income has been reduced a lot for those 10 years. We don't eat out, run 10 year old cars and are sensible with our spending, not fashionable but prudent.
Bought a flat in the late 90's as I knew I needed to get on the ladder, pretty well broke on one salary £48k, nearly four times my salary. Fixed the rate, it was the right decision as I was in the market, others I knew didn't buy and got caught napping . Got divorced moved mid 2000's bought a semi for £125k, got a nice tracker at 0.5% above base rate, kept an eye on the rates and stuck with it. Mortgage increased and salary very slightly. Moved 2017 and borrowed a further £60k, looked like it was time to move as I got the feeling the market was moving up. You don't want to move up when the market is moving upwards, the gap gets larger.
As I said, you have to time your moves to the market as well as you can and the type of mortgage deal to mitigate the risk. There is some luck but you have to play the odds in your favour too. You can't blame it on luck as I know people of a similar age, with better incomes who have made much poorer choices. Yes if I was buying right now with zero cash I'd be screwed. I have a friend who is much younger who is it that situation, renting but they've been saving and waiting ready to time their purchase. Bear in mind I had to move 130miles away to find something I could afford in the first place before moving back 8 years later. I never said any of this is easy
So in a nutshell you've had a mortgage for over 30 years and managed to pay it off... hardly news?
Either way it's the either suggested or explicit point that you've somehow done something clever or had monk like self control when what you've actually done is live within your means which the overwhelming majority do anyway.
Along with the handy advantage of starting this journey before the runaway house price inflation thats made even looking at the ladder a 10x salary hell ride for anyone starting now for which you deserve zero credit.
That all reads as what you've succeeded in doing is not being a moron and borrowing more than you can afford?
Of course. We've not been 'off' the ladder but rather just chilling on the same rung for too long. House prices are about 50% higher than when I was casually looking a few years back and the cost of borrowing has doubled. So its more about trying to minimise that i.e. buying a house for only 40% more than it used to be instead of 50%. We'd ne trading up, so rising prices would increase the cost of moving. I'm less concerned about the cost of borrowing as we probably wouldn't need to borrow more money, if anything high interest rates are probably a good thing because they might scare off / price out the competition.
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You seem to have a bit of an attitude? Only in your mind does anyone who made the most of the situation deserve "credit" it's just how it is. I think you've worked it out, we have a lot more morons around right now borrowing more than they can afford. The smart ones are saving and biding their time. Relatively speaking having some awareness of the situation and timing your commitments is clever. The only ones I see bemoaning this thinking are those who blame everything that goes wrong for them on someone else. I work on the basis of I have to make the most of any situation as I can't rely on anyone helping me out. I like to be as self sufficient as possible.
As I said my friend is waiting to get on the market but knows it's stupid to buy at a historical peak and borrow so much any tiny change in circumstances will make him homeless. I give him credit for that. He's not complaining he's got a plan.
Soldato
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It depends where on the ladder you are, but I don't want to chase the thing all the way up either, at some point it would be nice to be mortgage free and living somewhere you like, that has everything you need.
It's a long haul unless you are a big earner or your number come up. I'm almost to that point but it's been 30 years in the making. You'll get there if you have a target and a plan to get there. Try not to get divorced, that can throw things out a bit
I completely get this approach but do you feel you missed out at all? When it comes to housing (and only housing), I've had the complete opposite risk appetite over the 25 years I've been a home owner. Stretched myself with every purchase on the basis that I'm in it for the long haul so can ride out any dips in the market. That plus the idea that every year the debt repayment that's fixed will be more affordable as my career progressed meant I was comfortable, within reason, to do that. In common with you I have made sacrifices though - typically in the first couple of years after trading up I cut back on luxuries until they become affordable again. Net result is that by the time I pay off my mortgage next year I am in a property 5x the current value of the first place I bought and I will have only paid out 30% of my property's current value in mortgage payments over the decades. For sure lots of luck involved with house prices rocketing but it wasn't always 0.x% interest rates over the 25 years either though.
The only attitude I've got is towards the people who made a totally average decision in more benign conditions then congratulate themselves afterwards.
You've got no evidence to suggest there are more morons borrowing too much other than your gut at best or ego at worst. It's not a straight comparison.
We're a similar age in similar positions, I've just gotten so mind numbingly bored of listening to people who did totally mundane things doing a victory lap.
I sort of assume you don't have kids? If you do, why aren't you up in arms about the fact they're unlikely to be able to afford their own home? For many many people entering the market "making good decisions" is so over simplified as to be insulting.
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not saying it was anything .. but did you think rates could drop any further ?? i got a 10 yr mortgage ..for the simple fact it could never stay that low forever i'm on a low income compared to most on here it was a good stable decision.
and as it turned out i'm fine and will be for the next 7 yrs .. i'll have a mortgage for 1 more yr after it finishes .. i'm over paying by 10% a yr ..
my lad bought 2 yrs ago got a 5 yr deal he saved for 20 yrs and bought a house at 30 .. so yes kids can get on the ladder they just have to save and not go out and blow there wad .. which most do ..
Isn’t the point that a 2 or 5 year fix at the same time would have been lower than the 10 year fix you got? If they weren’t then everybody would have gone for a 10 year fix.
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well not by much .. just took the long term view .. was thinking 2 then 10 .. but just settled for 10
edit: the reason they din't go 10 is they all thought a)it would last forever b) why should i be paying more ..
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Sometimes 5/10 years isn't a good choice.
People are always saying.. Ooh you should have got a 5 year at 1.x percent. You fool. Rates were always gonna go up.
But it's all just luck. If you got a 5 year at 1.x in 2018 you'd have followed that advice but now you're into the 5s now at 2023 renewal
If you'd have got a 5 year in 2021 you'd be onto a winner.
You can't predict it. Many get lucky. Many get unlucky. But thinking you've done an amazing job is often a fallacy.
Many people can't (and shouldn't) treat thier house and time thier buys by planning for market moves.
People are always saying.. Ooh you should have got a 5 year at 1.x percent. You fool. Rates were always gonna go up.
But it's all just luck. If you got a 5 year at 1.x in 2018 you'd have followed that advice but now you're into the 5s now at 2023 renewal
If you'd have got a 5 year in 2021 you'd be onto a winner.
You can't predict it. Many get lucky. Many get unlucky. But thinking you've done an amazing job is often a fallacy.
Many people can't (and shouldn't) treat thier house and time thier buys by planning for market moves.
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I see your method and we did a similar thing, but bought well within our means and didn't have sky or even broadband for nearly a year! Our phones had data so we just used that instead.
The only time this doesn't work out is if your house value drops like a stone and you've got no equity to remortgage and are stuck on the standard variable rate that you can't afford. Plus not everyone who works gets a pay rise every year so things get easier. Most private sector workers will do but public or government workers, not so much.
My girlfriend is nearly on the same wage for the last 9 years while mine has gone up at least with inflation, maybe just under.
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Soldato
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Yep. I got extremely lucky by fixing at 1.89% for 5 years in March 2022. FTB and would have gone with 2 only the 5 was lower rate. Absolutely no skill or timing the market on my part.