Mortgage Rate Rises

Got a new mortgage in place this morning (3.99%) fixed for 5 years. Advisor said the systems have been crazy this morning, as people trying push new deals before the announcement.

Gone from 2 years left on my mortgage back to 20.
 
Last edited:
Also i'm really annoying myself. As part of my budget planner, and since i'm on a tracker rate mortgage. I worked out a mortgage payment schedule, to help me forecast payments etc depending on rate movements.

Everything was working swimmingly, until i've tried to build in an overpayment calculator. The problem is that by sticking in an overpayment, it's reducing the following payments which i don't want to do, but i do want to keep the option to flex the future interest rate.

I feel like i keep staring at it and making 1 step forward but 2 steps back!

I'm aiming at selling up around December 23, so the normal online calculators don't really offer much help as they work on the life of the mortgage, whereas i'm wanting to look short term to compare against short term investing.
 
unwashed potato! said:
So that 0.25 increase goes to banks? I thought the BoE set the rate at which it expects payments from banks, so 4.25 now goes to BoE, and banks keep the rest, thus the government earn more from this. Guess I was wrong
Click to expand...
No the money doesn't go to banks, there is no more money actually. The idea is to shrink the money supply. Lending is constrained because the cost of money is higher, at least in theory. Banks do earn more through interest rate differentials though and I see big banks are still lagging on their savers rates.
 
unwashed potato! said:
So where does it go?

Let's say I was on a tracker and yesterday I was paying £1000 a month, today I'm paying £1050 a month. Who gets that extra £50?
Click to expand...
my simplified and possibly wrong understanding

Bank of England gets it
BoE create money out of thin air to give to banks that loan it to people.
That money is paid back with interest to BoE and then disappears into thin air.

Inflation is (normally) excess money in system. Too much money not enough product - prices go up.
Solution is to burn some of the money (the interest part)

Except this time the problem is that product became more scarce and expensive from other reasons. So we get to enjoy price increase from inflation AND expensive loans from monetary policy.

PS Alternatively banks loan out the money people keep in savings accounts. In that case money is not burned
 
Last edited:
kai said:
Got a new mortgage in place this morning (3.99%) fixed for 5 years. Advisor said the systems have been crazy this morning, as people trying push new deals before the announcement.

Gone from 2 years left on my mortgage back to 20.
Click to expand...

Huh?? How does this work. Have you just taken a load of money out of the value of the house?
 
We had thought about moving to a bigger place with a slightly bigger garden but glad I'm staying put atm, just hope when our deal runs out in 2026 interest rates have fallen a bit. Current rate is 1.49% and have about 90k left on the mortgage so will probably try to overpay as much as possible, and is allowed.
 
Unfortunately our mortgage is up for renewal at the end of this year and I can't see rates dropping that much before then. We want to move into a bigger house but currently we seem to be in a weird place where house prices haven't really dropped but mortgage rates have more than doubled.

Hoping that people accept that they house isn't worth what is was and we can offset the higher mortgage cost by getting a discount on the house we want. Don't know how likely this is on houses around £1m though.
 
gingergundog said:
We had thought about moving to a bigger place with a slightly bigger garden but glad I'm staying put atm, just hope when our deal runs out in 2026 interest rates have fallen a bit. Current rate is 1.49% and have about 90k left on the mortgage so will probably try to overpay as much as possible, and is allowed.
Click to expand...

You may be better off saving and earning interest rather than overpaying with such a low interest rate. Depends on your circumstances but you can get 3% in an instant access saver or similar in an ISA.
 
Last edited:
You must log in or register to reply here.
Back
Top Bottom