Mortgage Rate Rises

apatia77 said:
Oh well, my fix term is ending at end of April but i only have like £17k left so going to close the account and pay it all off.
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54k and 2.5 years left on the fixed term here. Should be able to get it below 40k, then hopefully clear half of it. Should take the sting out of the interest rate jump anyway :)
 
apatia77 said:
Oh well, my fix term is ending at end of April but i only have like £17k left so going to close the account and pay it all off.
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I'll be the same but a month earlier. You'll probably have to contact your provider about a month before to request a statement of redemption though. That way they work out the correct amount of interest and any charges if they apply so you can pay your final amount. I'm with nationwide and I phoned up last month to check how far in advance they needed and the guy suggested the month timeframe
 
MikeTheNative said:
On a mortgage of £150,00 at 4% over 25 years you will pay £87,428 of interest. 20 year term is £68,078 total interest.
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And what is your point here? A simple interest calculation is entirely pointless, there are no fees after 1-3 years on those deals, and you can overpay a certain amount without fees.

The fix is one way, they must offer you 4% for 25 years once you sign, you can re-mortgage after only 3 years or 5, or 10, or overpay and shorten the term.
 
platinum87 said:
And what is your point here? A simple interest calculation is entirely pointless, there are no fees after 1-3 years on those deals, and you can overpay a certain amount without fees.

The fix is one way, they must offer you 4% for 25 years once you sign, you can re-mortgage after only 3 years or 5, or 10, or overpay and shorten the term.
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Yeah, didn't read your post properly :p
 
It just shows how much profit the banks want to make. Interest rates were 2.5 percent or so but mortgage rates were through the roof, 5.5 or more percent after the mini budget.

Now interest rates are 4 percent and it's looking like you can get sub baserate mortgages. Why can't they just not be greedy and be happy with 2 percent profit, regardless of the baserate. :D

I'm not bitter because my mortgage is going up in the next few months!
 
Nemiyen said:
It just shows how much profit the banks want to make. Interest rates were 2.5 percent or so but mortgage rates were through the roof, 5.5 or more percent after the mini budget.

Now interest rates are 4 percent and it's looking like you can get sub baserate mortgages. Why can't they just not be greedy and be happy with 2 percent profit, regardless of the baserate. :D

I'm not bitter because my mortgage is going up in the next few months!
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With my limited knowledge, I thibo banks put to those rates because of what they expect the next 5 years to be if going down the current plan. The plan the government had, meant the banks thought that interest rates would have to go higher. Although they weren't at the peak that the banks expected (if we continued down that path), the banks took a guess at what the peak was going to be and then made sure if that happened, they'd be making money or at least, minimal losses. We've changed paths now so different story
 
Nemiyen said:
It just shows how much profit the banks want to make. Interest rates were 2.5 percent or so but mortgage rates were through the roof, 5.5 or more percent after the mini budget.

Now interest rates are 4 percent and it's looking like you can get sub baserate mortgages. Why can't they just not be greedy and be happy with 2 percent profit, regardless of the baserate. :D

I'm not bitter because my mortgage is going up in the next few months!
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Remember at the time of 5pc truss was still in power, and it wasn't clear if she would get the boot. Turmoil was rife. Pensions were at risk. Basically UK finance was a mess, and that's an understatement.

I'm not one to defend big corps but you can see why rates were what they were
 
I think the issue is I need to learn how all this lending works. I thought it was 100k taken from a pot and given to me for 3 years at 2 percent for my mortgage. Ergo, they make 2 percent regardless of what the markets are doing.

What I think happens, in my non financially educated mind, is that pot doesn't exist and the money is passed around at different rates throughout those 3 years, going up and down in percentage rates. Probably even month to month! Which makes me wonder if this whole system is a ponzi scheme of sorts! :eek:
 
Nemiyen said:
I think the issue is I need to learn how all this lending works. I thought it was 100k taken from a pot and given to me for 3 years at 2 percent for my mortgage. Ergo, they make 2 percent regardless of what the markets are doing.

What I think happens, in my non financially educated mind, is that pot doesn't exist and the money is passed around at different rates throughout those 3 years, going up and down in percentage rates. Probably even month to month! Which makes me wonder if this whole system is a ponzi scheme of sorts! :eek:
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The money itself probably did not exist until it was lent to you to buy a house with.
 
Nemiyen said:
I think the issue is I need to learn how all this lending works. I thought it was 100k taken from a pot and given to me for 3 years at 2 percent for my mortgage. Ergo, they make 2 percent regardless of what the markets are doing.

What I think happens, in my non financially educated mind, is that pot doesn't exist and the money is passed around at different rates throughout those 3 years, going up and down in percentage rates. Probably even month to month! Which makes me wonder if this whole system is a ponzi scheme of sorts! :eek:
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Look up Fractional Reserve Banking


Plenty more explanations out there if you want more detail.

In very simple terms, when you deposit money into banks they don't have to keep a pot of it there ready for you to withdraw or to lend to others, they only have to keep a %, or fraction of it, and can "create" more off the back of it to lend out.

EG: for every £1,000 the banking system has, they can create (out of thin air) another £9,000 off that collateral to loan out.

Then the opposite also happens, when a loan gets paid back (out of the 'created' money) it doesn't sit in the bank, it just cancels out the original loan, so that money doesn't exist anymore and the only part left is the interest they charged on that loan.

So in a very simple cycle : Bank gets £1,000 deposit it puts in its vault. It then creates £9,000 of 1 year loans off the back of that £1,000 and charges 10% interest. There is now £10,000 total in the banking system. After 1 year all the loans are repaid and the bank now has £1,900 in its vault, the £1,000 initial deposit and £900 interest. The £9,000 that was created into the system with the loans is then removed as the loans were repaid.

Obviously macro economics is far far more complicated in the real world, but that's the nub of it.
 
Which essentially is why one bad loan out of ten could wipe out the profits and the bank will ensure it is head of the queue to be paid in case of a default.
 
Mercenary Keyboard Warrior said:
Although this fraction reserving is technically correct its not as simple as every time £100 is deposited say £900 is created.

Due to forced reserving limits its potential to be created happens, rather than it actually being created.
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Seeing that Nemiyen was coming from a position of virtually no understanding of the system, look at my post as a Ladybird level of explanation :p

It's one of those subjects that you think "I'll give a simple explanation" then 3 paragraphs later and still needing to include numerous other facets, you realise it's not that easy to do lol.
 
IvanDobskey said:
54k and 2.5 years left on the fixed term here. Should be able to get it below 40k, then hopefully clear half of it. Should take the sting out of the interest rate jump anyway :)
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You are similar to ourselves. Less than 50k left and we managed to fix at 3 48% for 3 years just as this was all kicking off. Increase from 470 to 510 so not the end of the world. Energy has been far more costly to us. The shortfall in the mortgage has just been taken up by cancelling subscription services.
 
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Freakbro said:
Seeing that Nemiyen was coming from a position of virtually no understanding of the system, look at my post as a Ladybird level of explanation :p

It's one of those subjects that you think "I'll give a simple explanation" then 3 paragraphs later and still needing to include numerous other facets, you realise it's not that easy to do lol.
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thanks for that post.... not even 10 am on a Sunday and learned summat new.

ladybird level of banking is my perfect target demographic
 
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Freakbro said:
Look up Fractional Reserve Banking


Plenty more explanations out there if you want more detail.

In very simple terms, when you deposit money into banks they don't have to keep a pot of it there ready for you to withdraw or to lend to others, they only have to keep a %, or fraction of it, and can "create" more off the back of it to lend out.

EG: for every £1,000 the banking system has, they can create (out of thin air) another £9,000 off that collateral to loan out.

Then the opposite also happens, when a loan gets paid back (out of the 'created' money) it doesn't sit in the bank, it just cancels out the original loan, so that money doesn't exist anymore and the only part left is the interest they charged on that loan.

So in a very simple cycle : Bank gets £1,000 deposit it puts in its vault. It then creates £9,000 of 1 year loans off the back of that £1,000 and charges 10% interest. There is now £10,000 total in the banking system. After 1 year all the loans are repaid and the bank now has £1,900 in its vault, the £1,000 initial deposit and £900 interest. The £9,000 that was created into the system with the loans is then removed as the loans were repaid.

Obviously macro economics is far far more complicated in the real world, but that's the nub of it.
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This is the reserve aspect of it, the way you describe it that they have zero cost leverage.

If i have zero cost leverage 9x, guarenteed by the BOE, i can single handedly make it so a bottle of coca cola costs £100,000.
 
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