Mortgage Rate Rises

Yeah asking prices are still $lol as bottom feeding estate agents try and make bank. A lot of them founded in the kumbaya hay day of wokeness so have never had to lay folk off. RIP.

Friends had a house worth 700; must have peaked at 825; sold for 775 and then gazumped 15k to 760k as of last week.
 
mattx4 said:
Isn't that a gazunder?
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Looking for some number help:

I have £90,112 left to pay, by 2041 (18 years left)

I have taken a 10 year fixed deal @3.24% and my plan is pay it all off at the end of that.

I started doing £500pm, but that will clear it in 8 years and I'll be subject to a £2k ERC.

If I do £300pm, in 10 years I'll just have a small amount to pay to clear it, job done, nice and easy.

The £300pm will only cost me £1k more in interest, over paying £500pm and after paying the ERC, so not really worth it? I could put the £200 into another ISA.

Or....do I put £500 in fixed ISAs, move it around (more hassle) over 10 years to get the best deals, have a pot of £60-70k and pay off the £46,700 left @ 10years of my mortgage.

I cant seem to put on paper a simple comparison between the ideas, I think I'm over complicating it.....but its rather annoying lol.
 
I have some other money going into vanguard and some into Circa5000, so I was going to stay away from riskier ones.
I see Leeds Building Society have a 4.25% fixed rate bond ISA, so I can do that with the £200 for 3 years and then move on as required.
 
kona786 said:
Yeah. It doesn't look like deals will dip back to 3% for a long, long time. Grrr.
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Usually the forecasts are optimistic too. So for those that got those offers of 3.99 but were waiting and seeing.. Probably worth locking those in!

Can't see the base rate being under 4pc for a while.
 
unwashed potato! said:
Perhaps people don't consider their savings as an account that can be touched?

Obviously there's those ones that you pay in a certain amount each year tax free, and if you take out from that, you can't put it back 2 months later without using up tax free allowance.

I find myself in a position where I do actually have a healthy amount of savings, but when I consider day to day spending, I don't feel I have that much to use, and a big expense could set us back and borrow on credit cards etc, even if it's the stupid way to do it, the savings are similar to say a stock, on that you could sell it and have instant money, but you consider it gone until it will be used for it's intended use, e.g a holiday/wedding/paying off mortgage early etc.

Sounds stupid, but I just wonder if that's messing up the figures. Credit card spending is borrowing after all. If we had to buy a new washing machine (not that I'd buy brand new), but they can go for £500 plus, tumbles the same, any white good in fact, you may borrow to buy that.

Also the key word from the report is the word 'beleive'.

People believing something doesn't make it true
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I have my views on this but I appreciate others may think differently.

The way I operate is that [nearly] all of my finances are just nebulous, part of the same thing. So I don't have a budget for different things, I just have one generic 'pot' of money even if it is stored in different places. One month I might spent £500 another month I might spend £5k and that money isn't assigned to any purpose until it is spent. To put it another way, the "intended use" for savings is constantly evolving. You never know what the future will bring, you might think that today that money is going towards a holiday but if the washing machine breaks down next week maybe that's no longer the priority for that money.

One of the common fallacies (again, from my personal perspective) I see is people who are taking out debts that are more expensive than funds they already have available. In your case buying a washing machine on credit only makes sense if the interest rate charged is less than you get on savings (unlikely unless you pay it off straight away). The message I struggle to get across to people is that by doing this, they will have LESS savings in the long term, because the cost of servicing that debt will impact on their ability to build savings. So if you buy a washing machine for £500 on savings instead of credit then yes tomorrow you have £500 less savings. But in a couple of years time your savings should be bigger than had you bought the washing machine on credit because you will have spent more than £500 plus savings interest on that washing machine due to the higher interest rates on the debt.
It's a similar equation with people paying for insurance monthly, to me it makes no sense if they can pay it annually and avoid the interest, as after 1 year they will have more money than had they paid it monthly (unless they have a good investment vehicle for the capital, obviously).
 
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Richie said:
Up until the financial crash of 2008, base rates were generally around the 5% mark... Perhaps they won't go down again?
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Possible that 3-4pc becomes the mid term norm.

If house prices don't come down to balance it out its going to grow that wealth divide even further.

Going to be a disaster long term when do many people aren't mortgage free, but the state pension is worth naff all. And nhs is long gone. Do not envy the kids off now!
 
HangTime said:
I have my views on this but I appreciate others may think differently.

The way I operate is that [nearly] all of my finances are just nebulous, part of the same thing. So I don't have a budget for different things, I just have one generic 'pot' of money even if it is stored in different places. One month I might spent £500 another month I might spend £5k and that money isn't assigned to any purpose until it is spent. To put it another way, the "intended use" for savings is constantly evolving. You never know what the future will bring, you might think that today that money is going towards a holiday but if the washing machine breaks down next week maybe that's no longer the priority for that money.

One of the common fallacies (again, from my personal perspective) I see is people who are taking out debts that are more expensive than funds they already have available. In your case buying a washing machine on credit only makes sense if the interest rate charged is less than you get on savings (unlikely unless you pay it off straight away). The message I struggle to get across to people is that by doing this, they will have LESS savings in the long term, because the cost of servicing that debt will impact on their ability to build savings. So if you buy a washing machine for £500 on savings instead of credit then yes tomorrow you have £500 less savings. But in a couple of years time your savings should be bigger than had you bought the washing machine on credit because you will have spent more than £500 plus savings interest on that washing machine due to the higher interest rates on the debt.
It's a similar equation with people paying for insurance monthly, to me it makes no sense if they can pay it annually and avoid the interest, as after 1 year they will have more money than had they paid it monthly (unless they have a good investment vehicle for the capital, obviously).
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Yes. Use savings not credit if rates say so.
Pay off annually can save 10pc or more.

Always pay house/car insurance annually
 
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HangTime said:
I have my views on this but I appreciate others may think differently.

The way I operate is that [nearly] all of my finances are just nebulous, part of the same thing. So I don't have a budget for different things, I just have one generic 'pot' of money even if it is stored in different places. One month I might spent £500 another month I might spend £5k and that money isn't assigned to any purpose until it is spent. To put it another way, the "intended use" for savings is constantly evolving. You never know what the future will bring, you might think that today that money is going towards a holiday but if the washing machine breaks down next week maybe that's no longer the priority for that money.

One of the common fallacies (again, from my personal perspective) I see is people who are taking out debts that are more expensive than funds they already have available. In your case buying a washing machine on credit only makes sense if the interest rate charged is less than you get on savings (unlikely unless you pay it off straight away). The message I struggle to get across to people is that by doing this, they will have LESS savings in the long term, because the cost of servicing that debt will impact on their ability to build savings. So if you buy a washing machine for £500 on savings instead of credit then yes tomorrow you have £500 less savings. But in a couple of years time your savings should be bigger than had you bought the washing machine on credit because you will have spent more than £500 plus savings interest on that washing machine due to the higher interest rates on the debt.
It's a similar equation with people paying for insurance monthly, to me it makes no sense if they can pay it annually and avoid the interest, as after 1 year they will have more money than had they paid it monthly (unless they have a good investment vehicle for the capital, obviously).
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so what your saying is ...if you haven't got it don't spend it except for things like a car or house ..live within your means .. age old saying that got lost at some point ..
 
rodders said:
Looking for some number help:

I have £90,112 left to pay, by 2041 (18 years left)

I have taken a 10 year fixed deal @3.24% and my plan is pay it all off at the end of that.

I started doing £500pm, but that will clear it in 8 years and I'll be subject to a £2k ERC.

If I do £300pm, in 10 years I'll just have a small amount to pay to clear it, job done, nice and easy.

The £300pm will only cost me £1k more in interest, over paying £500pm and after paying the ERC, so not really worth it? I could put the £200 into another ISA.

Or....do I put £500 in fixed ISAs, move it around (more hassle) over 10 years to get the best deals, have a pot of £60-70k and pay off the £46,700 left @ 10years of my mortgage.

I cant seem to put on paper a simple comparison between the ideas, I think I'm over complicating it.....but its rather annoying lol.
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Basically it comes down to whether you can beat 3.24% net return on investments. At current interest rates, yes you can. So the optimal solution IMO is:
  • Do not overpay your mortgage, put funds into ISAs paying more interest than that
  • Monitor rates over the next 10 years. If you can't beat 3.24% after tax then switch to overpaying the mortgage
  • If you hit the £20k annual limit (unlikely given you are talking about £500 a month but who knows what the future holds) then you might want to think about it.
Note you need to be disciplined here. If you are the type of person who will decide to cash in their ISA and go to Vegas for the weekend then this approach may not be the best, the idea is this money is being set aside in lieu of overpaying the mortgage because after 10 years you can simply pay off the remaining balance and have more money left than had you overpaid the mortgage.
 
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