Mortgage Rate Rises

[dl8860]

I am in the extremely fortunate position of being fixed at 1.58% til March 2026. Currently putting everything we can into a higher interest rate savings account to use as a lump sum come remortgage time.

Currently being charged ~£210/month interest on my mortgage account. Is there any sense in making overpayments to the mortgage to the same value as the interest charges, or am I better off sticking with putting everything in savings for later?

Don't forget that tax may be due on interest beyond a certain point according to whether you are a basic, higher or additional rate tax payer.

 

[taB]

Some dude on radio4 was like I have £340k mortgage and my payments have gone from £200 to £1200 ?? I think I heard that right. But why should we feel sorry for people overstretching so much.

Iirc he's 63 and it's interest only. He was ****** anyway...

 

[FBi7]

Don't forget that tax may be due on interest beyond a certain point according to whether you are a basic, higher or additional rate tax payer.

Excellent point. I had forgotten about that, thanks.

 

[div0]

Iirc he's 63 and it's interest only. He was ****** anyway...

Why?

Likely there is a ton of equity and he's at an age where next move is likely to downsize.

Interest only is not for me, but I'm not sure I'd assume he's ******.

 

[Gammawolf]

I kinda see it both ways.

Yes - people shouldn't be overstretching, but the reality is - house prices have gotten so damn expensive, unless you earn a ton of money - pretty much everyone is going to be overstretching themselves to buy a house in the last couple of years (before this charade)

People just want decent places to live, if you have a family and you need 3-4 bedrooms, a garden and garage - unless you're right up north or in a real crap area, you're going to need in the region of £340k to get anything relatively standard. If you're in the south - basically forget it now.

I guess it depends on what you class as "right up north"? I never really thought of Sheffield as that far north but there’s housing here that’s affordable. Not representative story but my sister just bought in July this year, offer was put in Jan/Feb. They are typical FTB buyers (couple, no children and 10% deposit, mid 20s). They bought fairly near me in what i'd class as an average area (its not the best and most expensive area and certainly not the cheapest/worst). Its a 3 bedroom semi, samller sized garden, a driveway and no garage. Again what i'd class as a starter home. It needs "some" work doing to it in that the kitchen/bathroom fixtures are a little dated but things are all functional (plus the usual redecorating). It cost them 185k, so mortgage of 166.5k with interest rate of 2.2%, 30 year term, £632 a month. Even ignoring the equity they will have and term reduction, at remortgage of 8% their monthly's would about double to 1.2k, which although is not ideal its still doable to them as a couple with averagely paid jobs (26k and 25k) and equates to just around 35% of their take home.

 

[neocon]

Why?

Likely there is a ton of equity and he's at an age where next move is likely to downsize.

Interest only is not for me, but I'm not sure I'd assume he's ******.

Yes he'll just be selling at a loss and downsizing, assuming he bought between 2019 and now. But it totally depends on the area and location. Desirable property always sells.

 

[throwaway4372]

failed to keep up with dollar again, causing more inflation, /sarcastic thumbs up

 

[taB]

Why?

Likely there is a ton of equity and he's at an age where next move is likely to downsize.

Interest only is not for me, but I'm not sure I'd assume he's ******.

Then surely now is the perfect time to downsize for him rather than complaining about a 600% increase in monthly payments.

 

[neocon]

failed to keep up with dollar again, causing more inflation, /sarcastic thumbs up

Pound getting caned again

 

[Screeeech]

It cost them 185k, so mortgage of 166.5k with interest rate of 2.2%, 30 year term, £632 a month

I think the point is, if they bought that house now - at 6% it would be around £1k a month for 30 years.

On average you're going to earn less money up in Sheffield so it balances out when you look across the country, in comparison 2 years ago I was renting in Surrey for only £850 a month.

 

[Karl]

Perfect, thanks. Yes, better off putting everything into savings by the looks of it.

Cheers!

Just as long as you're going to use those savings to pay off the mortgage if the savings rate drops below the mortgage rate.

I bet lots of people will save some money, forget it was meant to offset mortgage interest rates, buy a telly, sofa, emergency boiler fix, etc etc, and they'll have lost on both counts. Sometimes it's better to overpay the mortgage and kiss goodbye to the money.

 

[LabR@t]

I tried to follow the press conference. Am I mistaken or did he say he expects interest rates to max out next year at around 5%

That's boe rate so mortgage rate of 8-9% I would suggest

 

[FBi7]

Just as long as you're going to use those savings to pay off the mortgage if the savings rate drops below the mortgage rate.

I bet lots of people will save some money, forget it was meant to offset mortgage interest rates, buy a telly, sofa, emergency boiler fix, etc etc, and they'll have lost on both counts. Sometimes it's better to overpay the mortgage and kiss goodbye to the money.

Oh definitely! Savings will be 100% going towards the mortgage - it's just when, as you say, depending on interest rates.

 

[Dem2k]

House prices don't fall in isolation though. In the scenario where they have fallen, interest rates have gone up, inflation is up, cost of borrowing is higher, unemployment has increased, etc. So unless you're a rich cash buyer, where is the gain?

The gain is house prices falling to within much more realistic value that people can afford. The hope is the interest rates will recover eventually and the housing market won't just shoot up in value when that happens they will recover in time but it'll take years. This is my hope anyway.

 

[LabR@t]

The gain is house prices falling to within much more realistic value that people can afford. The hope is the interest rates will recover eventually and the housing market won't just shoot up in value when that happens they will recover in time but it'll take years. This is my hope anyway.

The rates have recovered they have been abnormally low for a decade.
I don't think we will ever see them that low again.

 

[Raymond Lin]

I just checked Zoopla (take it with a grain of salt) that the house i bought in 2015 for £187k now estimated worth £295k on the low end to £325k on the high end.

That’s a like a 60% increase in 7 years, the market is in a bubble.

 

[LabR@t]

I just checked Zoopla (take it with a grain of salt) that the house i bought in 2015 for £187k now estimated worth £295k on the low end to £325k on the high end.

That’s a like a 60% increase in 7 years, the market is in a bubble.

£200k in 2008 now £390k pointless as everything else has gone up the same, it wouldn't bother me how much it drops as it's a home not an investment.

 

[200sols]

I just checked Zoopla (take it with a grain of salt) that the house i bought in 2015 for £187k now estimated worth £295k on the low end to £325k on the high end.

That’s a like a 60% increase in 7 years, the market is in a bubble.

According to zoopla my house is worth between 569-619k. But a similar house nearby recently sold for 495k although it hadn't had much work done. Zoopla estimates are too high ime.

 

[413x]

According to zoopla my house is worth between 569-619k. But a similar house nearby recently sold for 495k although it hadn't had much work done. Zoopla estimates are too high ime.

Think so too.

Ours I don't think would get the estimate even a few months ago at the peak.

 

[Gammawolf]

I think the point is, if they bought that house now - at 6% it would be around £1k a month for 30 years.

On average you're going to earn less money up in Sheffield so it balances out when you look across the country, in comparison 2 years ago I was renting in Surrey for only £850 a month.

Even at 1k a month it's still below the typical 33% rule with their pretty average wages for the city so is still affordable for a FTB to buy here even at these interest rates with the lower wages