Mortgage Rate Rises

[danlightbulb]

What difference do any of those make?

• It was pretty obvious rates wouldn't stay that low. Should have expected increases in future. Maybe not to 5 or 6% but to 4% or so as banks test for. 5 or 6% might be tough and unpleasant to deal with, but not ruinous.
• If affordability if rates go up was a serious concern, should have locked in for longer.

Ok so lets take your thoughts on rates.

So it was obvious rates wouldn't stay low, after 15 years of rates being low? If it was 'obvious', then why weren't the markets pulling deals like they are now? Why wasn't the stock market falling like it is now? It was a risk yes, it was far from obvious if or when it would happen. What should people do, not buy for decades in the hope that the market crashes? Some people have been priced out by that tactic for a long time.

Even if it was obvious, what could an individual do about it? Continue to rent perhaps, paying off someone else's mortgage and then getting to retirement still paying private rent on a pension income?

Or perhaps buying a cheaper house? Conveniently forgetting that the "housing market's" primary purpose over the past 20 years has been to extract as much money from individuals as they could bear. Where are these cheaper houses I wonder, that we could all buy? And what if an individual is up against time pressures, because of the combination of high prices and working life remaining?

Locking in for longer. Great idea yes, except the market has never really catered for deals longer than 5 years and so competition, and therefore rates available, were poor.


So where in all this can an individual make any material changes? Please give us your insight.

 

[flea.rider]

Nonsense.

A house isn't a gamble or an investment and never should be.

It is nothing to do with making better choices, if the market rates treble in only 6 months through nothing you could do anything about.

how is it not when your over stretching ?? like most did because they thought rates would stay the same ? every thing is some sort of gamble .. to say someone took a 200k instead of a 500k mortgage a smaller step there going to get hit very much less they took 2-3x there income to 4.5-5 times .. did anyone know it was going to go up ??? no but to think it would always stay there is stupid .. this is the problem so many are having they took max over subtle increase .. it will happen again and again ..

 

[danlightbulb]

how is it not when your over stretching ?? like most did because they thought rates would stay the same ? every thing is some sort of gamble .. to say someone took a 200k instead of a 500k mortgage a smaller step there going to get hit very much less they took 2-3x there income to 4.5-5 times .. did anyone know it was going to go up ??? no but to think it would always stay there is stupid .. this is the problem so many are having they took max over subtle increase .. it will happen again and again ..

Lots of people, myself included, have already bought the cheapest (reasonable*) house they could. My house was £250k, there were only slums cheaper than this within miles of this area. That is not overstretching, its, unfortunately these days, a normal basic house for stupid money. Do you think I should be able to absorb a mortgage going from £900 a month to £1600, which is what will happen if rates are 8% in 4 years time.

There probably are people who have overstretched, but lots haven't and will still get shafted.

 

[EvilRob]

Ok so lets take your thoughts on rates.

So it was obvious rates wouldn't stay low, after 15 years of rates being low? If it was 'obvious', then why weren't the markets pulling deals like they are now? Why wasn't the stock market falling like it is now? It was a risk yes, it was far from obvious if or when it would happen. What should people do, not buy for decades in the hope that the market crashes? Some people have been priced out by that tactic for a long time.

Even if it was obvious, what could an individual do about it? Continue to rent perhaps, paying off someone else's mortgage and then getting to retirement still paying private rent on a pension income?

Or perhaps buying a cheaper house? Conveniently forgetting that the "housing market's" primary purpose over the past 20 years has been to extract as much money from individuals as they could bear. Where are these cheaper houses I wonder, that we could all buy? And what if an individual is up against time pressures, because of the combination of high prices and working life remaining?

Locking in for longer. Great idea yes, except the market has never really catered for deals longer than 5 years and so competition, and therefore rates available, were poor.


So where in all this can an individual make any material changes? Please give us your insight.

Of course it was obvious - or at least likely. That's why banks tested affordability against higher rates. They didn't need to up their rates whilst they could still borrow at the low base rates.

The rest of your argument basically centres on the person who could only just afford (although they would still have been tested for affordability at higher rates) to buy the cheapest possible property available, so is kind of an edge case.

Plenty of people on this very thread booked in rates early or even exited deals early to hedge against rate rises. Even if you didn't, coming to the end of a 5 year fix you would have a slightly better position as you will have paid down some principle and have other options to avoid being "ruined".

 

[flea.rider]

Lots of people, myself included, have already bought the cheapest (reasonable*) house they could. My house was £250k, there were only slums cheaper than this within miles of this area. That is not overstretching, its, unfortunately these days, a normal basic house for stupid money.

to be frank .. your looking in the wrong area d o you live where you are for yourself ?? or do you want to move for your kids ? if it's my job is here get another job ? different area

 

[Mercenary Keyboard Warrior]

I think property needs a rethink apart from an arbitrary rate being set.

But I'm about society, and you're a Tory so we likely won't agree.

So nothing then. Maybe come back when you have had a think about it all.

I think its more about stability. At the point you buy a house (a main house, not an investment property, buy to let or holiday home), you are assessed and you take account of term, repayments and affordability at that point under different scenarios.

Is it then fair for very short term external circumstances to ruin a person? I don't think so.

So fundamental changes are required. How about full term fixed rates that allow a person to still move house? Rates that reflect the risk of an individual not the whims of markets or the BoE that no one has any control over.

The question I would put back to you is why should individuals bear the risk of national market/policy failures? All any of us can do is try to be financially responsible by controlling our own stuff, making sure we're employed, not wasting money etc. We can do all that, yet get ruined anyway by poor national policy or behaviour of markets.

So are we also protecting from everything else that can go wrong in life or just the mortgage interest rate?
You can certainly take a long term fix, in my life I have never taken a mortgage less than 5 years, I've taken a 10 twice and a 15 once.
The headline rates look less attractive hence most people never even look at them. For me, oddly, stability in my mortgage has always been behind my decisions.

But as I said, the longer the term the higher the rate typically as there is more lender risk. I bet a lot wouldn't agree with you if they had to pay 1% more to take a full length fix.

Why should people bear the risk? Because we live in a country where that is deemed to be the best way. Its the way in all the most successful countries.
The reality is most will get wrecked by their own lifestyle choices (failure to plan for things going wrong) such as redundancy, ill health, etc than from interest rates.

 

[danlightbulb]

to be frank .. your looking in the wrong area d o you live where you are for yourself ?? or do you want to move for your kids ? if it's my job is here get another job ? different area

And there it is, the typical 'move to another area' response that fails to recognise that 99% of people have circumstances that means they can't just up sticks and move to the other side of the country.

What should someone do who is already in a cheap area and will still get battered by trebling rates?

 

[Stu999]

Young un's just need to cut out the frothy coffees, netflix and avocado toast

And iPhones. I buy a new iPhone every month therefore can't afford a house.

 

[danlightbulb]

The reality is most will get wrecked by their own lifestyle choices (failure to plan for things going wrong) such as redundancy, ill health, etc than from interest rates.

It is very difficult to plan for those things though isnt it.

What can you do to plan for redundancy or severe ill health? Expensive insurance policies, or save a rainy day fund? How can most people save a rainy day fund when:

• The high house prices have bled you dry initially.
• Then cost of living has trebled everyone's energy bill and doubled everyone's food bill?
• Then we're about to get shafted by higher interest rates
• Pay rises are terrible and not keeping up.

People completely fail to see the whole picture of pressure here. Get a new job, move to a different area, cut back on X,Y,Z costs, save tens of k to pay off your mortgage early etc etc. For many people, those aren't viable options.

 

[Mercenary Keyboard Warrior]

It is very difficult to plan for those things though isnt it.

What can you do to plan for redundancy or severe ill health? Expensive insurance policies, or save a rainy day fund? How can most people save a rainy day fund when:

• The high house prices have bled you dry initially.
• Then cost of living has trebled everyone's energy bill and doubled everyone's food bill?
• Then we're about to get shafted by higher interest rates
• Pay rises are terrible and not keeping up.

People completely fail to see the whole picture of pressure here. Get a new job, move to a different area, cut back on X,Y,Z costs, save tens of k to pay off your mortgage early etc etc. For many people, those aren't viable options.

It sounds exactly like the early 90s to me.

I am sure we will get yet another expert come along and tell us we all had it so good

 

[danlightbulb]

It sounds exactly like the early 90s to me.

I am sure we will get yet another expert come along and tell us we all had it so good

I think it is true that the level of debt now that is exposed to higher rates is far higher than it was then. Not to say the impact wasn't big in the 90's, it was, but on far lower levels of mortgage debt compared to salary. There was much more job loss in the 90's recession though. And back then there were still social housing options if you did lose your house or job. What social housing backstop would there be for most people now?

 

[tamzzy]

I am sure we will get yet another expert come along and tell us we all had it so good

we all had it so good

 

[esmozz]

So nothing then. Maybe come back when you have had a think about it all.



So are we also protecting from everything else that can go wrong in life or just the mortgage interest rate?
You can certainly take a long term fix, in my life I have never taken a mortgage less than 5 years, I've taken a 10 twice and a 15 once.
The headline rates look less attractive hence most people never even look at them. For me, oddly, stability in my mortgage has always been behind my decisions.

But as I said, the longer the term the higher the rate typically as there is more lender risk. I bet a lot wouldn't agree with you if they had to pay 1% more to take a full length fix.

Why should people bear the risk? Because we live in a country where that is deemed to be the best way. Its the way in all the most successful countries.
The reality is most will get wrecked by their own lifestyle choices (failure to plan for things going wrong) such as redundancy, ill health, etc than from interest rates.

I assume therefore you refused to accept the energy price guarantee and gave the money back this winter? Actually there are any number of 'life essentials' that are protected from pure market forces - there's no reason mortgages should be any different.

And actually, I think you are wrong, I suspect the government will step in at some point if interest rates continue in the same direction. Probably in the form of tax relief on mortgage interest.

 

[kaiowas]

And iPhones. I buy a new iPhone every month therefore can't afford a house.

I bought so many iPhones in the 80s that I built a house out of the boxes and it’s now worth more than all the iPhones cost.

 

[Hagar]

It is not possible to individualise mortgage rate to cater for individuals risk. Actuaries will have a field day. The process would take forever and most people in most circumstances do pay off their mortgage so apart from the complexity it is not required.

 

[Mercenary Keyboard Warrior]

I think it is true that the level of debt now that is exposed to higher rates is far higher than it was then. Not to say the impact wasn't big in the 90's, it was, but on far lower levels of mortgage debt compared to salary. There was much more job loss in the 90's recession though. And back then there were still social housing options if you did lose your house or job. What social housing backstop would there be for most people now?

Yes debt to salary multiplier is now higher, unemployment rate was much higher and taxes higher, and protections worse.

I assume therefore you refused to accept the energy price guarantee and gave the money back this winter? Actually there are any number of 'life essentials' that are protected from pure market forces - there's no reason mortgages should be any different.

And actually, I think you are wrong, I suspect the government will step in at some point if interest rates continue in the same direction. Probably in the form of tax relief on mortgage interest.

The problem with MIRAS or something similar as that its kind of self defeating in that if your artificially lowering the rate of interest which has been raised in order to try to damper demand then your shooting yourself in the foot, probably damaging business investment more than you need to.
Now I am not against MIRAS but its only taking from one party and giving it to another. So should we support higher taxation in order to give it to house owners, seems a bit harsh on pensioners, those renting etc, no?

 

[413x]

There is an argument about moving to a cheaper area.
I know it's unpalatable for many. But it is an option for many. You might not want to do it. But sometimes it is an necessary evil.

I do think it sucks that through no fault of your own you can be wrecked by house price swings.

But what's the alternative?
That all houses are state owned? Or that there's some sort of complex price fixing? I can't see how it would work.

You do get the sad stories about people who bought pre crash.
Its not just the negative equity, it's all the things that come with it. I don't a these people, but who've been shafted once, get shafted again by being stuck in SVR.
This is unfair!

 

[413x]

Yes debt to salary multiplier is now higher, unemployment rate was much higher and taxes higher, and protections worse.



The problem with MIRAS or something similar as that its kind of self defeating in that if your artificially lowering the rate of interest which has been raised in order to try to damper demand then your shooting yourself in the foot, probably damaging business investment more than you need to.
Now I am not against MIRAS but its only taking from one party and giving it to another. So should we support higher taxation in order to give it to house owners, seems a bit harsh on pensioners, those renting etc, no?

Its the reason that although, personally, I'd love the mortgage to be salary sacrifice. But it would have to be rent as well. Otherwise you are pushing up house prices, hurting the next gen of FTBs.

 

[Mercenary Keyboard Warrior]

Its the reason that although, personally, I'd love the mortgage to be salary sacrifice. But it would have to be rent as well. Otherwise you are pushing up house prices, hurting the next gen of FTBs.

IMO the issue is not homebuying its the lack of social housing.
I am not against social housing and would support more being built, however I will never support the state (and hence all the population) somehow guaranteeing those doing well enough to be buying a house off the backs of those significantly poorer then themselves who will never get that opportunity.
Buying a house should come with the risks of doing so. If you want the benefits suck up the risk buttercup.

Funny I don't get it because I am a Tory and yet those who criticise in effect want exactly that.

 

[danlightbulb]

The problem with MIRAS or something similar as that its kind of self defeating in that if your artificially lowering the rate of interest which has been raised in order to try to damper demand then your shooting yourself in the foot, probably damaging business investment more than you need to.
Now I am not against MIRAS but its only taking from one party and giving it to another. So should we support higher taxation in order to give it to house owners, seems a bit harsh on pensioners, those renting etc, no?

Raising rates effect mortgage holders significantly more than other groups. A big chunk of people have no mortgage, mostly because they are older and have paid it off. Where is the incentive on those people to dampen their demand?

So rates as a tool is very biased towards mortgage holders, who are expected to take all the pain whilst other groups generate even more money off their savings.

Energy bills effected everyone, that should have dampened demand across everyone left unchecked. But instead they gave out money for that (which I of course also benefited from), which actually will have helped reinforce inflation.

The policies are not working together anyway, so why excessively penalise mortgage holders in this?