Mortgage Rate Rises
- Thread starter glenimp617
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Market pricing is not currently for substantial base rate cuts from here and slightly longer duration normally carries a slightly higher yield.Imagine I am 5 years old and retell please
Soldato
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Who said that?
If you had invested in say tesla with the money, how many millions would you have instead?
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That's an optional risk for you to take. With living you have no choice but to either pay rent or pay mortgage. Not the same things.
Soldato
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not surprised really
Me either.
I was hoping to get a sub 3pc rate on renewal in 2027. And it is looking more and more possible.
On 1.93 still so anything in the 2s would be nice.
Soldato
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Forgetting the deposit though. I was told to buy a house as early as possible, I dilly dalleyed and bought later than I probably should have. But I sold £60k stocks to do that. Stocks that would be worth a lot more now than my house.
That's why I'm curious who it is that told them to rent over buying
Soldato
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I guess I'm still confused as to why the offer for 5 years is higher.
The way I understand it is that in 5 years it's very highly likely that the base rate will be lower, so to take a 2 year mortage in 3 years time, you'll be paying a lower rate, let's say 2.9 percent. So I'd expect a bank to say offer 2 years fixed at 3.7, 5 years fixed at 3.5, because they know in 2 years when interest rates are much lower, they are making good money on the interest being locked in at higher than what everyone else is paying. Like now I'm currently paying 5.2 percent, so HSBC is making good money on that.
Which is why I still don't understand why their 5 years fixed is higher than a 2 year or 3 year fix
Soldato
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A longer term will always have a higher interest rate. This is because you, as the customer, are paying a premium for greater certainty of what your future repayments will be.
The bank isn't making a call on future interest rates when they offer mortgages, they are offering them according to what the prevailing interest rates in the market are now. The longer term rates are always higher, and the relevance of current rates for banks is pricing against their competitors, i.e. trying to be competitive.
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Exactly you explained that well.
The bank doesnt start making extra on your loan just because the base rate goes down, remember they set their price based on the cost of capital when you took out the loan not what might happen in 5 years time.
Soldato
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The bank doesn't, but the swap market does. Banks hedge mortgages into the swap market so they don't hold interest rate risk, but that then sits in the swap market. Some movement is priced in to that already but if its larger then expected the swap market (ultimately the holders of the banks' hedged mortgage assets) can benefit. They can also disbenefit if the rate goes up.
There’s advantages to renting, I have become more risk averse since becoming a mortgage owner and it’s limited my potential earning in career choices. Turned down an opportunity only to take it a few years later. Turned down another one in another country.. heck only last month there was another job opportunity that was in Leeds and I don’t really want to deal with the hassle of driving there two days a week or relocating as I will have to sell or rent out my house.
There’s also hidden costs, like repairs to ownership.
Sadly for most people, you either renting a house or you are renting the money to live in a house.. and for some who treat their shelter as an asset, they over commit and make a poor financial decision but it sounds like you’re doing fine.
I was just looking at this as I did the same ~18 months ago and starting to think about next move.
I opted for 2 year tracker at BR+0.1%, which at the time was 5.35%. That's now down to 4.1%. Hoping the next decision works out as well.
I think it will do. It’s worth the punt. Especially as we will be looking to move, too.
Soldato
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Lots of news outlets are suggesting that the rate will be cut this month to 3.75 and possibly another 0.25 in the new year.
Caporegime
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Mine is renewed at end of January so hoping for that. 3.48% i did 3 years ago.
Soldato
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I see now HSBC went from the best rates to one of the worst. Now the price I can get is £1240 per month. Hoping it'll drop enough by end of Feb so that I can be below £1200
And how long ago was that? Its never a simple calculation like this. Most people who have this sort of outcome have had a house for a long time to get to where they are making this comparison from.
If your money in the markets would have returned 9% then you need to beat that in your housing calculations. People always seem to completely ignore this.
"Oh I am paying **** all mortgage after 15 years whilst the people that didn't do what I did are paying X". Yes, and if you had rented during that time and stuck the £60k you put into your deposit into the markets you would have enough money to buy the house outright now. Thats ignoring the cost of keeping and maintaining a house. All the costs involved in buying a house etc.
People do very very simplistic sums to come to these broad conclusions. Yes if you literally did nothing with the money you would have been paying towards a mortgage and just spent it then of course you will be far worse off. Thats not the comparison people are making that suggest that renting isn't quite the mad decision some suggest.
Not sure this is quite the decision you are suggesting. Every month you are paying the higher rate you are essentially digging a hole vs the fixed rate. So even if you get these 2 drops and even if you get a third or fourth, will you actually have been better off within 2 years vs the fix?