Mortgage Rate Rises

[413x]

I’m the same (mid 30’s in my case)but I know about the housing crisis, my boss has told me the story of when they brought their first house and ended up with negative equity in the 90’s.

I’m certainly not trying to gloat at all but some personal responsibility has to come into it.

What annoys me is that experts like mortgage advisors ., you know, the people who should know, pretty much encourage you to max out.


Never when I was getting my mortgage was I told

"you know, you might want to fix for longer because..."
Or
"you might not want to max out right now because.."


I probably wouldn't have listened however!

I've mentioned in this thread before when I remortgaged the advisor told me if we wanted we could borrow 300. Far too much!

 

[Richie]

Of course. But under normal circumstances?

I did use the example of 1pc in final year. Those 5pc fees throughout should be illegal! Most people (me included) didn't even know what an erc was before already getting my first mortgage!

Under normal circumstances then yeah, agreed. Not sure if mid 2022-end 2023 are going tombe close to normal.

I was the same. I never looked at ERC as I never considered it affecting me - I was always going to run the term and then refix, just like I imagine the vast majority do.

Now it's affected me and I see how it affects others, I bear it in mind. That brings me round to what I suggested a few posts up - people who haven't mortgaged before should not be derided or look down on because of mistakes they have possibly made.

By "derided" I suppose I mean mocked. Give opinions/advice with some empathy is all I'm suggesting rather than being patronising/ridiculing.

 

[neocon]

What annoys me is that experts like mortgage advisors ., you know, the people who should know, pretty much encourage you to max out.


Never when I was getting my mortgage was I told

"you know, you might want to fix for longer because..."
Or
"you might not want to max out right now because.."


I probably wouldn't have listened however!

I've mentioned in this thread before when I remortgaged the advisor told me if we wanted we could borrow 300. Far too much!

Conflict of interests?

 

[Doobedoo]

What annoys me is that experts like mortgage advisors ., you know, the people who should know, pretty much encourage you to max out.


Never when I was getting my mortgage was I told

"you know, you might want to fix for longer because..."
Or
"you might not want to max out right now because.."


I probably wouldn't have listened however!

I've mentioned in this thread before when I remortgaged the advisor told me if we wanted we could borrow 300. Far too much!

But again you don’t have to max out. I was offered more than I took because I wasn’t comfortable maxing out so I didn’t. I made compromises so that I had what I need in a house, not what I necessarily wanted.

Unfortunately a lot of people are going to struggle and as has been pointed out it’s usually those at the lower end of society that get the brunt of it.

 

[413x]

Under normal circumstances then yeah, agreed. Not sure if mid 2022-end 2023 are going tombe close to normal.

I was the same. I never looked at ERC as I never considered it affecting me - I was always going to run the term and then refix, just like I imagine the vast majority do.

Now it's affected me and I see how it affects others, I bear it in mind. That brings me round to what I suggested a few posts up - people who haven't mortgaged before should not be derided or look down on because of mistakes they have possibly made.

By "derided" I suppose I mean mocked. Give opinions/advice with some empathy is all I'm suggesting rather than being patronising/ridiculing.

Absolutely. Financial education in UK is dire.
Why do we spend hours learning Shakespeare vs personal finance at school for example?


What other skill is so universally needed vs any other subject?


Even people financially savvy get caught out easily. Cannot expect the average person to be able to live perfectly.

 

[413x]

Conflict of interests?

Quite possible there are a load of rules around "advice". Like how you can't give financial advice unless you're certified. I don't know the ins and outs.

But again you don’t have to max out. I was offered more than I took because I wasn’t comfortable maxing out so I didn’t. I made compromises so that I had what I need in a house l, not I necessarily wanted.

Unfortunately a lot of people are going to struggle and as has been pointed out it’s usually those at the lower end of society that get the brunt of it.

You dont. But since last decade and most of much longer, buying "the most you can" has been by far most profitable path. Its only a few times it isn't.


But no you don't have to max out. But it's hard to understand the true effects of a overburdened debt until you live it.

 

[Doobedoo]

Quite possible there are a load of rules around "advice". Like how you can't give financial advice unless you're certified. I don't know the ins and outs.




You dont. But since last decade and most of much longer, buying "the most you can" has been by far most profitable path. Its only a few times it isn't.


But no you don't have to max out. But it's hard to understand the true effects of a overburdened debt until you live it.

Well we live in different circles because not once did profitability come into my decision making. Some value a roof over their heads more than making a profit.

 

[neocon]

Broker surely gets a bigger bonus for selling a larger longer term mortgage.

 

[Mercenary Keyboard Warrior]

Of course. But under normal circumstances?

I did use the example of 1pc in final year. Those 5pc fees throughout should be illegal! Most people (me included) didn't even know what an erc was before already getting my first mortgage!

So did you not read the paperwork you were sent in regards your mortgage pack then?
Its all on them and explained with a schedule etc.

 

[Haggisman]

Indeed, however the ERC from my provider can not be rolled up in to the new mortgage, and we don't have £5k sitting around to pay it, plus it would negate the savings from locking in the reduced rate now, so all we can do is gamble that will be able to do something come May next year.

I can't lock a rate in until 90 days from the end of the fix, so if by Feb next year things are still looking grim, all we can do is get a lodger in.

There's also the extra interest you'd be paying due to the new rate almost certainly being higher than the previous (e.g. coming off 2% onto 4% 3 years into a 5 year deal would mean paying your ERC, plus 2% extra for 2 years), and then potential fees on top as well (e.g. paying £1k fees for 3 years rather than 5). Basically it's almost 100% down to luck as to when your renewal is due

It's not just younger people. I'm in my late 30s and a Millenial and it's all I've ever known for my working life too.

Same here, thanks to various unexpected circumstances, e.g. job losses, problems with kids' health etc. we're only just going to be in the position next year to start topping up our savings again (touch wood!), for the last few years it's just been one thing after another :s.

Well we live in different circles because not once did profitability come into my decision making. Some value a roof over their heads more than making a profit.

Profitability is maybe the wrong word - but it's:

"buying the cheapest possible £100k house and then selling it for £150k, but having to pay £xxxx to move after a couple of years because you've grown out of it, and paying £300k for the house you actually want"
VS
"buying the £200k house that you want first time round"

Buying the cheap house first time round might be more "sensible" in terms of reducing risk, but it costs you more over all.

 

[Mercenary Keyboard Warrior]

What annoys me is that experts like mortgage advisors ., you know, the people who should know, pretty much encourage you to max out.


Never when I was getting my mortgage was I told

"you know, you might want to fix for longer because..."
Or
"you might not want to max out right now because.."


I probably wouldn't have listened however!

I've mentioned in this thread before when I remortgaged the advisor told me if we wanted we could borrow 300. Far too much!

What they almost certainly did was ask you some questions on risk and income and income expectations etc

If you think your mortgage was mis-sold then you can consider taking it up. But I bet the IFA covered their bases you just didn't realise that's what they were doing.
People tend to skip over stuff like ERC since they are all excited and not really paying attention to the boring financial part apart from if they can get the mortgage and the £££ pre month its going to cost them

Unfortunately most people will take the lowest cost mortgage that's a short term fix.
They wont be able to really consider the pros and cons in a balanced way.

You had people like Psyco Sonny or whatever his name was who would go on and on and on about people taking 2 year fixes and how the LTV could be affected and save them money.
Where as I would always argue the key should be for many people how they could deal with affordability at the end of that fix with the assumption a deal thats not as good is all thats available.
It will cost you more usually taking the safest approach, its a risk reward balance.

 

[Mercenary Keyboard Warrior]

Broker surely gets a bigger bonus for selling a larger longer term mortgage.

Generally a fixed amount

 

[krooton]

What they almost certainly did was ask you some questions on risk and income and income expectations etc

If you think your mortgage was mis-sold then you can consider taking it up. But I bet the IFA covered their bases you just didn't realise that's what they were doing.
People tend to skip over stuff like ERC since they are all excited and not really paying attention to the boring financial part apart from if they can get the mortgage and the £££ pre month its going to cost them

Unfortunately most people will take the lowest cost mortgage that's a short term fix.
They wont be able to really consider the pros and cons in a balanced way.

You had people like Psyco Sonny or whatever his name was who would go on and on and on about people taking 2 year fixes and how the LTV could be affected and save them money.
Where as I would always argue the key should be for many people how they could deal with affordability at the end of that fix with the assumption a deal thats not as good is all thats available.
It will cost you more usually taking the safest approach, its a risk reward balance.

Yep, sadly I was trying to be clever by doing 2x 2 year fixes, so that in my fifth year I could look to staircase some of the HTB loan before it starts being chargeable.

Had I fixed for 5 years back in 2021, I would have weathered this fine, but that's the roll of the dice.

 

[ljt]

It's ok for those saying you should have seen it coming (higher rates)

It's the speed in which they have increased that's the problem. If typical rates had gone from 1.5% to 6% over 4 years for example, then it wouldn't have been so much of a financial shock.

Coupled with it coinciding with large, sudden price rises in energy and food means it has even more of an impact on peoples finances, especially as wages aren't rising anywhere near enough, or quick enough to cope.

 

[krooton]

It's ok for those saying you should have seen it coming (higher rates)

It's the speed in which they have increased that's the problem. If typical rates had gone from 1.5% to 6% over 4 years for example, then it wouldn't have been so much of a financial shock.

Coupled with it coinciding with large, sudden price rises in energy and food means it has even more of an impact on peoples finances, especially as wages aren't rising anywhere near enough, or quick enough to cope.

That's the kicker indeed, in the space of 1 year:

Monthly energy costs: +£100
Monthly council tax: +£40
Monthly groceries: +£50 (even after switching exclusively to Lidl and halving cat food quality)
Monthly mortgage: +£700 (at least)

Effectively £900 more per month for the same thing

 

[Haggisman]

That's the kicker indeed, in the space of 1 year:

Monthly energy costs: +£100
Monthly council tax: +£40
Monthly groceries: +£50 (even after switching exclusively to Lidl and halving cat food quality)
Monthly mortgage: +£700 (at least)

Effectively £900 more per month for the same thing

£50-100 extra on petrol/diesel as well, plus the knock on effect of all the other little things going up, e.g. internet, insurance etc.

I'd guess most people's mortgages won't quite be going up £700, but even £3-400 still puts it in the region of £5-600 total/month extra.

I wonder what the disposable income was for an average household 12 months ago? I'm betting it was significantly less than £5-600/month!

 

[CapitalOne]

£50-100 extra on petrol/diesel as well, plus the knock on effect of all the other little things going up, e.g. internet, insurance etc.

I'd guess most people's mortgages won't quite be going up £700, but even £3-400 still puts it in the region of £5-600 total/month extra.

I wonder what the disposable income was for an average household 12 months ago? I'm betting it was significantly less than £5-600/month!

That doesn't include Thursday's tax rises either. Well done Tories.

 

[EvilRob]

It is exactly that bad, I'm looking at a 700-800 increase in May next year (1.28% to 5.5%)

There's a big difference between 700-800 and 800-1000. The fact he is giving such a wide range when he could be locking in a rate already makes me suspect he might not be on the ball with this and could maybe use some help.

It's likely a first time buyer:

• Probably didn't get a rate as low as 1.28 in the first place due to LTV
• If they bought in 2019, probably now has a much better LTV
• Probably borrowed less than 300-400k

Of course those are assumptions, hence asking how much he borrowed.

 

[neocon]

When you see some people's costs laid bare you really wonder what this is going to do to the rest of the economy. Who's going to be eating out and going in holiday?

 

[Haggisman]

When you see some people's costs laid bare you really wonder what this is going to do to the rest of the economy. Who's going to be eating out and going in holiday?

The other half reckons we're going to Lapland over Christmas next year Still trying to figure out how to break it to her gently that she can sit on my lap, but that's about the closest she's going to get...