Mortgage Rate Rises

[413x]

Yeah I think once you drop under 60% there's probably very little difference.

When took out mortgage in 2020 it was 90pc.
Then it was 75 (I think) in 2022.
But getting to 70 (do I put more cash into it) either side wasn't worth it.
I do remember it making a difference being 75 and not 80 (ie if house was valued down)

House was valued down but still under the threshold.

 

[DB_SamX]

Yeah I think once you drop under 60% there's probably very little difference.

I'm with HSBC and despite being at 41pc LTV, their lowest band of rates was 60pc and under.

 

[MikeTheNative]

I'm with HSBC and despite being at 41pc LTV, their lowest band of rates was 60pc and under.

This and to the difference between 75% to 60% probably isn't that much either.

 

[robfosters]

Are there many people who have been doing that outside of BTL mortgages and they have probably been banking on house price increases more than anything else for their profits.

Depends where and when they bought really. People who bought down London and the SE about 20 years ago are laughing now.

I had a disagreement with my pal over this as he thinks people on interest only have just been renting far below market value and are getting money for nothing, so they should be taxed on their equity.

 

[ImMrChris]

Yeah I think once you drop under 60% there's probably very little difference.

yes i've never noticed any difference from the 60% myself

 

[fez]

Seem to be quite a few still, FCA link
This says 750k wholly interested only regulated mortgages, or 9% of market. BTL mortgages generally aren't regulated, so I think the majority of those would be normal home owner mortgages.

Is that "interest only" and we have no other information about it? My parents had an endowment mortgage I believe so that would theoretically count as interest only even though fundamentally there was a "set in stone" plan for paying off the capital.

Depends where and when they bought really. People who bought down London and the SE about 20 years ago are laughing now.

I had a disagreement with my pal over this as he thinks people on interest only have just been renting far below market value and are getting money for nothing, so they should be taxed on their equity.

Its an interesting thought because ultimately they were having a gamble. If somehow house prices crashed they would have been on the hook for any negative equity in the house but could declare bankruptcy if required. In simplistic terms though, yes they have been renting at very little cost and their houses have probably gone up in value many times over so they have played a blinder if they have invested that money elsewhere.

 

[EvilRob]

Is that "interest only" and we have no other information about it? My parents had an endowment mortgage I believe so that would theoretically count as interest only even though fundamentally there was a "set in stone" plan for paying off the capital.

Yes, but endowments are NOT set in stone. Most endowments fail. Your parents were lucky and/or more switched on than most with an endowment mortgage if it succeeded in fully repaying their capital.

 

[fez]

Yes, but endowments are NOT set in stone. Most endowments fail. Your parents were lucky and/or more switched on than most with an endowment mortgage if it succeeded in fully repaying their capital.

Oh I know. They did reasonably well out of it as far as I know. I.e there was a small payout on top of the mortgage being paid off but I know none of the specifics around it.

What I mean by "set in stone" is that they had a plan to pay off the house at the end of the mortgage. It wasn't "we will probably save enough to pay it off" or "we will try and invest some money and hope that covers it". There was a set plan that was designed to take the place of monthly repayments.

 

[EvilRob]

Oh I know. They did reasonably well out of it as far as I know. I.e there was a small payout on top of the mortgage being paid off but I know none of the specifics around it.

What I mean by "set in stone" is that they had a plan to pay off the house at the end of the mortgage. It wasn't "we will probably save enough to pay it off" or "we will try and invest some money and hope that covers it". There was a set plan that was designed to take the place of monthly repayments.

The trouble is, even if you have an endowment in good shape or a well thought out repayment strategy you are still very exposed to interest rate rises as compared to a repayment mortgage because you haven't repaid any of the capital. I feel for people on this type of mortgage even if they may have been naive or had their heads in the sand.

 

[Hagar]

The trouble is, even if you have an endowment in good shape or a well thought out repayment strategy you are still very exposed to interest rate rises as compared to a repayment mortgage because you haven't repaid any of the capital. I feel for people on this type of mortgage even if they may have been naive or had their heads in the sand.

There will have been quite a few who are not naive or heads in the sand just relying on property increases to bail them out at the end of the term. When or if it does go pear shaped they claim they were badly informed it I don't believe the half of it.

 

[Cadder]

Fixed deal (1.85%) ends in January. Last week the best rate for us using the MSE comparison tool was 4.7% for 2 years fixed but that has now increased to 4.9%. It's not like me to do this but my plan is to keep holding off until the last minute as I get the feeling rates will drop a little as soon as I lock in.

I can live with 2 years under 5% in hope of rates coming down by the end of the "deal".

 

[a1ex2001]

Fixed deal (1.85%) ends in January. Last week the best rate for us using the MSE comparison tool was 4.7% for 2 years fixed but that has now increased to 4.9%. It's not like me to do this but my plan is to keep holding off until the last minute as I get the feeling rates will drop a little as soon as I lock in.

I can live with 2 years under 5% in hope of rates coming down by the end of the "deal".

You do realise you can lock in a rate now and then swap it if they drop in the meantime?

 

[SaBBz]

You do realise you can lock in a rate now and then swap it if they drop in the meantime?

This is specifically covered in the mortgage charter too

 

[Cadder]

You do realise you can lock in a rate now and then swap it if they drop in the meantime?

I did not realise that. Thanks for letting me know.

 

[jaybee]

I have a neighbour that has an interest only mortgage and he's going to have to downsize and live in a flat he says. He's got to like 60 and can't afford to pay it off. I looked and he bought when it was 150k. It's now worth probably 380k.
Is he basically saying he does not have a means to find 150k?
So he's going to have to sell to pay it, then find something for 230k?
I don't understand the mindset of interest only mortgages really. Seems so many would end up in similar positions.

 

[Trifid]

I have a neighbour that has an interest only mortgage and he's going to have to downsize and live in a flat he says. He's got to like 60 and can't afford to pay it off. I looked and he bought when it was 150k. It's now worth probably 380k.
Is he basically saying he does not have a means to find 150k?
So he's going to have to sell to pay it, then find something for 230k?
I don't understand the mindset of interest only mortgages really. Seems so many would end up in similar positions.

It would be OK if they heavily invested in their pension and paid it off with the 25% tax free allowance. However I suspect those who opt to save a bit on their mortgage repayments are the same people who would pay the minimum into their pension.

I expect your neighbour is more looking at a £200k flat by the time they paid all the moving fees.

 

[unwashed potato!]

mine renews in 10 days. just heard hsbc have dropped ours from 5.54 to 5.39

 

[EvilRob]

I have a neighbour that has an interest only mortgage and he's going to have to downsize and live in a flat he says. He's got to like 60 and can't afford to pay it off. I looked and he bought when it was 150k. It's now worth probably 380k.
Is he basically saying he does not have a means to find 150k?
So he's going to have to sell to pay it, then find something for 230k?
I don't understand the mindset of interest only mortgages really. Seems so many would end up in similar positions.

You're supposed to have a repayment strategy as part of getting an interest only mortgage.

 

[BUDFORCE]

You're supposed to have a repayment strategy as part of getting an interest only mortgage.

Yeeeeeeeeeeeeeee.

But back in the day it was literally a case of ticking a box that a said "ISA" or "Overpayments" with no further questions or checks.

I know I used to approve ones like that, and you knew damn well half of them wouldn't do anything about it. I got no sympathy personally.

 

[Mercenary Keyboard Warrior]

I was recommended an interest only mortgage back in 2000.
The "financial advisor" asked about parents and said I should inherit plenty to pay it off so should go for an interest only.

I said I was looking at (and did actually take out) a 15 year fixed.

He didn't get my I want minimum risk on my house and will take my risks in the stock market comment seriously.