Mortgage Rate Rises

[Zefan]

Just moved to a two year tracker at 0.11% above the base rate. I only need two 0.25% base rate drops to be in the same position as the best fixed currently available for me.

57% LTV.

This is what I did for part of our mortgage (two products out of sync, renewal wise, due to moving and borrowing more). The way I saw it was that it is more unlikely than not that we'd get conditions that favour the tracker. This may well be a luxury risk to take, in that if it went up to 6% I'd not be belly up.

 

[Chris344]

Thats an absolutely ridiculous product fee on a 2 year mortgage! £83/month extra just on the product fee. God I hate mortgage lenders. Make tens of thousands from you and still have the cheek to charge a fee. They should be banned. The rate should be the rate.

Agreed. The American model is far better. I personally find it ridiculous that typically we have to remortgage every 2 or 5 years (or even 10) whilst paying a “fee” each time. People forget that the fee, if added to the mortgage, also incurs interest over the lifetime of the mortgage.

 

[coupe69]

No, in general you want to own a property in retirement but if you have made sensible choices alongside choosing to rent for your working life there is no reason you can't have enough to buy a house outright.

I get the point, but that assumes a level of disposable income that just isn’t realistic for most renters today. “Sensible choices” only go so far when rent is eating such a huge chunk of your pay every month. Saving enough to buy a house outright later in life sounds great in theory, but in practice very few people can out‑save rising rents, rising house prices, and the general cost of living. Owning earlier isn’t about chasing a milestone, it’s about locking in stability while you still can. Renting your whole working life and hoping you’ll somehow have the cash to buy outright at the end is a gamble most people simply can’t win.

 

[a1ex2001]

Agreed. The American model is far better. I personally find it ridiculous that typically we have to remortgage every 2 or 5 years (or even 10) whilst paying a “fee” each time. People forget that the fee, if added to the mortgage, also incurs interest over the lifetime of the mortgage.

The product fees should be capped at the actual cost of setting up the mortgage by the banking watchdogs as they are simply scummy tactics to make the products look more competitive than they really are and also harder to compare. There is no need or justification for them.

Nice to see a lower than expected inflation figure today, should increase the likely hood of a rate drop tomorrow we have ten months left on our 1.25% fix so if it the base rate could find it's way down to 3% before then then I will be a happy bunny.

 

[fez]

Agreed. The American model is far better. I personally find it ridiculous that typically we have to remortgage every 2 or 5 years (or even 10) whilst paying a “fee” each time. People forget that the fee, if added to the mortgage, also incurs interest over the lifetime of the mortgage.

How does the american system work if its a "lifetime" rate. Lets say you were unlucky enough to get that mortgage when rates are 7%. Are you stuck on that for the life of the mortgage or can you break and get a lower rate whenever you like. I assum you can but are there horrible penalties? How does it work with regards to upsizing and taking on more debt etc?

 

[Freakbro]

How does the american system work if its a "lifetime" rate. Lets say you were unlucky enough to get that mortgage when rates are 7%. Are you stuck on that for the life of the mortgage or can you break and get a lower rate whenever you like. I assum you can but are there horrible penalties? How does it work with regards to upsizing and taking on more debt etc?

I don't know all the details but yes, it's normal to change the mortgage when rates drop over there - it just needs to be worth it since you would need to take into account all the fees involved with setting up the new one, as well as any exit fees from the original.

The US system is better for long term stability, but does cause it's own issues. Like now, when the interest rates have risen quickly to a high rate, it has stopped all unnecessary moving/house buying, as who is going to swap their 2% mortgage for a 7% one if they don't need to since you can't port mortgages like you can over here.

 

[fez]

The US system is better for long term stability, but does cause it's own issues. Like now, when the interest rates have risen quickly to a high rate, it has stopped all unnecessary moving/house buying, as who is going to swap their 2% mortgage for a 7% one if they don't need to since you can't port mortgages like you can over here.

Ouch! So lets use your example and say you want to go from a £500k house to a £1m house. Lets say you owed £400k on the first one and were going to owe £800k on the second. Your mortgage payment would go from £1700/month to £5650. Doubling your mortgage would result in a 330% increase in payment. I guess the flip side is that over here you are likely to be forced onto that higher rate eventually even if you stay put but that must hurt.

 

[unwashed potato!]

The product fees should be capped at the actual cost of setting up the mortgage by the banking watchdogs as they are simply scummy tactics to make the products look more competitive than they really are and also harder to compare. There is no need or justification for them

Yeah but unfortunately the interest rate is now a government problem, in that if the interest rate is high = government fault, if low = government saying how well they are doing

So governments will secretly be happy with this if it means that banks offer what appears to be a lower interest rate, because headlines ignores the £1k fee every 2/3/5 years, and all the other costs.

If banks charged £5k product fee and dropped the rates from 3.7 percent to 2.7 percent, no government would stop thst. Headlines would be "banks now at 2.7 percent thanks for x government doing x things"

 

[413x]

You can certainly do 10 year fixes but I imagine you can do longer but they are not commonplace.



Yeah, its all smoke and mirrors to confuse people with the headline rate. Make its so much more work to calculate.

Cashbacks
ERC
Rate
Fees
Potentially legal fees
Duration of fix.

It should be a very simple "this is the rate for X years". This is the ERC. Thats it. Nothing else. Then everyone can say "look, this mortgage is cheaper over 2 years than this one over 5" (for the initial 2 years) rather than "Hmm, so this 2 year fix is cheaper than the 5 but I will have to get another fix in 2 years and probably pay another fee to do that so....".




If you don't like to stay in one place then I wouldn't be buying right now. They don't seem to have any will to change stamp duty into something remotely sensible so moving house in a market that is flat is so expensive unless you are talking houses in the low hundreds.

Currently own. But so bored of where live want to move. But it's not ideal to move every 5 years. You just end up burning money. Sure, this time it's been OK due to the covid spike.

Not really sure how to play it really. Big life choices and all that.

Ideally I'd only stay in one place 2-3 years. Which is definitely a no go for owning.

 

[unwashed potato!]

R

Currently own. But so bored of where live want to move. But it's not ideal to move every 5 years. You just end up burning money. Sure, this time it's been OK due to the covid spike.

Not really sure how to play it really. Big life choices and all that.

Ideally I'd only stay in one place 2-3 years. Which is definitely a no go for owning.

Rent yours and rent another? Certainly gives some freedom to try something new while not committing to anything and avoids any large costs.

If you still "live" in your owned house, you'll get some tax free amount per month on the rent income.

 

[AndrewNR]

It was a broad generalisation. Without a specific set of figures for everything its all conjecture but its based on doing hypotheticals.

Lets say your do stick a £22k deposit down on a £220k house. Over 15 years that 22k would become £85k if you got a 9% return every year.

Lets say you are paying off your £198k mortgage over 25 years and over the last 15 year period you manage to average a 4.5% interest rate (renewing mortgage, fees etc). I don't think 4.5% avg. is unreasonable.

In year 15 you will now have about £105k left. You've paid off about £93k of capital and about £106k in interest. Another way to look at it is that you have paid about £600/month in dead money servicing the interest. Then you start to get into the costs associated with owning a home and it all adds up. People always like to compare "what I pay on my mortgage to the rent I would pay" when its not the same. Rent is dead money, interest is dead money.

The only reason owning a house has been broadly speaking a good idea financially is because house prices have been going up so much that the money you are "making" is very high in most cases. The issue with that obviously is when people want to climb the ladder and the house they want has also gone up by X% which in real money terms is far more than their own home. So yes on paper they have move money but the amount of debt they are taking on to afford the house is crazy.

In a future where house prices stagnate and in places regress, house ownership really isn't a no brainer.

This is a fair point but:
You'd struggle to get a 9% ROI every year for 15yrs I'd say
Rent on a 220k home would be far higher than 600p/m...mire like 800?
You've ignored house price growth, probably 'free' growth of 80k in tgat period (220 to 300)...actually you mentioned this but with no figure

 

[Sythe79]

Agreed. The American model is far better. I personally find it ridiculous that typically we have to remortgage every 2 or 5 years (or even 10) whilst paying a “fee” each time. People forget that the fee, if added to the mortgage, also incurs interest over the lifetime of the mortgage.

Again it's not really better when it comes to costs, go and look at what the average mortgage rate is on a 30-year fix, it's probably around 6-6.5% when the base rate is under 4%. And that's discounting how their banks assess affordability. If you don't have enough of a deposit, they will force you into their own mortgage insurance, for example, and factor in property taxes as well.

Neither is better than the other by any sort of margin, banks in any country aren't doing you any favours or leaving money on the table.

 

[BUDFORCE]

I find it quite amusing that people complain or moan about mortgage costs. Nobody is forcing you to borrow money.

People think "it's their right" to get a mortgage or something, does my head in. These mortgage lenders simply wouldn't exist if it wasn't for people borrowing money.

It's the whole "blame the banks" no.... Blame the people who borrow money, they are the ones enabling the whole thing.

I remember helping out on an external audit, I was working with a couple of guys from Spain looking to buy a load of mortgage books, they were clearly some kind of investment company because whilst they had a basic knowledge they clearly didn't know too much about mortgages.

Anyway, whilst their English was basically perfect, they described these accounts as "new money " which did make me think.

All this money that is traded between Banks and funds all this spiraling capitalism, still has to come from somewhere.

As usual though, it's easy for people to shift the responsibility from themselves and blame something else for their poor choices.

 

[fez]

I find it quite amusing that people complain or moan about mortgage costs. Nobody is forcing you to borrow money.

No one thinks its their right to borrow money but you need a home. Having a nice home makes a massive difference to your quality of life and you either get a mortgage or you likely pay more to not have a mortgage.

You can't just choose not to have a home one way or another.

This is just another case of blaming people for a system that they have absolutely no control over. They didn't choose not to build enough houses. They didn't choose to be born when they were or in what part of the country or with whatever earning potential they have. They didn't decide to sell off loads of council houses or inflate the market over decades rather than try to keep a lid on it.

The only choice you have is how much you borrow if you are lucky enough to be choosing rather than being forced to max yourself out. Even then, historically you have been richly rewarded for leveraging yourself up to the eyeballs with your mortgage as house prices and wages have quickly made that decision a wise one.

 

[unwashed potato!]

I find it quite amusing that people complain or moan about mortgage costs. Nobody is forcing you to borrow money.

People think "it's their right" to get a mortgage or something, does my head in. These mortgage lenders simply wouldn't exist if it wasn't for people borrowing money.

It's the whole "blame the banks" no.... Blame the people who borrow money, they are the ones enabling the whole thing.

I remember helping out on an external audit, I was working with a couple of guys from Spain looking to buy a load of mortgage books, they were clearly some kind of investment company because whilst they had a basic knowledge they clearly didn't know too much about mortgages.

Anyway, whilst their English was basically perfect, they described these accounts as "new money " which did make me think.

All this money that is traded between Banks and funds all this spiraling capitalism, still has to come from somewhere.

As usual though, it's easy for people to shift the responsibility from themselves and blame something else for their poor choices.

You couldn't be more wrong.

Your post is a dream and nothing more

 

[alexakasloth]

Having a look at deals with nationwide and the one product that doesn't have their fees (£999) is the two year fixed, with all other fixes having lower interest rates. Seems like they are suggesting rates will continue to decrease in the short term?

 

[a1ex2001]

Having a look at deals with nationwide and the one product that doesn't have their fees (£999) is the two year fixed, with all other fixes having lower interest rates. Seems like they are suggesting rates will continue to decrease in the short term?

everyone is predicting a slow fall in rates next year (not a big fall) hance some people are taking base rate trackers as a couple of rate reductions would see them below current fixes. Hard to know what to do and I haven't had any sort of tracker mortgage in over 15 years!

 

[Jono8]

I find it quite amusing that people complain or moan about mortgage costs. Nobody is forcing you to borrow money.

People think "it's their right" to get a mortgage or something, does my head in. These mortgage lenders simply wouldn't exist if it wasn't for people borrowing money.

It's the whole "blame the banks" no.... Blame the people who borrow money, they are the ones enabling the whole thing.

I remember helping out on an external audit, I was working with a couple of guys from Spain looking to buy a load of mortgage books, they were clearly some kind of investment company because whilst they had a basic knowledge they clearly didn't know too much about mortgages.

Anyway, whilst their English was basically perfect, they described these accounts as "new money " which did make me think.

All this money that is traded between Banks and funds all this spiraling capitalism, still has to come from somewhere.

As usual though, it's easy for people to shift the responsibility from themselves and blame something else for their poor choices.

You have this the wrong way around.

The whole reason housing costs are so ludicrous is exactly because banks are willing to loan exorbitant sums of money.

If the money wasn't there to borrow, houses wouldn't be so absurdly expensive.

Ofcourse this benefits the banks and bank executives and it's absolutely in their interests for houses to be as expensive as possible so people have to have larger and longer mortgages so they can continue to make money.

Making more money just because you have money to lend in the first place is the most leeching and unproductive contribution to society. Yet these are the people and companies that tend to make the most money ...

 

[jaybee]

I find it quite amusing that people complain or moan about mortgage costs. Nobody is forcing you to borrow money.

People think "it's their right" to get a mortgage or something, does my head in. These mortgage lenders simply wouldn't exist if it wasn't for people borrowing money.

It's the whole "blame the banks" no.... Blame the people who borrow money, they are the ones enabling the whole thing.

I remember helping out on an external audit, I was working with a couple of guys from Spain looking to buy a load of mortgage books, they were clearly some kind of investment company because whilst they had a basic knowledge they clearly didn't know too much about mortgages.

Anyway, whilst their English was basically perfect, they described these accounts as "new money " which did make me think.

All this money that is traded between Banks and funds all this spiraling capitalism, still has to come from somewhere.

As usual though, it's easy for people to shift the responsibility from themselves and blame something else for their poor choices.

Seems a strange take on things.
People are just trying to live. If renting was better financially long term, people would do that. It isn't in this system and likely never will be.

BOE decreased rates to 3.75%. There will come a point next year I expect where it would have been better if I had gambled on a tracker rather than a 2 year fix at 4.07%.

 

[ci_newman]

I'll be trying to remortgage early next year (renewal in June), another drop in Feb would do me nicely.