House Prices / Interest Rates 2022 onwards

Associate
Joined
2 Nov 2018
Posts
110
Without a mass house building program to alleviate supply along with rent controls house prices are only going to go up. Both of which will need gov intervention and that ain't ever happening in this country.
 
Soldato
Joined
17 Jul 2008
Posts
7,290
I wholeheartedly agree. I wasn’t even aware a 35 year mortgage term existed.

We have 5 years left on this house, then we’ll sell both and find our forever home and retire early.

The bank is willing to lend my step daughter (with 2 kids split 50/50 with her x) 250k when she earns 35k (over 35 years),

I cannot help feel these low interest rates are going to cause an issue further down he line.. Not that I have a clue when or how
 
Associate
Joined
15 Jan 2011
Posts
384
The bank is willing to lend my step daughter (with 2 kids split 50/50 with her x) 250k when she earns 35k (over 35 years),

I cannot help feel these low interest rates are going to cause an issue further down he line.. Not that I have a clue when or how
That's unusual - I thought the max multiplier was about 6x income at the moment (gradually up from 4-4.5x post financial crisis).
 
Soldato
Joined
18 Oct 2002
Posts
8,062
Location
7th Level of Hell...
It may be because of the term length... Affordability is to do with monthly payments rather than size of the loan i.e they will let you borrow more if over a longer period as payments are same as smaller loan over shorter period
 
Soldato
Joined
2 May 2011
Posts
10,876
Location
Woking, Surrey
I wholeheartedly agree. I wasn’t even aware a 35 year mortgage term existed.

We have 5 years left on this house, then we’ll sell both and find our forever home and retire early.

We've had more than one long term mortgage, and we're on our second house in seven years. It's worked well for us so far - the first house we made about 25% on, and the house we moved into in March has already gone up by about 10%. So we're carrying around something like £100k equity from 7 years of ownership, which isn't bad.

The flipside is that we still have 34 years on our mortgage, but we're also climbing the market fairly quickly. It's affordable, it's not killing me to pay it, I don't like the interest but I do like the house we have now and it's a hell of a lot better than renting.

Writing this, I think that's a major part of why people don't care about 35 year mortgages - you could easily be paying a landlord £1000 a month for a 2 bed flat, or you could be paying £1000 a month to a 3 bed house that you actually own.
 
Soldato
Joined
5 Mar 2010
Posts
10,194
The bank is willing to lend my step daughter (with 2 kids split 50/50 with her x) 250k when she earns 35k (over 35 years),

I cannot help feel these low interest rates are going to cause an issue further down he line.. Not that I have a clue when or how

That's very generous. When we took out a mortgage in 2019 the max multiplier i could find was 4.75, so based on her salary the bank would only lend 166k. When you add in a fairly sizeable deposit of 30k, she's still short of 200k overall, and for 200k you can't get much these days. So the only way banks will get new customers is by upping the total amount they'd loan.

I don't really see interest rates moving that much till 2030+, so she's got some time to build equity, but you're right if rates do shoot up and people don't have much equity in their homes then they plunge into negative equity.

It may be because of the term length... Affordability is to do with monthly payments rather than size of the loan i.e they will let you borrow more if over a longer period as payments are same as smaller loan over shorter period

Yeah it's a pretty poor system, my brother fell into this trap recently. He can afford the monthly payments, but the amount the bank would lend based on his salary wasn't enough to buy something reasonable.
 
Soldato
Joined
26 Aug 2012
Posts
3,853
Location
North West
Are you sure about that?

Mine was about 4.75* our combined earnings and I thought that was high to be honest. I haven't really heard of over 5.5x for fairly usual <100k salaries

Yes, my better half works at a specialist finance company. I say banks I should really say some lenders.

See Habito as an example https://www.theguardian.com/busines...uk-home-prices-as-habito-launches-7x-mortgage for 7 times. Others are offering 7-9 times.

Most sensible lenders will offer 3-5 times. On my first house I borrowed 4 times. Current house 2 times (29 currently).

The one thing about these big lends is they are fixed for 30-50 years in terms of rates, so at least you know what you are paying... If you find a house that will increase in value well, you could still be better off based upon interest rates and inflation.
 
Soldato
Joined
4 May 2007
Posts
8,433
Location
West Midlands
Yes, my better half works at a specialist finance company. I say banks I should really say some lenders.

See Habito as an example https://www.theguardian.com/busines...uk-home-prices-as-habito-launches-7x-mortgage for 7 times. Others are offering 7-9 times.

Most sensible lenders will offer 3-5 times. On my first house I borrowed 4 times. Current house 2 times (29 currently).

The one thing about these big lends is they are fixed for 30-50 years in terms of rates, so at least you know what you are paying... If you find a house that will increase in value well, you could still be better off based upon interest rates and inflation.
Aye those seven times rates as I recall are fixed for 35 years at a (relative to current levels) terrible rate of 3 or 4% APR? - which would be massive amounts of interest on a 7* mortgage. Mines 1.64% fixed for 5 years ( at 75% LTV)

I get what you mean though, generally the market is trending towards higher and higher multiples and the only thing sustaining this is low interest rates. I know a lot of people (myself included) would struggle with 5+% interest rates!
 
Soldato
Joined
13 Jan 2010
Posts
24,914
Location
Llaneirwg
The habito thing is cruel. I'm very much opposed to having job dependent multipliers.

It absolutely makes sense to lenders. But it's yet another divide in haves/hav nots.

Pushes up prices again. But now if you don't have one of the good jobs you fall even further behind.

If I had access to 7x salary I could have my forever home now. The benefits are insane if you can get that multiplier.

Obviously this is assuming rising prices, which is generally the trend over the long term
 
Soldato
Joined
13 Jan 2010
Posts
24,914
Location
Llaneirwg
Aye those seven times rates as I recall are fixed for 35 years at a (relative to current levels) terrible rate of 3 or 4% APR? - which would be massive amounts of interest on a 7* mortgage. Mines 1.64% fixed for 5 years ( at 75% LTV)

I get what you mean though, generally the market is trending towards higher and higher multiples and the only thing sustaining this is low interest rates. I know a lot of people (myself included) would struggle with 5+% interest rates!

5 percent interest...
I think that would cripple but not Kill me.

I'm hoping to lock in for 5 years next. Annoying I have 1 year 1 month left. I'm actually thinking of remortgage early (in a month) and taking the fee hit.

1 percent for me would be 2k.
But 1 percent increase on rate between now and mortgage end would swallow that up and then some if I wait.

I can remortgage now for 1.6 percent
If this goes to 2.6 in a year when I have to re fix I'm gonna regret not doing it sooner.
 
Soldato
Joined
13 Jan 2010
Posts
24,914
Location
Llaneirwg
Just did the maths. 1.6 to 2.6 is 100ppm difference.


5 percent would add 300. Not actually as bad as I thought. But still, it's a lot to chuck away every month. Especially with NI hit coming soon.
 
Soldato
Joined
26 Aug 2012
Posts
3,853
Location
North West
The habito thing is cruel. I'm very much opposed to having job dependent multipliers.

It absolutely makes sense to lenders. But it's yet another divide in haves/hav nots.

Pushes up prices again. But now if you don't have one of the good jobs you fall even further behind.

If I had access to 7x salary I could have my forever home now. The benefits are insane if you can get that multiplier.

Obviously this is assuming rising prices, which is generally the trend over the long term

I think the multipliers can be used to borrow more than the X% of salary that most people would have from the way I interpreted it, so you can get even more if you meet the criteria. Which makes sense as a lot of those jobs are pretty safe jobs in any economic climate compared to others say.
 
Soldato
Joined
4 May 2007
Posts
8,433
Location
West Midlands
Just did the maths. 1.6 to 2.6 is 100ppm difference.


5 percent would add 300. Not actually as bad as I thought. But still, it's a lot to chuck away every month. Especially with NI hit coming soon.
Aye changing to 5% for me adds about £800 a month (1200 to 2000). Bit spicy! But hey I live in what most people could consider a "forever home" when the renovating is finished..
 
Soldato
Joined
2 Feb 2010
Posts
9,517
Location
East Midlands
Thankfully we only have 63k to pay off. But due to both me and the Mrs being around 50, the length of mortgage term isn't as long as we'd have liked, so the monthly payments are a bit higher. Still managing to pay max overpayments though, so by the time the 5 year fixed period ends, hopefully will be down to 40k. So any increase in interest rate shouldn't hit us too hard..
 
Associate
Joined
15 Jan 2011
Posts
384
The habito thing is cruel. I'm very much opposed to having job dependent multipliers.

It absolutely makes sense to lenders. But it's yet another divide in haves/hav nots.

Pushes up prices again. But now if you don't have one of the good jobs you fall even further behind.

If I had access to 7x salary I could have my forever home now. The benefits are insane if you can get that multiplier.

Obviously this is assuming rising prices, which is generally the trend over the long term

Would you actually want a 7x loan over 35 years hanging around your neck just to fulfil the goal of obtaining a "forever" home?
I ran a quick calculation and the repayments would be over 50% of our take home compared to around 20% currently. This would limit our quality of life in other areas and/or our retirement plans (goal to retire at 55 or earlier). Seems like a horrible idea to me unless your current accommodation is awful.
 
Soldato
Joined
10 Jul 2008
Posts
6,066
Does it matter? If renting is more expensive than buying, why in the world wouldn't you buy?!

Raising a deposit whilst in a rent trap is very hard. Years go by. People want to actually live life whilst they can so they buy expensive cars/holidays etc slowly erasing any savings. Add in inflaation and rising prices. Add in salaries not increasing with inflation. Add in wanting to have a kid or two and then suddenly by the time you are mid to late thirties, you are still renting and have a family. Your first house you have to buy to be large enough is a 3 bed minimum.

Try buying a 3 bed house in some areas near me and you are looking at anything from 350k to 500k depending on property. Let's say you and your Mrs have a combined household income of above average and you bring in 70k a year. Times that by 5 and you get 350k. Yay you can kind of afford a 350k house...but can you... no. You need a 10% deposit traditionally even if you can afford a 100% mortgage, so you have to go and find 35k. Who has 35k in the bank?
 
Soldato
Joined
13 Jan 2010
Posts
24,914
Location
Llaneirwg
Would you actually want a 7x loan over 35 years hanging around your neck just to fulfil the goal of obtaining a "forever" home?
I ran a quick calculation and the repayments would be over 50% of our take home compared to around 20% currently. This would limit our quality of life in other areas and/or our retirement plans (goal to retire at 55 or earlier). Seems like a horrible idea to me unless your current accommodation is awful.

Not in my position as I'd have to make the step anyway as I own my first home now. (with mortgage).

It's more if you can skip the starter home completely.
No one wants that rate. But (I'm not sure if it's fixed for 20 years) it could even be amazing if interest rates really spike.

I think if I was about to buy my home again and someone said 'you can get this 500k house' or this '300k' house but you'll pay less I'd go for the 500.

Also.the house price rise of 25 percent in two years here is a lot more on that 500k house!

That 500k house is now 625k. So that few hundred a month extra is still. Probably a saving.
I have to find that 125k. The original Buyers on that 7x don't.

You also save on moving costs. Stamp duty again and legal fees.

So really. If you are confident in an increasing market its a no brainer.. Imo
 
Top