Mortgage Rate Rises

[alexakasloth]

There’s going to be an awful lot of disappointed sellers if they’re still asking silly prices.

Houses around here are regularly having their asking prices lowered, compared to a year or so ago when they were being bought by investors within hours wthout even a viewing.

[edit]
2/3 bed terraced houses are quite common around here - currently there's 23 for sale that are not under offer and 12 of them have reduced their prices. Compare this to a house on our street which sold last year within hours to an investor (landlord).

 

[HungryHippos]

When I bought my house in 2022 the LTV was ~15%, but presumably that ratio is changing/ worsening day by day?

In theory part of your payments each month are interest, and the other part comes off the capital.

LTV will move based on the house price going up/down as well as your equity going up slowly as you pay the monthly payments.

Boils down to your current equity position vs the value of the house. You can also work this out in reverse (house price - remaining mortgage balance = equity). equity / house price then becomes your LTV, if you have a £100K house and your equity is £10K, then you have 10% equity and an LTV of 90%.

 

[Mercenary Keyboard Warrior]

Because it's no different to the support lots of other people get already for various things in society. We all fund lots of things.

In this particular case, a mortgage crunch could effect millions, a big enough number that without support could push the country into recession, costing jobs and businesses. Mass repossession would also increase the burden on the state to provide alternative housing which currently doesn't have the capacity to support a problem on this scale.

The support wouldn't extend to capital repayment or the original accepted interest, it would only apply to the interest element above a certain threshold where the mortgage holder couldn't have foreseen or have been expected to take that scale of risk.

Renters should also be protected so no increase in rents.



There is a difference in my mind to an individual winning or losing based on their own circumstances or choices, and millions of people potentially facing financial ruin through nothing they could have done about it. Yes, clearly the Government is there to protect that scale of a problem, as it did with furlough for that group, because when/if the problem reaches that level it will effect more than just mortgage holders.

Of course, this problem were facing now is partly a result of all the cash given out during COVID. The government helped make the problem, they should therefore support those now effected by it.


Obviously we're not going to agree on it, but in time a sufficient weight of people effected might force the government's hand on it.

You were all for small government before when you thought it would lower your bills.
Now your all for nanny state large government.

 

[neocon]

It's kind of difficult to know the value of properties in a falling market. You've literally got to find a buyer to know the true value, not ask an agent.

 

[Freakbro]

You were all for small government before when you thought it would lower your bills.
Now your all for nanny state large government.

I think we all realise dan is for whatever is best for dan

 

[Mercenary Keyboard Warrior]

I think we all realise dan is for whatever is best for dan

Yep, lost track of how many times I have said this.

 

[Doobedoo]

I think we all realise dan is for whatever is best for dan

Tbf the majority of people are that way inclined some might not admit or realise it.

 

[200sols]

The previous MCOB stress test was 3% which isn't that much considering that rates were as low as 1.something% in the last couple of years - the current rates for a 10 year fix are just above this stress test which isn't all that high historically (~4.8%).
The 3% stress test was removed last August by the FCA. Regulations need to get tighter. not softer.
I think we should adopt a model more like Canada's, whereby a more average historical rate is used (5.25%) as a stress test, it would have helped with this scenario where the stress test became fairly redundant.

The stress test was 3% above the lenders variable rate, not 3% above the rate you fixed at though.

 

[Mercenary Keyboard Warrior]

Tbf the majority of people are that way inclined some might not admit or realise it.

Yes this is true.
But to have sensible conversation you have to form positions based on realism.

 

[Bear]

You were all for small government before when you thought it would lower your bills.
Now your all for nanny state large government.

He only cares whats best for Danlightbulb and thats it

 

[HungryHippos]

Work colleague mentioned there was a mortgage tax relief scheme in the 80's, not sure if a similar thing would even help here, I hadn't heard of it before: https://en.wikipedia.org/wiki/Mortgage_interest_relief_at_source#cite_note-1

Would such a scheme help much?

 

[Mercenary Keyboard Warrior]

Work colleague mentioned there was a mortgage tax relief scheme in the 80's, not sure if a similar thing would even help here, I hadn't heard of it before: https://en.wikipedia.org/wiki/Mortgage_interest_relief_at_source#cite_note-1

Would such a scheme help much?

MIRAS, It was filtered out over time.
I had it on my first mortgage.

We have briefly talked about it in this thread.
It was in effect quite heavily capped by the end.

Its certainly an option and as we discussed, IMO, far better than the suggestions of making mortgage deductions salary sacrifice.

 

[Bear]

Work colleague mentioned there was a mortgage tax relief scheme in the 80's, not sure if a similar thing would even help here, I hadn't heard of it before: https://en.wikipedia.org/wiki/Mortgage_interest_relief_at_source#cite_note-1

Would such a scheme help much?

I think I prefer your previous idea of an extension to the term and let everyone go onto an interest only for that extension term if they are struggling. It will cause a lot of extra admin for the banks but what the hell, the tax payer helped out when times were hard for them so they can reciprocate now the shoe is on the other foot

 

[Mercenary Keyboard Warrior]

I think I prefer your previous idea of an extension to the term and let everyone go onto an interest only for that extension term if they are struggling. It will cause a lot of extra admin for the banks but what the hell, the tax payer helped out when times were hard for them so they can reciprocate now the shoe is on the other foot

It was government funded in effect not bank/building society.

Again the issue is, introducing these types of thing when they will reduce the effectiveness of the measures they are trying to perform is semi self defeating.

 

[dlockers]

I think I prefer your previous idea of an extension to the term and let everyone go onto an interest only for that extension term if they are struggling. It will cause a lot of extra admin for the banks but what the hell, the tax payer helped out when times were hard for them so they can reciprocate now the shoe is on the other foot

This is in the control of the mortgage holder anyway?

 

[HangTime]

Main issue is that land ownership in UK is screwed up - who wants to live in a flat which you lease and will need to return after x number of years?
Because here we look for "number of bedroms" rather than sqft, developers ar einsentivised to cram as many tiny coffins as possible into as smallest space as possible leading to most houses and flats being awful. Even in France, they have a 9sqm min area rule as to what can be called a bedroom, here you just have a coffin sized room and call it a bedroom.

So annoying that square footage doesn't get widely published or made a searchable criteria on property sites, so you have to click through every property hoping the floorplan will list it.

I think many people won't have any choices here either really.

Downsize - how if you're in negative equity because of the crunch?

Sell up entirely - and live where? Social housing provision is almost non existent now. Also again potential negative equity issue if it gets bad enough.

Cut expenses - many already are, and how can you cut enough bills or hobbies to meet a mortgage cost that, for example, might double from £900 a month to £1800?

Get a second job - might be an option for some, but even people with good jobs and middle earner salaries are going to be caught up in this because of the scale of the change. It's not easy to increase your salary if it's already above average. It's also not easy to increase your salary if you're at the lower end and, for example, only have experience in certain types of work, for example factory work, retail or warehousing.

There shouldn't be that many in negative equity unless they took a mortgage very recently with high LTV. House prices are about 20% above pre-pandemic levels and 50% higher than 2015 so the majority of people should be above the line. Obviously depending on what happens with house prices more people could be dragged under but that's speculation at this stage and there's still quite a big buffer to clawback.
Sell up means going back to whatever you were doing before you owned a house - perhaps renting (if you have an income) or living with relatives.
Cutting expenses varies massively dependent on what lifestyle people are leading. A lot of people spend thousands a year on nice cars, holidays etc.

 

[Bear]

This is in the control of the mortgage holder anyway?

That is a good point, it probably pays to speak to the mortgage provider in the first instance to ask for help as they dont want to repossess the house any more than the homeowner wants to lose it

 

[HungryHippos]

This is in the control of the mortgage holder anyway?

It wasn't that easy to get onto an interest only mortgage before when I last checked, the bank I spoke to about it basically said you can get one if you can prove you are saving towards paying off the balance.

I prefer capital repayment anyway when possible, I was just evaluating options at the time.

My suggestion was to make it a default option that people could do if they're in trouble without the same requirements, to tide people over. It might be that it's a little like the energy costs, go sky high for a couple of years but then settle back down a bit, though 0.5% base rate feels like it won't be coming back again anytime soon.

 

[dlockers]

It wasn't that easy to get onto an interest only mortgage before when I last checked, the bank I spoke to about it basically said you can get one if you can prove you are saving towards paying off the balance.

I prefer capital repayment anyway when possible, I was just evaluating options at the time.

My suggestion was to make it a default option that people could do if they're in trouble without the same requirements, to tide people over. It might be that it's a little like the energy costs, go sky high for a couple of years but then settle back down a bit, though 0.5% base rate feels like it won't be coming back again anytime soon.

Yeah a quick search for myself quickly wrote off interest only as an option. But extending the team seemed fully in my control, although I am a young buck.

 

[HungryHippos]

Yeah a quick search for myself quickly wrote off interest only as an option. But extending the team seemed fully in my control, although I am a young buck.

Yes they allow term extension on regular repayment ones, I've done it, but depending on how drastic the change is that may not be enough by itself.

Going from say a 25 year term to 35 years would help a bit, but if your mortgage would double at 25 years, the jump to 35% would only take the edge off.