Surely you're almost at a point where it would be better to remortgage and pay an ERC?October 2028 for me at 5.44%
Mortgage Rate Rises
- Thread starter glenimp617
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Yet the government has asked the bank to stop asking for a 10% deposit and only a 5% deposit?
There wasn’t really a housing crash in the uk. The housing crash was in the US. People here saw it and panic.. and like a self fulfilling prophecy did a bank run to get the money out.
This is why the government made it so banks have to keep more money liquid after the bank runs. The banks that was mostly affected where the banks that was leading out 100% mortgages or in some cases 105% or 110% mortgages as simply they had the least money at hand to give back people their deposit.
The actual housing market prices dropped slightly as the banks was stocking up on liquid cash and people themselves where more carefully in lending. If you want to see a real housing crash, look at the Japanese housing market.
The affordability rules that you speak off has nothing to do with the amount that the banks lend someone. They are stuff like removing stamp duties for first time buyers, shared ownership schemes, making a certain percentage of new houses “affordable” for new projects. All stuff that makes houses easier to sell.
Banks have changed their approach to mortgages now so it’s based on affordability. Rather than the standard 25 years mortgages, if you can afford to pay more as you are sensible and not gone over budget of 33% of your monthly income for shelter, you will be asked to pay more as mortgage term will be shorten.
The amount a person can borrow is only 4.5x their annual pre-tax income. So for someone earning 50k (which is the point where someone is considered as a high earner.) it’s only 225k.. barely enough to get a starter home in most areas. As a couple, there are three methods that a bank can use.
On top, the second lower income is simply added on top of the first amount after it’s been multiplied. So two people earning 50k would get 275k.
Halved, the second income is halved and added to the first then multiplied. Giving a mortgage of 337,500
Together, where both salaries are added together and then multiplied. Giving a mortgage of 450k.
Sounds a like bit of you consider that the cities that are likely to have jobs that are offering 50k are the cities with the crazy house prices.. half a million price houses are nothing for some areas of greater Manchester, Chester.. a new build 2 bedroom in Knurtsford is 750k!
The maths are simple, the smallest amount you borrow for the shortest amount outweighs any fluctuations in the interest rates.
No, it's quite obvious that if massive amounts of money was not available to be borrowed for houses, house prices wouldn't be at the ridiculous levels they are now.
Soldato
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But who's fault is that? Banks for lending it, governments for not making a rule that banks can't lend so much, or voters for not voting for a government to fix this?
Difficult to point at anyone in particular. It's just how our economy and society has evolved, but fundamentally the problem has always been absurd wealth disparity (dating back centuries).
Ideally, there never should have been individuals and companies that had amassed such vast wealth that they could lend it out to people to simply make more money without doing any actual work, or anything productive.
Or people willing to borrow more than they can comfortably afford?
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Soldato
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Sure but you'll never have a mortgage at a rate you can "comfortably" afford. Mortgage will always be a huge chunk of someone's pay, so most who take a mortgage even when stretched can afford it, until something goes wrong and they lose their job. But even someone comfortable, would still struggle if they lose their job. And of course, if you don't stretch, your neighbour will, and you never find a place.
The only way to control the issue is government regulation. But which government wants to fight that fight
There isn't a massive amount of money available for buying houses.. when compared to the prices of houses on the market today.
Getting credit isn't as easy as you think it is, else house prices wouldn't have gone sideways for the past decade.
IMHO, it's the people.. if someone wants to borrow way more than they can afford.. they get their view across by voting for the party that allows them to do this. Then they will shop around at the banks until someone like northern rock will give them that loan. If the government doesn't allow it, then they will just get replaced by a government that will. If the bank doesn't grant them the loan, they will just find a bank that will.
Short term gain for very long term pain. Rather spending less than what they can afford and using the additional cash to make their area a better place to live increasing the value of their house, they rather think that the house that they want is a long term investment bbut who's going to make the area in better place to live in? When there's no spare cash for spend in the local shops or tor enavate?
But with house prices as they are, they have to....?
Average house prices are over 7x the median salary.
I’ve got till ‘29 at 4.4%
I suppose it depends on how large your mortgage is.
I locked in last month @ 4.14% until Dec 2030. I just wanted stability again, so I know exactly how much I'm paying. Even if rates dropped to 3% - for me that would only be about £30 a month difference, so not worth the constant switching really.
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338k currently left so a chunker, went from 1.99% to that, not ideal but similar to you, world is a mess and I preferred knowing that this is my payment for the next 5 years and which ever way it went, I just have to accept it.
with current rates it'd be £50 ish less a month, if it ever goes down to 2% etc in the 5 years then yeah, a shame but it is what it is, can work both ways with rates and it still may change..
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Yeah that's a fair chunk left! You can always overpay to lessen the impact though.
Mines only 55k thankfully, so rate changes don't have such a big impact.
I can't see them rapidly dropping now. The last base rate change only just passed 5 to 4 votes. And they said rates drops would come more slowly from now on.
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It will get worse as rates fall. There’s a lot of pent up demand. Money will become *cheaper* and thus, house prices will go up.
No they don't have to, they choose to. I've had 4 mortgages and have always chosen to get the mortgage and have never been forced to by the lenders.
Soldato
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I only ended up taking a two year fixed at 4.2%, hope things keep falling for the next 2 years!
Hi yes the last overpayment I made in Nov was £3900
It lowered my monthly payment from £720 to 699
I suspect if I make another £4k overpayment it should go from £699 to maybe £640 a month
In order for it to readjust the monthly payment you need to make an overpayment of at least £2600 I think for it to recalculate
My goal was to overpay around 6-8 k or even if I can hit 10k overpayment a year it will bring the term from 22 years to around 10-11 years left
I am still saving inbetween though
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Well obviously they choose to...but because they want a place to live.
So if they choose to buy a house they also choose how much they are willing to pay to get a house.
Associate
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If the banks didn’t lend horrific amounts then people wouldn’t buy houses and prices would come down to match what they could borrow.
It’s a bit of a chicken/egg scenario, but ultimately it’s the banks that allow huge mortgages.
Which is dictated by matters out of their control and our stupid society/economy/for profit banking.
House prices are silly, majorly in part so that those that already have absurd amounts of money can make more without being productive or contributing usefully to society.
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