Mortgage Rate Rises

[Mercenary Keyboard Warrior]

Much the same position and it really is money for nothing, like I'd have to I'll back savings/pension contributions which I'd argue is already a societal good because god knows I'm trying to look after myself so nobody else has to!

I get we can't stay at 0% forever, I'd like to think we can get back to something more rational like 3-4%

3-4% I would say would have been a much fairer rate in the UK since 2008.
The problem is the state of the UK right now, a fair interest rate taking into account risk is probably high single digits!

 

[Uther]

Sascha did a decent video, if you can ignore the usual hyperbolic title. Warning for swearies in video...

 

[413x]

3-4% I would say would have been a much fairer rate in the UK since 2008.
The problem is the state of the UK right now, a fair interest rate taking into account risk is probably high single digits!

And it might have limited house price rises.
If that total life time mortgage debt is less but raised due to interest rates, not really an issue is it.

Preferable to have a lower barrier to entry and higher rates.

 

[Martynt74]

And it might have limited house price rises.
If that total life time mortgage debt is less but raised due to interest rates, not really an issue is it.

Preferable to have a lower barrier to entry and higher rates.

Yeah, i think this is where i'm looking forward to Spain. It's just a fixed rate for the life of the mortgage. When i looked last month it was between 3%-3.75% which seemed fair.

 

[Mercenary Keyboard Warrior]

And it might have limited house price rises.
If that total life time mortgage debt is less but raised due to interest rates, not really an issue is it.

Preferable to have a lower barrier to entry and higher rates.

Its interesting. Take a couple of forced to balance examples.
Say house is now £300k, low interest rate, and you pay say £600k over lifetime of mortgage. Asset is still worth £300k at end.
Alt (1980s version) house was £150k but high interest rate, pay say £450k over lifetime of mortgage. Asset is still worth £150k at end.

The benefit of high interest and lower rates are, lower barrier to entry via lower deposit, and if you can overpay your accrued benefit from overpaying is much higher.
The benefit of high house price with low interest is that your asset to total cost ratio is much higher. If your going to pay minimum for a long term this is better.

 

[Joe Jones]

No one knows.
You make the best decision at the time and hope you get lucky.

In hindsight a 10 year fix would have been sensible, but in a relationship/joint mortgage, you have to be practical and think of what might happen in a break up.
Hence not a long fix.

I recently found out that in the case of a mortgage with joint ownership, all parties are able to port half of the outstanding mortgage to another property so in hindsight a longer term doesn't matter in that regards.

 

[fez]

Exactly, and still some knob will come along talking about being good with money or living within means.

For the vast majority they're just living and rolling the dice.

Right, but thats a choice that comes with consequences. If you want to play it risky then don't be surprised if you end up getting burned. If you mortgaged yourself to the eyeballs 10 years ago you have probably done very well out of it. Low interest rates, massive house price increase. If you did the same 2 years ago you might be in for horrible amounts of pain.

Both choices were the same and came with similar risks but one person got away with it and one didn't. Both were risky and I wouldn't have huge amounts of sympathy for either.

We could have borrowed a lot more than we did when we bought our current house but we didn't want to live on the edge and not have wiggle room in our budget. Plenty didn't make that choice.

You make the best decision at the time and hope you get lucky.

The issue is when people are being greedy. The "best choice at the time" depends on your risk tolerance. I don't think most people do make the best choices. They make the greediest choices. If they are lucky it will work out. If they aren't then they can't really complain.

 

[Hagar]

The reason we have never won big on the house lottery is that we always factored in large rate rises. We were risk averse. We could have gone 4 bed detached much quicker in '92 but stated at semi detached until 2003.
We are now downsized having paid off the mortgage in a small 1960 semi detached.

 

[413x]

I recently found out that in the case of a mortgage with joint ownership, all parties are able to port half of the outstanding mortgage to another property so in hindsight a longer term doesn't matter in that regards.

Isn't this at discretion of lenders? I don't recall seeing this on ours?

 

[Blackjack Davy]

The issue is when people are being greedy. The "best choice at the time" depends on your risk tolerance. I don't think most people do make the best choices. They make the greediest choices. If they are lucky it will work out. If they aren't then they can't really complain.

Except they will, everything and everyone and especially the BoE and the govt, but not themselves.

 

[413x]

Right, but thats a choice that comes with consequences. If you want to play it risky then don't be surprised if you end up getting burned. If you mortgaged yourself to the eyeballs 10 years ago you have probably done very well out of it. Low interest rates, massive house price increase. If you did the same 2 years ago you might be in for horrible amounts of pain.

Both choices were the same and came with similar risks but one person got away with it and one didn't. Both were risky and I wouldn't have huge amounts of sympathy for either.

We could have borrowed a lot more than we did when we bought our current house but we didn't want to live on the edge and not have wiggle room in our budget. Plenty didn't make that choice.



The issue is when people are being greedy. The "best choice at the time" depends on your risk tolerance. I don't think most people do make the best choices. They make the greediest choices. If they are lucky it will work out. If they aren't then they can't really complain.

The reason we have never won big on the house lottery is that we always factored in large rate rises. We were risk averse. We could have gone 4 bed detached much quicker in '92 but stated at semi detached until 2003.
We are now downsized having paid off the mortgage in a small 1960 semi detached.

This.

Looks like the majority of the time max it out.

You could be very unlucky.. And it's obviously a big risk. But recent history seems to show it is the best choice.
Like I said, we did this 3 years ago. And even in that short time, it's worked out.


Huge moving costs, stamp duty, stress, recent history ... All. Pushes you to maxing out.

 

[Hagar]

This.

Looks like the majority of the time max it out.

You could be very unlucky.. And it's obviously a big risk. But recent history seems to show it is the best choice.
Like I said, we did this 3 years ago. And even in that short time, it's worked out.


Huge moving costs, stamp duty, stress, recent history ... All. Pushes you to maxing out.

You have gone through a lot of angst, in the last few years though what with covid and now rising rates. You are one of the more prolific posters on your situations. I preferred a quieter life always having a reserve and not stressing overmuch about money. I'm not criticising though.

 

[matt100]

Right, but thats a choice that comes with consequences. If you want to play it risky then don't be surprised if you end up getting burned. If you mortgaged yourself to the eyeballs 10 years ago you have probably done very well out of it. Low interest rates, massive house price increase. If you did the same 2 years ago you might be in for horrible amounts of pain.

Both choices were the same and came with similar risks but one person got away with it and one didn't. Both were risky and I wouldn't have huge amounts of sympathy for either.

We could have borrowed a lot more than we did when we bought our current house but we didn't want to live on the edge and not have wiggle room in our budget. Plenty didn't make that choice.



The issue is when people are being greedy. The "best choice at the time" depends on your risk tolerance. I don't think most people do make the best choices. They make the greediest choices. If they are lucky it will work out. If they aren't then they can't really complain.

That's not what I said.

Why is it whenever someone takes this "you took a risk" position always ends up with it being about how proactively smart they were?

Your "up to the eyeballs" is massively subjective, my point for many that was just living. I'd argue that someone back in the noughties taking out a 125% interest only mortgage could almost certainly be accused of either knowingly or ignorantly taking a gamble.

Someone saving up a 10% deposit to take out a stress tested mortgage with a major bank is just doing what everyone would consider entirely normal.. our economy is practically built on it. It sucks that they might end up getting rinsed.. but to some extent I'd accept that they should be aware and I'd argue most are in reality aware that there is some level of risk involved... everyone knows you might lose your job/fall ill etc.

What is not fair is an accusation that anyone has been greedy, stupid or crazy to take an entirely run of the mill mortgage which is why I suggested it was knobs who would do such a thing.

pride before a fall etc.

 

[413x]

You have gone through a lot of angst, in the last few years though what with covid and now rising rates. You are one of the more prolific posters on your situations. I preferred a quieter life always having a reserve and not stressing overmuch about money. I'm not criticising though.

Yeah for sure. I'd say it was stressful all the way up to the renewal being done.

I guess I've learnt
-better to buy than wait
-fix for longer
-no more over extending after first house.

Particularly remortgaging and the initial "should we buy" right as covid hit

 

[matt100]

This.

Looks like the majority of the time max it out.

You could be very unlucky.. And it's obviously a big risk. But recent history seems to show it is the best choice.
Like I said, we did this 3 years ago. And even in that short time, it's worked out.


Huge moving costs, stamp duty, stress, recent history ... All. Pushes you to maxing out.

Bearing in mind to buy a house you need someone to sell and the nature of selling is you sell for the maximum you can get.

My point throughout the last few posts has been for many maxing out is the only option if they want to achieve owning a house.

Which would be fine if we had a functional rental market that wasn't also designed to absolutely max out the income etc.. this is precisely why everything is broken.. I don't honestly believe people max themselves out for stupid or greedy reasons.. generally it's either the only option given your income.. income and location.. income, location and profession or occasionally as a plan for your near future eg to have a family.

None of that is stupid or greedy.

 

[Joe Jones]

Isn't this at discretion of lenders? I don't recall seeing this on ours?

Perhaps. Most major lenders will allow mortgage porting...what I didn't realise is that the porting mortgage can be split between owners (at least that's what HSBC is letting us do).

 

[Joe Jones]

Which would be fine if we had a functional rental market that wasn't also designed to absolutely max out the income etc.. this is precisely why everything is broken..

I had seen a quote somewhere that 85% of buy-to-let mortgages are interest only....most of those are probably over-leveraged now and just keep raising rates to cover their bad decisions....unfortunately some people have no choice but to accept that increase but ultimately if banks had stricter rules on the buy-to-let market we may have had better rental rates and perhaps less explosive house price growth. But yeah, it's all greed driven (and the banks ultimately win regardless).

 

[fez]

Why is it whenever someone takes this "you took a risk" position always ends up with it being about how proactively smart they were?

Its not about being smart, its about not being stupid. People should be saving where they can, contributing to pensions and living within their means. Its not like we have been predicting the future, we just didn't fancy the risk of living at the edge of our means and a large even causing us massive issues. A large event could be one of us not working for 6 months etc. My partner has just gone off on maternity for a year which we can afford because we didn't take out the max mortgage we could have.

None of this is smug "told you so". We are about to have to remortgage at the end of the year and will probably be looking at a 5.5% rate. We will be fine but I'm damn happy that we don't have a £400k mortgage instead of a £200k one.

What is not fair is an accusation that anyone has been greedy, stupid or crazy to take an entirely run of the mill mortgage which is why I suggested it was knobs who would do such a thing.

pride before a fall etc.

A bank stress test is basically saying "can you pay for this" and the customer saying "course I can". Its not like they run a fine tooth comb through your finances and watch you like a hawk and send you messages at night saying "noticed you just got a new lease car, you still good for that mortgage money".

People have had it so good for so long that they did live at the edge of their means because they felt there was little risk to it. As long as the status quo didn't change they would be OK. Well its changed. Most will be OK, plenty won't and some of those people will have been spending like it was going out of fashion for years with no thought of having a rainy day fund or any sort of plan for when things aren't so good. Those people get no sympathy from me.

 

[matt100]

Its not about being smart, its about not being stupid. People should be saving where they can, contributing to pensions and living within their means. Its not like we have been predicting the future, we just didn't fancy the risk of living at the edge of our means and a large even causing us massive issues. A large event could be one of us not working for 6 months etc. My partner has just gone off on maternity for a year which we can afford because we didn't take out the max mortgage we could have.

None of this is smug "told you so". We are about to have to remortgage at the end of the year and will probably be looking at a 5.5% rate. We will be fine but I'm damn happy that we don't have a £400k mortgage instead of a £200k one.



A bank stress test is basically saying "can you pay for this" and the customer saying "course I can". Its not like they run a fine tooth comb through your finances and watch you like a hawk and send you messages at night saying "noticed you just got a new lease car, you still good for that mortgage money".

People have had it so good for so long that they did live at the edge of their means because they felt there was little risk to it. As long as the status quo didn't change they would be OK. Well its changed. Most will be OK, plenty won't and some of those people will have been spending like it was going out of fashion for years with no thought of having a rainy day fund or any sort of plan for when things aren't so good. Those people get no sympathy from me.

The bit you're choosing to miss as you self congratulate again is you chose not to buy something unsuitable for your situation in the same way I choose not to buy nappies because I don't need them.

For huge volumes of people the only choice is a mortgage at the top end of what they can afford because thats what a house costs, a rental at the top end of what they can afford because that's what it costs, being homeless or in some situations moving entirely across the coutry.

I suspect the instances of people wilfully buying a 5 bed property for a childless couple at 95% LTV is vanishingly small to the point of being meaningless. It's certainly not the core of the issue which is that housing costs are at the creaking end of unaffordable for far far too many people but you can't choose not to live somewhere.

I too could have had probably double the mortgage for double the house but I don't choose to call myself smart.. I also choose not to set myself on fire, smoke crack, drive with my eyes closed all sorts of things that also almost nobody does...

 

[Bassmansam]

@fez income protection covers illness/ redundancy. I reccomend it for some piece of mind