Mortgage Rate Rises

fez said:
I haven't followed them either but the whole world has kind of gone to **** and rates have flown up in the past 6+ months. Mortgages are a large part of economies so they were always going to mirror that.
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Sure but right before that, the world kind of went **** and so they massively reduced interest rates, so the assumption was that they are going back to a more normal rate, definitely not above 4 percent that's for sure.
 
We would like to move, however we wanted a little longer in our current house thus, we renewed in Feb @1.39 for 2 more years. Rates have taken a hike and will probably continue to do so. BoE saying most households can afford 5% which suggests that's where we're headed - potentially meaning mortgages @ 6.5%

1: Sellers are in a good position right now due to lack of stock, high demand and prices are high
2: Buying is difficult, houses going above asking, long queues to view, very little time to mull things over and offers expected immediately

Do we sell now, in the peak and pay the ERC, rent and see what the market is like in 12-18 months time - possibly buying in the (slight 5-10%) dip.
or sell and buy now navigating the current housing market - locking in before rates are even higher (give or take 6 months of increases)

Our potential budget in the areas we like means a downgrade/compromise with a higher monthly mortgage payment. Who knows how things are going to play out. Decisions, decisions.
 
D.P. said:
but less than buying a house in the first place. Property is more volatile than a tracker fund, has lower average returns, ongoing costs, and is less accessible.
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I was intrigued by this comment so though I would dig a little.
The FTSE return is a little under the 7% I mentioned, but was good enough for that purpose. As I said it keeps throwing up 7% on many metrics, so it seems a good number to use, the actual is a little under however.
When you consider house prices matching the same period the FTSE100 has been about your actually right (I would have guessed not actually), the average UK house price inflation over the same period is around 6.1%. So not significantly different to the just sub 7% of the FTSE.
Looking more recently I suspect house prices may outperform, they haven't fallen really recently where as of course the FTSE has. So time period would be significant in this comparison.
However I don't think unless your a serious investor (talking multiple properties type level of investment) its a fair comparison. People buying houses and looking to lower the term of a mortgage aren't typically buying other properties to act as an investment to do so ;)

Your 100% right on the additional costs. The costs to dip in and out on a tracker are negligible, and also suffer minor upkeep costs vs a house.
Not only that you can also spread and divide so you can hedge your gains/losses a bit as you don't have to go all in or all out.

Volatility though I have to disagree, there have been swings of practically 50% on the FTSE (eg its hit highs of £6.6k then lows sometime afterwards of £3.6k more than once). However this is actually why I think its better than property, the point of a side investment in order to pay down some mortgage at a later indeterminate date is to be able to time and play the market a little. As discussed its easy to dip in and out, with low cost. That market volatility is what you want in order to play it.
So somewhere around the 50-60% of they way through the mortgage term you start to look at liquidating the investment (fully or partially again splitting a real option), pay down the outstanding capital and then switch to a simple overpayment regime, since by then the compounding of the investments or mortgage interest is becoming less and less impactful.
Of course you can always go far deeper, even beyond term if the mortgage payments are easily met and you want to max the investment gains.

Thanks for your comment, that sent me off on an interesting path.
 
We put our home up for sell a few months ago and found a buyer pretty quickly and agreed a price which saw us gain £100k without doing anything to the house.

We put an offer on an older property which we saw potential in however with the current cost of living crisis and interest rates being higher, we'd be a lot worse off every month and we're debating whether the move really makes any sense.

Yes, we'd move from a 3-bed semi-detached to a 4-bed detached but we'd be at least £700 worse off (£500 more on mortgage, £100 more on council tax, and at least £100 worse off with energy bills).

Currently looking into taking out some equity in this house and doing work to it so we can live here for the forseeable future such as a garage conversion and dorma.
 
Casdawer said:
We put our home up for sell a few months ago and found a buyer pretty quickly and agreed a price which saw us gain £100k without doing anything to the house.

We put an offer on an older property which we saw potential in however with the current cost of living crisis and interest rates being higher, we'd be a lot worse off every month and we're debating whether the move really makes any sense.

Yes, we'd move from a 3-bed semi-detached to a 4-bed detached but we'd be at least £700 worse off (£500 more on mortgage, £100 more on council tax, and at least £100 worse off with energy bills).

Currently looking into taking out some equity in this house and doing work to it so we can live here for the forseeable future such as a garage conversion and dorma.
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Significant reasons why people aren't moving.

Stamp duty,
Council tax,
Mortgage,
Potential heating increases.

As well as your normal inflation based increases.


I suspect its this keeping the market going. Sheer lack of volume.


I would not want to be taking on more optional costs at the moment when we have no idea when the compulsory food/energy etc increases will stop.
 
413x said:
Significant reasons why people aren't moving.

Stamp duty,
Council tax,
Mortgage,
Potential heating increases.

As well as your normal inflation based increases.


I suspect its this keeping the market going. Sheer lack of volume.


I would not want to be taking on more optional costs at the moment when we have no idea when the compulsory food/energy etc increases will stop.
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Yep, that's where we are at the moment.

A lot of costs are 'unknown' and the house needs some work which is additional spending which we're not sure we want to take on right now.

It's a shame as the house is fantastic and has a ton of potential but we're just not in the position to do what needs to be done.
 
Interest rates of near zero for so long are very novel, for reasons outilned above.

They were always going to go back up sooner or later. Those expecting it to stay the same are in for a big shock.
 
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mattyfez said:
Interest rates of near zero for so long are very novel, for reasons outilned above.

They were always going to go back up sooner or later. Those expecting it to stay the same are in for a big shock.
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There's almost a whole generation that are used to rates <1%. People are going to get into trouble.
 
I'd say it's a generation (or more). Average age of a first time buyer at that time was about 28 so most people under 40 have never experienced >1% base rate.
 
House prices will have to take a nose dive if the interest rates carry on as they are. Can you imagine a repeat of the early mid 90s with houses as they currently are? Suicides will be up ten fold.

And if they do drop, regardless of the fact I’d be losing equity on the home, I’d far rather pay the higher interest rate on say £200k than a lower/next to nothing rate on £400k for the same payment each month if it ever got to that. If you over pay, the cheaper house gets paid off quicker so it’s better to have cheaper housing and higher rates ultimately so I don’t understand why the banks have allowed it to get this way.

The issue is though that we are getting the bump in rates coupled with a cost of living inflation that’s once in a generation levels of “do not want” and the house prices are still sky high with people mortgaging to their current means without consideration for where that payment and other supporting payment such as utility etc will be on 6 months, a year, 5 years from now etc.

The thing is so many friends and family took the **** when I fixed at 2.24% for 10 years instead of taking 1.7ish for 2 years. Or just under 1.8% on 3 years (the rate they would have chosen) and just look where we are now. If it does drop again to 1.5% I’m only wasting £30 a month which is far better then finding yourself needing to scrape together an extra £300 or so when the rates about double.

My first payment doesn’t kick in until august at the new rate so I literally have a 10 year payment run at a price I know should be affordable. That’s sensible in my book and I’m happy that I rolled the dice and came out with a six’s rather than snake eyes.

I’ve had the mails come in thick and fast on credit cards saying rates are going up this last week. Getting things paid up and works finished to the house is a priority now before making any over payments even though I really do want to get around to that. I may even bin off having new cars and keep the car allowance or money earned from mileage as extra salary as time progresses as I don’t really go anywhere now so it’s just wasted.

I think a lot of the younger living at home generation will have an even tougher time now sorting a home out. They will have to learn to chose between home ownership and trinkets with insta likes. What a shock they will have.
 
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Perople are in trouble.

When most people take out a mortgage they tend to go for the max they can afford, which is understandable as they want the best house they can get.

However when interest rates are near zero the monthly repayments are as low as they can be.

When the rates rise, like now people tend to forget they have not factored it in even though the advice is to always factor in rises.

So yes a lot of people will be struggling not just with the mortgage repaments but the current fuel levels and food prices going up we are hit in every direction.

Some tough times ahead of us all.
 
bris said:
So yes a lot of people will be struggling not just with the mortgage repayments but the current fuel levels and food prices going up we are hit in every direction.
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that's my thought too.

this isn't just a rate rise, this is a large increase across the board. interest rates for us could be double what we currently pay by the time we renew, at a point when we will be getting rid of lodgers, and all going to plan, having a kid.

we'll be fine unless something major happens, but i can imagine there will be many many that wont be. Surely the government have to step in and do something
 
They will step in they won’t want house prices to fall or banks flogging peoples homes.

But then again did they learn anything from 2008 I doubt it. It’s going to be a hard few years
 
They will step in they won’t want house prices to fall or banks flogging peoples homes.
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