Mortgage Rate Rises

[LabR@t]

If there's one thing government could do to help it would be offering banks collateral so people in negative could at least access market rate fixes rather than SVR. I think that's reasonable

The government can't just throw money at every little problem..
That's one of the reasons we are in this mess.

 

[BUDFORCE]

Except the banks won't necessarily be making more money, infact possibly less as to get people through the door with new mortgages they will need to cut their margins.

Yup.

The cost of "swap rates" has soared.

This is why I keep saying that the bank of England base rate and mortgage rates are only loosely connected.

Our cost of borrowing on the market went something like .5% to 5.9% in the space of 6 months, obviously there is no defined rate across the board as each lender will have its own rating.

But, you can see the margins on lending say 3.5% then vs even 7% now.

That is at a very basic level, there is a bit more to it then that and there a difference deposit and -deposit taking lenders, and then securitisation further skew that, but gives you an idea, it isn't the mortgage lenders dictating these rates, and certainly non profiteering on high rates.

 

[sigma]

Our cost of borrowing on the market went something like .5% to 5.9% in the space of 6 months, obviously there is no defined rate across the board as each lender will have its own rating.

But I thought this was all just leftie media scaremongering? @LabR@t

 

[stuman]

So if they are not linked are we saying the driving factors are risk and ‘interbank lending greed’? as the risks go up a little - investors want a compound increase in ‘security’?

And at the same time, if investors can get Bank of England money for 2% return (which is quite safe), if you want to generate mortgage investment with the inherent risks you need to get well ahead say 7%?

Then as talked about pre-Covid, the government could just back the risk to bring it back to parity with other investment options?

 

[sigma]

I can see prices dropping, people getting forced out and downsizing, then the rich folk clearing up the cheap housing stock to rent it back out for profit in a few years.

Love a good wealth transfer.

Growth means growth.

 

[LabR@t]

But I thought this was all just leftie media scaremongering? @LabR@t

What are you on about?

 

[Richie]

Jesus wept, I just had a look at Halifax and the deals in August have ramped up massively.

5 year deal has went up 2.4% points in less than 2 months (1.2% since a few days ago)

2 yr - 6.2%
5yr - 5.71%
10yr - 5.34%

It's crazy how 10 year is now the lowest rate where the longer terms were traditionally higher.

 

[413x]

Jesus wept, I just had a look at Halifax and the deals in August have ramped up massively.

5 year deal has went up 2.4% points in less than 2 months (1.2% since a few days ago)

2 yr - 6.2%
5yr - 5.71%
10yr - 5.34%

It's crazy how 10 year is now the lowest rate where the longer terms were traditionally higher.

Not really. Makes a lot of sense. Rates are widely expected to peak within that 2 year window.

I'm guessing most institutions expect a bit of calm after this storm

 

[Mrwong]

I can see prices dropping, people getting forced out and downsizing, then the rich folk clearing up the cheap housing stock to rent it back out for profit in a few years.

Love a good wealth transfer.

Of course.

 

[Haggisman]

A real shame that a thread that started off with people sharing their situations and helping each other out has been side tracked by a few judgemental ******** revelling in their own lucky situations and looking down and passing judgement on people who are struggling.
Yes, of course there are people who rashly overextended. There are many more who are just trying to get by, probably made reasonable decisions based on the information they had at the time and as stated got caught out by how quickly the rate rises were implemented.

It's just the usual 2 idiots who are either completely out of touch with the reality 99% of the population live in, or are trolling. My money is on the latter.

Yup.

The cost of "swap rates" has soared.

This is why I keep saying that the bank of England base rate and mortgage rates are only loosely connected.

Our cost of borrowing on the market went something like .5% to 5.9% in the space of 6 months, obviously there is no defined rate across the board as each lender will have its own rating.

But, you can see the margins on lending say 3.5% then vs even 7% now.

That is at a very basic level, there is a bit more to it then that and there a difference deposit and -deposit taking lenders, and then securitisation further skew that, but gives you an idea, it isn't the mortgage lenders dictating these rates, and certainly non profiteering on high rates.

Someone must be profiting off the extra interest payments somewhere though? That extra money doesn't just disappear!

 

[Doobedoo]

Someone must be profiting off the extra interest payments somewhere though? That extra money doesn't just disappear!

Don’t worry it’ll trickle down at some point.

 

[neocon]

It's just the usual 2 idiots who are either completely out of touch with the reality 99% of the population live in, or are trolling. My money is on the latter.



Someone must be profiting off the extra interest payments somewhere though? That extra money doesn't just disappear!

I don't know why they would happy, I mean their asset will be losing value too?

 

[200sols]

That extra money doesn't just disappear!

Pretty sure it does because the cost of that money has also increased. When you pay back a loan the banks don't keep that money, it is deleted in the same way when they lent it to you they created it.

 

[wesimmo]

It's just the usual 2 idiots who are either completely out of touch with the reality 99% of the population live in, or are trolling. My money is on the latter.



Someone must be profiting off the extra interest payments somewhere though? That extra money doesn't just disappear!

The rich benefit.

 

[Freddie1980]

Lenders are being very opportunistic, rates seem to be going up daily. The financial regulators should consider linking savings rates to mortgage rates i.e. savings rates go up at the same rate as the lending rates do (also rates go up/down at the same time with no drag or delay).

 

[Haggisman]

Pretty sure it does because the cost of that money has also increased. When you pay back a loan the banks don't keep that money, it is deleted in the same way when they lent it to you they created it.

Interesting - so it's literally just made up numbers? (Genuinely interested, I have no idea how it works behind the scenes)

 

[200sols]

Interesting - so it's literally just made up numbers? (Genuinely interested, I have no idea how it works behind the scenes)

It seems it actually is just made up numbers, they create a liability on the balance sheet and then create the money into your account.

 

[BUDFORCE]

It depends on the type of mortgage lender.

So you get deposit taking lenders vs non-deposit taking.

So this vary say from your small more traditional building society that probably only well lend out on mortgages their savings (eg savings accounts people have with them) they pay 3% interest on their savings, charge 5% interest on their mortgages = profit. Simple.

Then you get high street commerical banks like Natwest for example, also deposit taking so work in the same way as above, but the likes of Nawest will also trade in investments or borrow money themselves to lend at a higher rate then they borrow.

Then non-deposit taking lenders which is like the one I work for, we do not offer any savings accounts at all, so all the money we lend in mortgages is borrowed ourselfs.We typically borrow this in tranches at a fixed rate so, £25m at a time, and then lend in out at a higher rate (or try to) and pocket the difference. We then do whats called securitisation, which is a simply as I can put it, is we take all our live mortgage accounts, and put them into a seperate limited company, these are then externally audited. Provided that is ok, we then sell this limited company and all its live mortgage accounts and a mortgage backed security, or a longer term investment.

The entities that buy and sell these tranches of money or securities can be anything, from very wealthy individuals, other banks, pensions funds etc. It's all just money going around in a big circle and trying to make a margin each time.

What cuased 2008 and what the concern is this time (mainly due to the Ukraine war) is if this circle of money suddendly stops, the whole thing falls on its arse and collapses. It only takes a few of these to stop lending to each other out of fear, and wanting a return on their capital, for everything to snowball.

 

[Haggisman]

It seems it actually is just made up numbers, they create a liability on the balance sheet and then create the money into your account.

So the lender is essentially told by the BoE, for every £100 of mortgage payments they are sent, they're only allowed to actually receive e.g. £95, and the other £5 just disappears? Sorry if this seems like a naïve question

Except, then this sounds like someone IS making extra profit on it?

It depends on the type of mortgage lender.

So you get deposit taking lenders vs non-deposit taking.

So this vary say from your small more traditional building society that probably only well lend out on mortgages their savings (eg savings accounts people have with them) they pay 3% interest on their savings, charge 5% interest on their mortgages = profit. Simple.

Then you get high street commerical banks like Natwest for example, also deposit taking so work in the same way as above, but the likes of Nawest will also trade in investments or borrow money themselves to lend at a higher rate then they borrow.

Then non-deposit taking lenders which is like the one I work for, we do not offer any savings accounts at all, so all the money we lend in mortgages is borrowed ourselfs.We typically borrow this in tranches at a fixed rate so, £25m at a time, and then lend in out at a higher rate (or try to) and pocket the difference. We then do whats called securitisation, which is a simply as I can put it, is we take all our live mortgage accounts, and put them into a seperate limited company, these are then externally audited. Provided that is ok, we then sell this limited company and all its live mortgage accounts and a mortgage backed security, or a longer term investment.

The entities that buy and sell these tranches of money or securities can be anything, from very wealthy individuals, other banks, pensions funds etc. It's all just money going around in a big circle and trying to make a margin each time.

What cuased 2008 and what the concern is this time (mainly due to the Ukraine war) is if this circle of money suddendly stops, the whole thing falls on its arse and collapses. It only takes a few of these to stop lending to each other out of fear, and wanting a return on their capital, for everything to snowball.

 

[413x]

It depends on the type of mortgage lender.

So you get deposit taking lenders vs non-deposit taking.

So this vary say from your small more traditional building society that probably only well lend out on mortgages their savings (eg savings accounts people have with them) they pay 3% interest on their savings, charge 5% interest on their mortgages = profit. Simple.

Then you get high street commerical banks like Natwest for example, also deposit taking so work in the same way as above, but the likes of Nawest will also trade in investments or borrow money themselves to lend at a higher rate then they borrow.

Then non-deposit taking lenders which is like the one I work for, we do not offer any savings accounts at all, so all the money we lend in mortgages is borrowed ourselfs.We typically borrow this in tranches at a fixed rate so, £25m at a time, and then lend in out at a higher rate (or try to) and pocket the difference. We then do whats called securitisation, which is a simply as I can put it, is we take all our live mortgage accounts, and put them into a seperate limited company, these are then externally audited. Provided that is ok, we then sell this limited company and all its live mortgage accounts and a mortgage backed security, or a longer term investment.

The entities that buy and sell these tranches of money or securities can be anything, from very wealthy individuals, other banks, pensions funds etc. It's all just money going around in a big circle and trying to make a margin each time.

What cuased 2008 and what the concern is this time (mainly due to the Ukraine war) is if this circle of money suddendly stops, the whole thing falls on its arse and collapses. It only takes a few of these to stop lending to each other out of fear, and wanting a return on their capital, for everything to snowball.

Really interesting stuff. Thanks for all the input in this thread. Learning a lot!