Mortgage Rate Rises

[Mrwong]

To this man: https://www.google.com/amp/s/amp.th...-for-wage-restraint-to-help-control-inflation

Remember not to ask for a pay rise though, or he will put the rates up again.

He can't increase that much and he knows that. That is why he said what he said.

He knows if he increases past a curtain % threshold he could cause damage real damage to economy. The west economy could not withstand rates of the 70s due to the current level of debt.

 

[413x]

Which is why I quoted salaries for relativity.
As a part qual at that stage it would probably be £35k and a receptionist maybe £20-23k now. So house value around 3x joint wage vs 2.5 then, but interest % higher, which is what matters most at the start.
Which would make the affordability a bit worse, last time I looked at the house its value was something like £140k. Just looking now sold for £225k earlier this year.
Bonkers.

The big difference was that if you could afford to start to reduce the term with overpayments the impact was significantly higher.
Don't get me wrong I would rather have lower property prices and higher interest rates rather then the opposite.

Problem of the really low rates for a long time. They push up the house prices. And those bank rates can't get any lower. They can stay there or go up.

At least with 10-15pc at 2.5x that rate isn't there to stay and can (and did) come way down.

Now it can only be as good as it was before this rise. Or it can be worse.

House prices rose to match affordability at 1pc base rate. I guess because it was 1pc ish for so long.

Thats OK for anyone joining the party in the beginning. That long run you can eat your over exposure down. But...

-Join at the end before covid, and you're left vulnerable.

-Join at the end, after that exceptional covid bump? And you're in a very very risky position.

-Join at the very end and only take a 2 year fix? RIP.

 

[dlockers]

House prices rose to match affordability at 1pc base rate. I guess because it was 1pc ish for so long.

They were stress tested to 6-7% though, so affordability on a real terms basis was misleading, but the banks didn't irresponsibly give out mega bucks (me aside).

 

[413x]

They were stress tested to 6-7% though, so affordability on a real terms basis was misleading, but the banks didn't irresponsibly give out mega bucks (me aside).

From the amount they would have lent me.. I feel they were stress tested at 6-7pc...but not with the additional costs. Ie food, energy etc.

So yes. 6-7 alone.. Manageable.
6-7 plus everything else? No.
I'd be screwed if I had taken max loan out at my remortgage on a tracker.

Just popped it into a calculator
If I had been borrowed the max allowed, 340k. At 7pc I'd be paying 2400. Or 1400 a month more than now.

Add to that 250ppm energy and 200ppm and 200ppm CT food you're at 3k for bills.

That is ball breaking. As there arw other bills like car, insurance, Internet, etc etc

 

[Mercenary Keyboard Warrior]

Problem of the really low rates for a long time. They push up the house prices. And those bank rates can't get any lower. They can stay there or go up.

At least with 10-15pc at 2.5x that rate isn't there to stay and can (and did) come way down.

Now it can only be as good as it was before this rise. Or it can be worse.

House prices rose to match affordability at 1pc base rate. I guess because it was 1pc ish for so long.

Thats OK for anyone joining the party in the beginning. That long run you can eat your over exposure down. But...

-Join at the end before covid, and you're left vulnerable.

-Join at the end, after that exceptional covid bump? And you're in a very very risky position.

-Join at the very end and only take a 2 year fix? RIP.

I am not convinced most of those didn't apply back when I was first on the market either.

For me the real difference that I can see is the barrier to entry.
When we bought the house I mentioned, we had to save hard for around 3 months. Like spending the absolute minimum for those months.
Now that wouldn't suffice. We needed 5% of 27k, or so, say £1350. Our combined take home was something like £850, so around 1.5 months takehome as deposit.
At £225k you need £11k. And on those salaries thats probably 3 months

 

[Mrwong]

Problem of the really low rates for a long time. They push up the house prices. And those bank rates can't get any lower. They can stay there or go up.

At least with 10-15pc at 2.5x that rate isn't there to stay and can (and did) come way down.

Now it can only be as good as it was before this rise. Or it can be worse.

House prices rose to match affordability at 1pc base rate. I guess because it was 1pc ish for so long.

Thats OK for anyone joining the party in the beginning. That long run you can eat your over exposure down. But...

-Join at the end before covid, and you're left vulnerable.

-Join at the end, after that exceptional covid bump? And you're in a very very risky position.

-Join at the very end and only take a 2 year fix? RIP.

You stick your property in a trust/ company and it will never be stolen by the state.buy land pass it onto your generations.

The lower class and lower middle class with eventually own nothing in the future.

All you need to do is use excel add 3% growth wage and 7% growth property prices watch it diverge. You can track wage grades affordability disappear.
Hence we have shared ownership to keep the sheep happy and that is just insane, mortgage + rent = stupidity.


of November 2022, the current average salary in the UK is £27,756

Lol 27k that is just slave labour in the UK.

Approx £21,846 after tax and National Insurance. This equates to £1,820 per month and £420 per week.
Avg rent £1000 leaves you with £820. Month congratulations £26.45p pounds a day is your worth.

 

[Efour]

Going to the bank to negotiate with my mortgage lender tomorrow.

Wish we locked for 5 years not just 2 but hey ho. It's really quite a small amount of money compared to most here

I'll use my English charms and threaten to leave if they don't match a cheaper provider, then move if we really have to, to prove the point. Don't f with me. Swedes are such non confrontational people. I think we'll get what we want. Pitiful rate discount .

 

[Freakbro]

of November 2022, the current average salary in the UK is £27,756

Lol 27k that is just slave labour in the UK.

That will include part time work as well, you need to look at the full time only average

 

[dlockers]

That will include part time work as well, you need to look at the full time only average

Median tbh?

 

[413x]

I am not convinced most of those didn't apply back when I was first on the market either.

For me the real difference that I can see is the barrier to entry.
When we bought the house I mentioned, we had to save hard for around 3 months. Like spending the absolute minimum for those months.
Now that wouldn't suffice. We needed 5% of 27k, or so, say £1350. Our combined take home was something like £850, so around 1.5 months takehome as deposit.
At £225k you need £11k. And on those salaries thats probably 3 months

Its the salary multiplier too.
At only 4-4.5x, often houses are out of reach for that.


For us we needed 40k for our house on our salaries.
The problem wasn't the 5pc it was the salary multiplier. At that time we were on combined 50k

Then there was stamp duty and all the fees too

We lived 6 months I a **** hole for the prior 8 months to save every penny we could to expand the houses we could get

 

[Freakbro]

Anyway, don't we need [or at least want] a recession to get inflation under control?

All this talk of the Govt about 'growing the economy' well growth causes inflation, so once again we're going to have fiscal and monetary policy pulling in opposite directions if we're not careful.

Our chancellor the other day

Risk of UK recession would be worth it to cut inflation. A recession in the UK would be a price worth paying to bring inflation down, the chancellor has suggested. Jeremy Hunt said he was comfortable with the Bank of England raising interest rates further as it struggles to curb rising prices.

 

[krooton]

Median tbh?

Median salary in 2022 was £33k

£26.5k per year take home.

Lets assume this average person earns less in the first half of their career, and more in the last half, resulting in the median being averaged across their entire 50 year working life.

That would put their life-time take-home at £1,325,000 (assuming all things stay relative like taxes, inflation, etc)

Yes this VERY rough, but it helps a bit to put a million in to perspective for the average person.

 

[dlockers]

@krooton did that exclude part time people?

 

[413x]

You stick your property in a trust/ company and it will never be stolen by the state.buy land pass it onto your generations.

The lower class and lower middle class with eventually own nothing in the future.

All you need to do is use excel add 3% growth wage and 7% growth property prices watch it diverge. You can track wage grades affordability disappear.
Hence we have shared ownership to keep the sheep happy and that is just insane, mortgage + rent = stupidity.


of November 2022, the current average salary in the UK is £27,756

Lol 27k that is just slave labour in the UK.

Approx £21,846 after tax and National Insurance. This equates to £1,820 per month and £420 per week.
Avg rent £1000 leaves you with £820. Month congratulations £26.45p pounds a day is your worth.

Definitely.
Owning is going out the window.
Even software, you can't buy a adobe photoshop. You have to subcribe. (I stopped at that point)

Now concepts like multi generational mortgages get thrown around. The FTB won't own thier home. But thier kids might.

We are slipping quite quickly to "subscribe" true rather than own.
Some is good. I prefer subscription to Netflix vs buying dvds. But others? Like renting your car? No. Never owning your home? No.

 

[Mercenary Keyboard Warrior]

Its the salary multiplier too.
At only 4-4.5x, often houses are out of reach for that.


For us we needed 40k for our house on our salaries.
The problem wasn't the 5pc it was the salary multiplier. At that time we were on combined 50k

Then there was stamp duty and all the fees too

The salary multiplier went up as it needed to for affordability to match lowering interest rates
TBH It was always a bit of a dumb test and hence why they moved to an actual affordability test as opposed to a simple salary multiplier.
We also had higher tax rates, generally.
Its very difficult to compare across decades, but from a simple affordability POV I don't see that similar people to me would be that different TBH.

There is another oft forgotten angle.
IIRC my interest would have been something like 225% of the house value. So I could buy a house for £27k that would cost me £88k and be worth £27k.
Now that house would be £225k, cost probably around 100% in interest. So I could buy the house for £225k, cost me £450k in actual payments and be worth £225k.

Compare the £88k to joint income of around £12k.
vs £225k now to a probable joint income of around £60k.

As ever its not always as bad relatively now as people seem to think. They only take the negatives and dont see the positives from the differing situations.

 

[Freakbro]

@krooton did that exclude part time people?

Yes, that's median for full time employees, which is about what I thought it was

 

[413x]

Our household fits the average fairly well. Below median before 33 years old, past median after 33.
We have that average house, average lifestyle etc. Only thing that really puts us above average is not having kids. But with kids we'd be the epitome of average

 

[413x]

The salary multiplier went up as it needed to for affordability to match lowering interest rates
TBH It was always a bit of a dumb test and hence why they moved to an actual affordability test as opposed to a simple salary multiplier.
We also had higher tax rates, generally.
Its very difficult to compare across decades, but from a simple affordability POV I don't see that similar people to me would be that different TBH.

There is another oft forgotten angle.
IIRC my interest would have been something like 225% of the house value. So I could buy a house for £27k that would cost me £88k and be worth £27k.
Now that house would be £225k, cost probably around 100% in interest. So I could buy the house for £225k, cost me £450k in actual payments and be worth £225k.

Compare the £88k to joint income of around £12k.
vs £225k now to a probable joint income of around £60k.

As ever its not always as bad relatively now as people seem to think. They only take the negatives and dont see the positives from the differing situations.

Tbh I think the main benefit is that even though it wasn't easy then, house price growth has put your generation in a sweet spot.
Of course you'd never have predicted then, that would happen. Otherwise everyone would have been piling into property.

So I agree it was tough back then. But I very much doubt we will get the same benefit through property price multipliers in 10-20 years.

Of course we could, but it would screw the next gen even more

Very interesting to hear the details rather than boomer this, millennial that

 

[Mercenary Keyboard Warrior]

Our household fits the average fairly well. Below median before 33 years old, past median after 33.
We have that average house, average lifestyle etc. Only thing that really puts us above average is not having kids. But with kids we'd be the epitome of average

Your 10 years ahead of schedule in that case.
Assuming start work at 18 and retirement is 68 years thats 50 years of work, so mid point is 18+25 = 43, not 33!

 

[413x]

Your 10 years ahead of schedule in that case.
Assuming start work at 18 and retirement is 68 years thats 50 years of work, so mid point is 18+25 = 43, not 33!

Yeah covid tech boom has put us into middle or above. And without kids cost we are comfortable.

Slow start. Not getting a house until I was 33. (and part of that is my fault). And jumping from 30k to. 55k between 33 and 37 years old has definitely accelerated things. As well as a few good finance decisions.


Managed to save 40k between 2020 (when I went down to 1k of savings after getting the house) and now.
So I can't complain! But only really accelerated due to covid. (thanks covid)

Consider it took from 21 to 33 to save that initial 40k. Lol