ours is £1650 on 1.99% we only just fixed for 3 years so will be ok for a while. But if it goes up to 3-4 etc it'll be a big chunk on top. We have calculated and can afford it but that doesn't mean I want to pay it! with everything else going up it's a stretch.
Mortgage Rate Rises
- Thread starter glenimp617
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Soldato
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They must have decided the housing "market" needs propping up againI can't see how that is a good idea, especially just as a lot of people are realistically going to get higher rates now. Joe Public are not clever enough to work out their affordability at 4, 5, 6% so this is going to end in tears for some.
All this talk has made us start overpaying our mortgage, even though we're only in the first year of a 5 year fixed, mid-renovation and spending all of our money on that.. We really wanted to make a start on overpaying asap to try and improve the maths before our fix ends. It's only a token amount, but once we've done the work on the house we'll have to hit it hard assuming rates are still high/going up. Try to lessen the damage...
Yep
TBH right now I would be seriously considering keeping overpayments liquid myself
Economic issues, rate rises etc
Depending how much your allowed to overpay I would be tempted to put the extra into S&S (something like vanguard) for 2-3 years then liquidate a planned year or so before your fix ends and review then.
Timing gap to allow you to time the withdrawl and then make the overpayment.
Just worth thinking about, especially if your rate is low by current standards.
They must have decided the housing "market" needs propping up again
I think it's a good idea. There's loads of people renting who would actually pay less per month for a mortgage but can't pass the affordability check. If they can afford to pay the rent as well as save up a deposit then clearly they can afford the mortgage even if the rates go up. (and it's not like their rent won't increase either, so nullifies part of any mortgage increase)
Mortgage affordability test scrapped by Bank of England
Some potential homebuyers may find it easier to get a loan as the central bank eases borrowing rules.
www.bbc.co.uk
Well it's an endless argument but my theory is our interest is calculated daily so with overpayments going in regularly you're cutting it off at the source. Rather than letting interest build up and up and then attacking it. I also don't like the idea of essentially gambling with S&S to pay off debt. But I have a very conservative view on that sort of stuff. Once we've done all of our work on the house and we're just paying our mortgage I will be looking to diversify my savings, with S&S etc.
Thats a fair point.
Soldato
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Nah I get it, its the same approach as I took. I just thought I would mention it as there is quite a lot of opportunity to make a decent amount over that period, assuming Ukraine is resolved.
Still doesn't mean they will be able to afford the mortgage if the rise was to come.
Rents as we have seen for years are far less linked to interest rates, seeing as they have repeatedly gone up whilst borrowing rates have been low.
There is more support for people with rent issues than mortgage issues historically.
Its a very difficult balance, and what lenders will do when is far from stable.
Yeah it's a considerable amount. Stretch is an understatement for many.
Glad we got our house and mortgage sorted out at the back end of last year, 5 year fix at 2.5% on an 88% LTV sounds unbelievable in the current market. 4.5 years left so hopefully ride out this jump and back to low levels
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What's everyones thoughts on discounted variable rate mortgages?
I'm tempted to switch to one next year. I've seen one at 1.7% compared to around 3.4% for a fixed (£84 a month for me). Rates would have to jump a decent amount before I'd be worst off, plus they tend to have better ERC.
Obviously if rates go through the roof.....but I don't think they will go crazy. We'd be back to 2008 levels of crisis.
I'm tempted to switch to one next year. I've seen one at 1.7% compared to around 3.4% for a fixed (£84 a month for me). Rates would have to jump a decent amount before I'd be worst off, plus they tend to have better ERC.
Obviously if rates go through the roof.....but I don't think they will go crazy. We'd be back to 2008 levels of crisis.
Soldato
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Its a funny term really.
Because its based on the lenders SVR (standard variable rate) which is uncontrolled.
So where as SVR may be base rate plus 3%, a discounted variable is really just base rate + say 0.75%
But the lender can do anything with the SVR and hence in effect your discounted variable.
Its practically a tracker, without the protection of knowing how its going to function.
Its not a bad thing to do, but if your inclined this direction if you can get one a tracker would be more predictable.
Before the financial meltdown discount rates used to be really popular they dried up when the BoE rate fell so low that people were paying 0%, if rates keep going up (which seems inevitable if utterly pointless) then I can see a big return to discount rates etc. When we took out our first mortgage it was a choice between a fixed rate a little bit below BoE rates and a variable discount rate a bit further below BoE rates.
I would agree with the above statement about trackers, if taking out a discount rate have a look at the lenders rate history some are much better at responding to BoE rate changes than others.
Congrats on locking in a good rate for a long time, that could save you tens of thousands. Hope you complete OK.
nearly 150k over the ten years compared to todays rates. everything crossed.
Optimistic. You got in when it was very low, it's probably just moving back to normal levels now. Hopefully it won't go too far through the other side before coming back down to normal... But you got 2.5% when the base rate was practically 0%. That's not going to be the norm.
Fair point. Our current plan is to aim for around a 55% LTV when it’s time to remortgage by overpaying wherever we can over the next 4 years. Obviously also depends on house prices not falling but we’re in an area with stupid growth and demand over the last few years.
Soldato
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Liked his stuff on index funds etc. Very useful.