Mortgage Rate Rises

[Mysterae_]

The whole mortgage rates and estate agent fees system are a crock of ****.

Everyone should pay the exact same percentage of interest and it should be fixed forever, for everyone. No need to hunt for the best rate, no need for luck or timing your house purchase so you're not going from 2% and a few years later paying 4.5%. The Bank of Cronies changing the interest rates doesn't impact people's spending really, unless it's a double digit interest rates.

Inastate agents should be paid a fixed fee regardless of the price or size of the house they are pimping and they should be regulated up the wazoo. The system should be cookie-cutter.

It won't matter in a few decades, home ownership is changing, and for the worse.

 

[Zatoichi.uK]

This thread reminded me to get something lined up renewing in Nov from a 1% mortgage. I've been putting my "overpayments" into a cash isa so will lump sum some off the balance before renewal. Hopefully monthly costs dont rise too much and I can start overpaying assuming saving rates dont keep up.

 

[200sols]

What's wrong with consumers getting value for money? A long term rate should be nowhere near 7% to start with, more in the order of say 4%. That covers inflation expectations (long term 2%) and profit/risk on top.

Rates are set by the cost of money when you borrow, not some random rate you pluck out of the air.

Mortgage lending (on your main residence) should not be at the whims of interest rate policy in the first place.

We live in debt based economies which means this is the case. If you think the state setting a fixed low rate of interest for housing will solve things then you are wrong, the cost of houses would simply rise as a result.

But lets say you did lock in for 30 years and rates fell. Why should you not get the benefit passed on or at least shared? Why should the banks win on this and not the consumer?

Banks don't win like that when rates fall, your money was created based on the conditions at the time. Falls in rates in the future after you took out your 30 year mortgage affect new borrowing, not existing fixed rate borrowing.

 

[mid_gen]

What's wrong with consumers getting value for money? A long term rate should be nowhere near 7% to start with, more in the order of say 4%. That covers inflation expectations (long term 2%) and profit/risk on top.

If that had been the case for the past 50 years we'd have had a much more stable housing market, none of the disasterous low rates that have caused excess borrowing and rampant house price inflation. None of the stupid high rates in the 1990's that saw thousands of people lose their homes. I know supply is a factor in price also, we'd still have got price inflation due to demand outstripping supply.

Mortgage lending (on your main residence) should not be at the whims of interest rate policy in the first place.


But lets say you did lock in for 30 years and rates fell. Why should you not get the benefit passed on or at least shared? Why should the banks win on this and not the consumer?

Where do you think the money the banks lend to you for a mortgage comes from?

Do you think it's free or something? I think you are missing some very basic understanding of how money works.

 

[Chrisc]

FYI - if you live in the house, there is no advantage to doing this. Look up ‘gift with reservation of benefit’.

It also doesn’t help dodge care costs either.

ill hopefully have some form of lodge by then which i can class as my only abode.

 

[danlightbulb]

Banks don't win like that when rates fall, your money was created based on the conditions at the time. Falls in rates in the future after you took out your 30 year mortgage affect new borrowing, not existing fixed rate borrowing

They do. Have you not seen the recent reports of bank profitability off the back of rate rises?

The loans are traded in the inter bank markets. Bought and sold to intermediaries. When rates fall those intermediaries are earning a bigger gap between the interest rate on your loan and the risk free rate hence gaining a larger profit.

When rates rise the markets make money too, by bundling loans into larger portfolios and selling them on for profit. And as banks have fixed costs, rate rises directly increase their margin even if matched by an underlying bank rate change.

The money/loans made historically are continually flowing being traded between intermediaries in the inter bank system.

Where do you think the money the banks lend to you for a mortgage comes from?

Do you think it's free or something? I think you are missing some very basic understanding of how money works.

It's lent from financial intermediaries but as I said above just because the rate is static for the borrower (you) doesn't mean the loans aren't traded around between intermediaries. They are, continually.

The inter bank system also allows existing loans to be off the books of the retail bank, meaning they can continue to lend new loans without affecting their cash buffer ratios.

 

[200sols]

They do. Have you not seen the recent reports of bank profitability off the back of rate rises?

Rate rises. Yes, and for new loans not existing loans, when rates normalised the interest rate margin also normalised.

The loans are traded in the inter bank markets. Bought and sold to intermediaries. When rates fall those intermediaries are earning a bigger gap between the interest rate on your loan and the risk free rate hence gaining a larger profit.

Mortgage securatisation is not the same as the bank profiting when rates fall on your existing loan. Also you have to remember somebody else is taking on the risk of interest rate movements when this happens, precisely the thing you dont want to be exposed to.

The money/loans made historically are continually flowing being traded between intermediaries in the inter bank system.

Yes, and if it didnt interest rates would have to be higher, not lower. A liquid market like this is better for you, not worse.

 

[mid_gen]

They do. Have you not seen the recent reports of bank profitability off the back of rate rises?

The loans are traded in the inter bank markets. Bought and sold to intermediaries. When rates fall those intermediaries are earning a bigger gap between the interest rate on your loan and the risk free rate hence gaining a larger profit.

When rates rise the markets make money too, by bundling loans into larger portfolios and selling them on for profit. And as banks have fixed costs, rate rises directly increase their margin even if matched by an underlying bank rate change.

The money/loans made historically are continually flowing being traded between intermediaries in the inter bank system.


It's lent from financial intermediaries but as I said above just because the rate is static for the borrower (you) doesn't mean the loans aren't traded around between intermediaries. They are, continually.

The inter bank system also allows existing loans to be off the books of the retail bank, meaning they can continue to lend new loans without affecting their cash buffer ratios.

You're using words which I don't think you really understand the meaning of.

If you're that dense that you want to get ripped off paying a fixed rate premium for the entire duration of your mortgage then you go ahead and do that, there'll be lenders out there who will happily take your money.

Those of us with some financial sense will take advantage of the range of mortgage products out there that make the most financial sense for our circumstances......fixing for the entire term is insane.

 

[danlightbulb]

You're using words which I don't think you really understand the meaning of.

Do elaborate.

If you're that dense that you want to get ripped off paying a fixed rate premium for the entire duration of your mortgage then you go ahead and do that, there'll be lenders out there who will happily take your money.

Those of us with some financial sense will take advantage of the range of mortgage products out there that make the most financial sense for our circumstances......fixing for the entire term is insane.

It depends on the premium and exit fees, and a dose of hindsight.

The overall point is that the whole market would be much more stable if interest rate variance didn't exist. A fixed 4% rate, no matter the timing, for all mortgages. If that was in place it would be normal to you, there would be no 'range' of products - everyone would get the same for entire term. There would be no need, or ability, to switch lenders because they would all be offering the same terms. And the market would therefore not be tied to interest rates as something which drives, or hinders, house price growth.

You don't understand it because you, like many others, can't imagine a different system from what we have.

 

[mid_gen]

Do elaborate.



It depends on the premium and exit fees, and a dose of hindsight.

The overall point is that the whole market would be much more stable if interest rate variance didn't exist. A fixed 4% rate, no matter the timing, for all mortgages. If that was in place it would be normal to you, there would be no 'range' of products - everyone would get the same for entire term. There would be no need, or ability, to switch lenders because they would all be offering the same terms. And the market would therefore not be tied to interest rates as something which drives, or hinders, house price growth.

You don't understand it because you, like many others, can't imagine a different system from what we have.

Competition is good for consumers.

Honestly I don’t know what you’re smoking, this is beyond stupid.

 

[slinxy]

The word "mortgage" literally translates from Old French as a "dead pledge"….
You are either renting a house or renting the money to live in a house.

I could if I wanted to, liquidate a load of my shares and pay of my mortgage but it’s one of the cheapest loads I will ever get even at 4.01%

The estate agents and previous owners are the ones who profit from higher house prices. Inflation has pretty much eaten away at the interest rate on mine and pretty much anyone else’s who took out a mortgage 3 or more years ago. I refused to play the estate agents game, around Manchester they want copies of bank statements and payslips to look for affordability, which I flat out refused to give them. I’ve showed them my mortgage in principle which was way way more than the price I offered for the house, I’m borrowing money from the bank, not the estate agents.. plus most of the estate agents won’t be able to store financial data securely anyway.. and I leave it to the estate agents to pass the offer to the seller or not.

Really if it wasn’t for my hate for estate agents, I would move often.. lol

There was a house on the market for offers above a certain price..
I went round took a look and made an offer..
Estate agents said, that my offer was too low, I pointed out it is higher than the asking price…
But the owner what’s more.. well you should have put on offers above a higher price then!
Oh they been messed about in the past by previous buyers… I think it’s you that’s messing about.. bye!

Two weeks later, they must have forgotten than I made an offer on the house, they called me to offer the house at a lower price.. erm… can you please **** off

 

[DJMK4]

Been overpaying on the mortgage only for the rises to happen again , I'm going to make one more overpayment end of this month of £3.9k which means since last year I have done around £12k overpayment for this last year,

Refreshes in July so I can make more overpayments if need be thorough out the year

My 5 year fixed rate on 3.95% id have to check when it ends

 

[Armageus]

Eh? Why overpay if you don't know how long you have at 3.95%?

Surely you are better investing etc

 

[DJMK4]

Eh? Why overpay if you don't know how long you have at 3.95%?

Surely you are better investing etc

I have had a check

30th June 2028 I'm at 3.95% until

Re investing iv pretty much used my ISA allowance , I could do the non ISA but I need to be careful not to go over gov allowances and get taxed

I am going to make another overpayment end of month as I already have about £2800 set aside in a pot to put towards an overpayment if I can get that to 4k end of this month that will mean this last year iv reached my allowance for overpayment without getting a penalty etc,

I'll have a think about July onwards

 

[TNA]

That’s the thing, dwellings shouldn’t ever have been considered an investment in the first place…

They are somewhere to live. If you want to invest in property, there is plenty of commercial real estate kicking around which is specifically for the purpose of generating return.

Unless you are renting the house, it’s a rubbish investment anyway because it’s illiquid and if you sell it, you still need somewhere to live.

Why don't they cracked down on people or companies that have more than x amount? Or if house is empty then you have to pay x amount. To stop people hoarding them for investment purposes.

 

[b0rn2sk8]

Why don't they cracked down on people or companies that have more than x amount? Or if house is empty then you have to pay x amount. To stop people hoarding them for investment purposes.

They do where it makes sense to do so...

If your house is habitable but empty, you are charged more council tax.

If you hold a house over a certain value in a company, you are charged an annual tax, it's called 'ATED' (Anual tax on enveloped dwellings). There are exemptions, the main one is it being rented out which is fine.

You can't crack down on companies who own houses because companies who own houses are also massive landlords like housing associations.

The private rental market is also great a serving a part of the market not well suited to the kind of long-term commitments you'd want council housing and associations to focus on.

 

[b0rn2sk8]

Eh? Why overpay if you don't know how long you have at 3.95%?

Surely you are better investing etc

'it depends'

If you are already maxing out your ISA's then over paying the mortgage could be a practical option assuming you are paying 4%+ interest on the borrowing.

You might get a slightly better return after tax (assuming you are at least a high rate taxpayer if your ISA allowances are used) but your money is at risk whereas paying the mortgage isn't. The downside of paying the mortgage is it's a lot harder or impossible to get access to that cash again if you need it. The additional taxable income may also push you into the £100k 'fun zone' also. If you can invest in a way which generates capital gains, they are taxed at lower rates.