Soldato
Yeah, fair point... I imagine there would be a small number of cases that got it just prior to completion so secured house price then "won" as they suddenly didn't have to pay the SD they had budgeted for.
Mortgage Rate Rises
- Thread starter glenimp617
- Start date
Yeah, fair point... I imagine there would be a small number of cases that got it just prior to completion so secured house price then "won" as they suddenly didn't have to pay the SD they had budgeted for.
Soldato
Ive never hoped for a crash nor thought there would be one. There probably should have been one when Covid happened, but all the support and reduction in supply pushed prices up instead.
There is a degree to which external circumstances should impact people. If we were nuked tomorrow, would you be saying just suck it up? I guess not, so where the boundary for support lies is grey and simply down to political choice.
Really don't understand why you would think this from my suggestions today or ever. We're talking about how to help potentially millions here, not just one person.
Again the problem is the transient policy. I disbenefited from stamp duty cuts in two ways - 1. I missed the specific cuts/holidays so I ended up paying stamp duty on my purchase and 2. the actions stimulated demand and pushed up house prices, demand which didn't need stimulating in the first place.
It is stability that is important. House prices are too high, and should come down in real terms. Even as a homeowner now (well, 90% mortgaged), I would welcome real terms reductions in house prices to improve affordability. I wouldn't care too much about nominal reductions either, but the problem is the lending system penalises high LTV (negative equity) so no nominal reductions is quite important for financial stability of many people.
Whether you sucked it up or not is irrelevant. What would you have done if it was a 100% increase in payment? Don't know your circumstances, but what if you were on 90% LTV and your mortgage was 40% of your income. House prices fall 20% so you're now in negative equity and your mortgage payments double to 80% of your income. All because of poor government policy over the past 10-30 years where our society has encouraged this unsustainable and unfair bubble in housing.
So back to MKW's question on whether people should be happy to support mortgage support for people due to this crisis - I would say yes they should - because many people have benefited from increasing property prices over the past 30 years and to now leave new buyers to the wolves is just another case of pulling up the ladder to those below.
Suspended
QE costs us all though in effect.
There is some disagreement of the full impact of QE, however :
Disadvantages of Quantitative Easing
- Inflation. The goal of the central banks is to keep inflation at a bare minimum. ...
- Interest Rates. Like inflation, the goal of the central banks is to keep the interest rates at somewhat stable levels. ...
- Business Cycles. ...
- Employment. ...
- Asset Bubbles.
Consequences for everyone not least creating a two tier housing system where those already on the ladder can benefit from lower rates while those struggling to get on the ladder have to suck up higher costs of borrowing and the knock on from these types of policies propping up house prices.
Soldato
If there is a way to support existing mortgage holders so they don't get crippled by rising rates, whilst at the same time making the system fair to new buyers and younger generations, then I am all ears.
The system has been a mess for younger generations for ages now.
We need more houses to increase supply, so there are many hundreds of thousands of new houses for younger people to buy.
Then we need a mortgage system that is stable over long periods, and for people to not see property as an investment or an asset to be profited from.
Suspended
I am happy to debate but the main benefit of QE was to improve liquidity but taking illiquid assets and freeing up (oiling?) the financial system with this increased liquidity.
The BOE dropped the base rate but borrowing rates went up for many. The markets main issue was lack of confidence and it took some time to improve.
The QE greased the wheels but it didnt lead to an immediate lowering of rates. In fact it was the opposite in that my ISA (cash as it was house savings) rates went up as the BOE rates were falling.
The BOE can only really force market rates by lending the markets the money directly very cheaply, or legislating for lower costs. Otherwise the market will dictate the borrowing rates themselves.
The BOE dropped the base rate but borrowing rates went up for many. The markets main issue was lack of confidence and it took some time to improve.
The QE greased the wheels but it didnt lead to an immediate lowering of rates. In fact it was the opposite in that my ISA (cash as it was house savings) rates went up as the BOE rates were falling.
The BOE can only really force market rates by lending the markets the money directly very cheaply, or legislating for lower costs. Otherwise the market will dictate the borrowing rates themselves.
Caporegime
To be fair, it is stable over long periods for the most part. You can get 10 year mortgages and low rates were here for a long time. The issue (and I am guilty of this too) is being greedy and short term-ist. We are on a 5 year fix that ends at the end of this year and it will be going up by about £4-500/month as a result. Thats increasing our payments by about 50%.
A large part of this misfortune is bad luck but we could have fixed for 10 years but we didn't because we would have got a worse rate. We took a gamble and lost but there are things in place to reduce the risk at the cost of a slightly higher premium.
100% agree about your second point however. They seem intent on killing BTL at the moment but what they really need to do is just increase supply. The problem is that takes a long time and with the state of housebuilding in this country I doubt its possible.
So many new builds are embarrassingly poorly made, no one wants one near them because it devalues the area and the infrastructure around them almost never improves to handle the added strain.
I didn't go for the 10-year fix because of the ruinous ERC if we wanted to move before those 10 years were up. The average time we've spent in a house before needing to upsize (more / growing kids etc) is every 5-7 years, and a 10-year fix usually has massive penalties to go along with it. The rate difference itself was negligible at the same for me. (1.24% versus 1.4% IIRC)
Caporegime
You can usually port these mortgages. And yes, the rate difference was negligible which tells you everything you need to know about what the banks thought would happen to interest rates. They were so confident that rates wouldn't shoot up that the rates weren't really any different.
Yes you can port, but since we're in the "upsizing" phase of our lives, porting would have meant we'd end up with two (or more) mortgages to increase our lending if / when we wanted to move and the logistics or pain that entails.
Yes hindsight is a wonderful thing, but nobody in the country predicted rates of 6% appearing in a matter of months.
Caporegime
Had I bought that house that i posted earlier back in Oct 2020, my plan was to lock it in for 10 years, as at the time, interest rates could not be any lower, so the only way was up IMO from that point. That was the plan. There was zero reason for me not to lock it as long as possible, or even longer than 10 years. I would just have to cross the bridge for any early exit fees if I ever come to it.
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I wanted the new developments near us because it meant they built a primary school that was a 10min walk away instead of 40min walk away, also also improves the route to a local station (bus service and cycle way). Also means a secondary school is being built.
I do think it has depressed house prices a bit though, my house has gained a lot less than the national average.
Soldato
Is it really bad luck, or bad management by our Government? Bad luck implies its all chance - none of this is chance, it is a sequence of events all layering up, bad national decision after bad national decision. Why should you pay for that? Its not chance, but it is completely outside your control so the impact you can have on it is the same, zero.
When I got my mortgage I asked my advisor about 10 year rates, he said the deals weren't good. I looked myself at the deals available, and they were considerably more expensive, and with less well known lenders, than the normal 2-5 year deals. I went for 5 because 2 year fix and 5 year fix were the same rate.
At the time (only Spring 2022), the scale of this impact simply wasn't foreseen. Interest rates going up, yes, but going up by this much, no, and worse may still be to come.
Its not gambling, mortgaging and remortgaging your one and only home. The system encourages these short term deals, and even if you wanted something more long term, you're then hit by punitive charges to disincentivise you from doing it. That isn't stability.
I understand European systems are different and mortgage deals are far more long term? Why, yet again, in this country do we have to be slaves to profiteering banks.
It is all chance. No one can predict the future. They value the risk and then work out what upside they would need to be compensated based on that risk. You do the same -- I can chose a tracker at £4116/mo, or I can buy a risk mitigation at £4200/mo (fixed). The bank will get the upside or I will get the upside - it all depends on who has predicted the future better.
Soldato
To be fair, virtually every country is facing the same issues. I don't think you can simultaneously say every government in the world mess up all together!
Sure they can probably mitigate things slightly, but this is far greater reaching than any local government.
It's more likely that people in the UK don't want to have longer rates, because no-one would choose a 25yr rate at 4% when you could have a 5yr rate at 1.5%. You said you did exactly the same thing. It's nothing to do with banks but the general attitude in the UK.
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Fixing for 10 years is a gamble in itself...imagine you move next to a crack den accidentally, or you divorce 2 months later or for whatever reason you have to move. Not all of them can be ported without additional fees.
We all knew rates would go up but with them being so low for so many years, you might have thought they would rise more gradually. A lot of it is luck. There is only so much of an informed choice you can make without requiring a bit of luck with timings. The majority of people in trouble or that will become in trouble, are not people that have made stupid decisions or wasted money. They are just trying to live and stay on the ladder.
We all knew rates would go up but with them being so low for so many years, you might have thought they would rise more gradually. A lot of it is luck. There is only so much of an informed choice you can make without requiring a bit of luck with timings. The majority of people in trouble or that will become in trouble, are not people that have made stupid decisions or wasted money. They are just trying to live and stay on the ladder.
Soldato
I'd say that's a big thing. I went onto a tracker because i only wanted something short term <18months.
I expected rates to increase but figured it'd be fine. Never expected payments to go from 1000 to 1600 in under a year
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Soldato
Buying a home to live in shouldn't require any of us to even try and predict the future. We are not investors.
This is the problem. House purchasing to live in it vs buy to let is not two different categories of risk and potential cost. We are all bundled into the same cesspit.