Mortgage Rate Rises

[Mercenary Keyboard Warrior]

This is a fairly meaningless metric when house prices just keep going up and up at such absurd rates.

Why? Houses are not the only reason money is borrowed.

 

[413x]

And the third category, those who have paid off their mortgage and will never be affected badly by high interest rates - about 1/3 of the population.

Why I invested in "old age" tourism stocks.
The boomers are super rich. And increased savings rates along with "if don't spend it now you never will" will probably keep the economy (inflation?) propped up.

This will push rates higher. Rewarding the rich even more and hammering the middle Even more.

 

[413x]

Why? Houses are not the only reason money is borrowed.

But it's the main reason for personal debt. The only one you can't just escape.

 

[fez]

This is a fairly meaningless metric when house prices just keep going up and up at such absurd rates.

Exactly. You don't get a clean slate every year and ignore the system you have built. House prices are absolutely in large part due to insanely cheap credit.

As a reference point a £200k mortgage at our current rate would be a total of £251,000 over the lifetime of the mortgage. At 5.5% it would be £368,000. So over 25 years you would be ~£117,000 worst off. I know thats a little oversimplified but thats a lot of money for most people.

 

[413x]

Exactly. You don't get a clean slate every year and ignore the system you have built. House prices are absolutely in large part due to insanely cheap credit.

As a reference point a £200k mortgage at our current rate would be a total of £251,000 over the lifetime of the mortgage. At 5.5% it would be £368,000. So over 25 years you would be ~£117,000 worst off. I know thats a little oversimplified but thats a lot of money for most people.

Cheap credit, short supply, arguably over generous salary multipliers.


Really. It would have been helpful to not have help to buy, not have 4.5x multipliers.

But then you'd encourage investors to put compete.

I'm very much in favour of government forming some sort of sensible plan to limit house price growth and foreign money coming in. I effect creating a stagnation and real terms fall in prices.

Supply certainly isn't going to grow now. But I do think there's scope to stop the mega rich and particularly foreign investment.

But it's hard. You need landlords to supply rentals. But you don't want to rocket prices.



I don't have the solution. But it's needed.

 

[Mercenary Keyboard Warrior]

But it's the main reason for personal debt. The only one you can't just escape.

It is but again its not the only debt.

It gets so frustrating when we keep going back to the same conversations.
Ultra low interest rates are not healthy for anyone. They were in many peoples minds unstainable. Plenty of us said this for years.

I get some people are bitter about having been on the wrong end of them via higher house prices.

BUT for years ultra low rates have been to all extents a charge on those with savings* (who in many cases are less well off than people borrowing) and a discount to the borrowers.
*Because interest rates were lower than inflation.

Put it this way. If you had £20k would you be happy to lend it to me at 0.1% so I can buy a house?
That is in effect what has happened to savers for the last 10 or so years. (Its more complicated than that but its in effect what has happened.)

 

[413x]

Exactly. You don't get a clean slate every year and ignore the system you have built. House prices are absolutely in large part due to insanely cheap credit.

As a reference point a £200k mortgage at our current rate would be a total of £251,000 over the lifetime of the mortgage. At 5.5% it would be £368,000. So over 25 years you would be ~£117,000 worst off. I know thats a little oversimplified but thats a lot of money for most people.

When I did the working out for our (very average) house, debt and took into account price rises it was shocking.

Going from 260k house with 220 mortgage @ 1.7 percent

But it now
320k, (requiring a 280k mortgage with same deposit) coupled with the 5-6pc rates...


In 3 years lifetime cost has gone up ball breaking amounts.

 

[413x]

It is but again its not the only debt.

It gets so frustrating when we keep going back to the same conversations.
Ultra low interest rates are not healthy for anyone. They were in many peoples minds unstainable. Plenty of us said this for years.

I get some people are bitter about having been on the wrong end of them via higher house prices.

BUT for years ultra low rates have been to all extents a charge on those with savings* (who in many cases are less well off than people borrowing) and a discount to the borrowers.
*Because interest rates were lower than inflation.

Put it this way. If you had £20k would you be happy to lend it to me at 0.1% so I can buy a house?
That is in effect what has happened to savers for the last 10 or so years. (Its more complicated than that but its in effect what has happened.)

But there are other options for savers.
Stocks, property, etc. For home owners there is no other option.

Savers can still benefit in ultra low rates or ultra high rates. Borrowers with no other option have no escape.

 

[fez]

And the third category, those who have paid off their mortgage and will never be affected badly by high interest rates - about 1/3 of the population.

Yeah, probably largely the boomer stock who are enjoying the high interest rates on their savings. My parents are (for god knows what reason) replacing their 4 year old car with another new one. They haven't got a mortgage anymore either. They are not wealthy by any metric but mum is retired and dad is semi-retired (potters around peoples gardens for £10/hour or something) and they probably spend about 2.5-3 months a year out of the country on holidays.

Cheap credit, short supply, arguably over generous salary multipliers.


Really. It would have been helpful to not have help to buy, not have 4.5x multipliers.

But then you'd encourage investors to put compete.

I'm very much in favour of government forming some sort of sensible plan to limit house price growth and foreign money coming in. I effect creating a stagnation and real terms fall in prices.

Supply certainly isn't going to grow now. But I do think there's scope to stop the mega rich and particularly foreign investment.

But it's hard. You need landlords to supply rentals. But you don't want to rocket prices.



I don't have the solution. But it's needed.

Yeah, this mess is decades in the making for sure. All you can do is try not to compound issues but this government doesn't seem overly concerned about that. As is the capitalist way, take everything you can and give as little in return.

 

[Mercenary Keyboard Warrior]

Cheap credit, short supply, arguably over generous salary multipliers.


Really. It would have been helpful to not have help to buy, not have 4.5x multipliers.

But then you'd encourage investors to put compete.

I'm very much in favour of government forming some sort of sensible plan to limit house price growth and foreign money coming in. I effect creating a stagnation and real terms fall in prices.

Supply certainly isn't going to grow now. But I do think there's scope to stop the mega rich and particularly foreign investment.

But it's hard. You need landlords to supply rentals. But you don't want to rocket prices.



I don't have the solution. But it's needed.

Its part of the reason I support a partial switch to wealth taxation and reducing the income taxation.

You can easily implement a higher rate of wealth taxation on assets in the UK for non residents, even by asset class should you wish.
You do need to be careful in this regard in terms of foreign investment in productive assets however.

 

[413x]

Its part of the reason I support a partial switch to wealth taxation and reducing the income taxation.

You can easily implement a higher rate of wealth taxation on assets in the UK for non residents, even by asset class should you wish.
You do need to be careful in this regard in terms of foreign investment in productive assets however.

Its long needed. Because if it doesn't come this problem is going to be harder and harder to fix.

Its a opportunity for Labour in thier incoming tenancy. They absolutely need to address this.

 

[Mercenary Keyboard Warrior]

But there are other options for savers.
Stocks, property, etc. For home owners there is no other option.

Savers can still benefit in ultra low rates or ultra high rates. Borrowers with no other option have no escape.

No because your mixing your savings with investments here.

People should be able to save and not be at risk of loss or volatility. It also risks pushing people (again remember not everyone with savings is rich) towards potentially higher risk.
It also preys on those who do not have the time or ability to keep an eye on whats going on.

 

[fez]

It gets so frustrating when we keep going back to the same conversations.
Ultra low interest rates are not healthy for anyone. They were in many peoples minds unstainable. Plenty of us said this for years.

I don't think many people are saying it was a good idea but unfortunately the average person had 0 sway over it. This is the way the world works. You either play the system as best you can or you get absolutely ruined by it. People who took those low interest rates and high house price growth have done fantastically from it. BTL landlords who leveraged themselves up to the eyeballs did wonderfully from it.

You can say it shouldn't have happened but it did and the current housing market is a massive reflection of 15 years of cheap ass borrowing pumping the market.

When I did the working out for our (very average) house, debt and took into account price rises it was shocking.

Going from 260k house with 220 mortgage @ 1.7 percent

But it now
320k, (requiring a 280k mortgage with same deposit) coupled with the 5-6pc rates...


In 3 years lifetime cost has gone up ball breaking amounts.

Yeh, suddenly you probably need a 20-30% higher wage for the same house. Something has to give.

 

[HangTime]

Yeah. Rather than new car at 500ppm when it was 300ppm before a new t shirt or something.

Christmas will probably take a big hit if you're on the edge. Maybe it will(hopefully) decommercialise Christmas a bit long term

Wonder about phone savings too. That's an easy saver.

Just keep your phone 4 years rather than 2. Probably saves 25-40ppm for many who get the latest every renewal.
Basically where you have something 90 percent as good as the latest thing. But that can save you 100s a year.

Christmas won't be decommercialised, at least I can't see that happening..

I agree about phones though, there's very little that new phones do that old phones can't and it's been that way for a while. I'd still be using my Honor P20 Pro (released 4 years ago) if I hadn't dropped it down concrete steps at a cricket match last year. My Nokia 8 from 2017 is functionally adequate too. Security updates are an issue though, that's really the only issue with older phones aside from battery replacements.

Exactly. You don't get a clean slate every year and ignore the system you have built. House prices are absolutely in large part due to insanely cheap credit.

As a reference point a £200k mortgage at our current rate would be a total of £251,000 over the lifetime of the mortgage. At 5.5% it would be £368,000. So over 25 years you would be ~£117,000 worst off. I know thats a little oversimplified but thats a lot of money for most people.

£117k sounds like a big number but really it depends on how much of that £117k you spend when. Ending up with £117k less cash in 25 years time isn't that big a number really due to inflation and the fact your house will probably be worth twice as much, but the issue is more about what you could have done with the money earlier on. i.e. if you were paying less in the earlier years of the mortgage could you have invested that money and then by 2048 you are actually £200k+ better off?

Probably putting up the 5 yr rates as the products are getting too popular. People think this will be going on for years and jumping on the 5 yr deals. Cash grab by the banks

It's a bit of a horse has bolted situation though, long term fixes seemed like a great deal to me back when it was 2.5% or whatever for 10 years fix with no fees. To be fair, it does depend on where people are in a cycle, they might have done a 10 year fix in 2013 and are just coming up to renewal now. I'll admit I misjudged it and assumed that rates would have risen before now and hence long term fixes weren't quite the great deal I thought they were.

 

[413x]

No because your mixing your savings with investments here.

People should be able to save and not be at risk of loss or volatility. It also risks pushing people (again remember not everyone with savings is rich) towards potentially higher risk.
It also preys on those who do not have the time or ability to keep an eye on whats going on.

Why? Borrowing you are at risk all the time. I don't see why savers should get a risk free option vs borrowers not having that option.

I don't see an issue (morally let's say) why everyone can't shoulder risk. The option is there.

 

[Doobedoo]

Interest on savings is a bonus not a necessity. You save for a goal or a cushion, if you want to earn then invest it.

 

[413x]

Christmas won't be decommercialised, at least I can't see that happening..

I agree about phones though, there's very little that new phones do that old phones can't and it's been that way for a while. I'd still be using my Honor P20 Pro (released 4 years ago) if I hadn't dropped it down concrete steps at a cricket match last year. My Nokia 8 from 2017 is functionally adequate too. Security updates are an issue though, that's really the only issue with older phones aside from battery replacements.

Probably not! I mean people get themselves into months of debt for it!


For myself I've made the call on TV. I have an old (but perfectly fine) TV. It's old! Especially for a tech forum person. But Im finding it hard to justify dropping 1.3k on something that will be better. But is it worth it?
That 1.3k can do more elsewhere.

I'd get it off my TV broke. Because I like doing significant upgrades. But it's still "a TV".

I'm keeping phones longer and longer. (camera is only consideration now).


TV subscriptions are another big one I suspect. Can see consolidation coming soon there.

 

[adam cool dude]

£117k sounds like a big number but really it depends on how much of that £117k you spend when. Ending up with £117k less cash in 25 years time isn't that big a number really due to inflation and the fact your house will probably be worth twice as much, but the issue is more about what you could have done with the money earlier on. i.e. if you were paying less in the earlier years of the mortgage could you have invested that money and then by 2048 you are actually £200k+ better off?

That is £117k that could have gone into a pension. Even at that value it is £6000 a year extra for 20 years ontop of the state pension. When you think state pension is what 10 grand a year now that gives you £1300 a month to live off which is absolutely plenty if you have no mortgage to pay.

 

[Jono8]

It is but again its not the only debt.

It gets so frustrating when we keep going back to the same conversations.
Ultra low interest rates are not healthy for anyone. They were in many peoples minds unstainable. Plenty of us said this for years.

I get some people are bitter about having been on the wrong end of them via higher house prices.

BUT for years ultra low rates have been to all extents a charge on those with savings* (who in many cases are less well off than people borrowing) and a discount to the borrowers.
*Because interest rates were lower than inflation.

Put it this way. If you had £20k would you be happy to lend it to me at 0.1% so I can buy a house?
That is in effect what has happened to savers for the last 10 or so years. (Its more complicated than that but its in effect what has happened.)

This is largely irrelevant to my point

Having a place to live is a necessity, and sudden high interest rates now put on absurd house prices makes living almost unaffordable for many.

House prices are ~10x the average salary, and were only just about manageable due to low interest rates. Now interest rates are going up, the whole flimsy house of cards could collapse.

I don't give a **** whether savers get some more interest or not. I am talking about having a roof over your head and having the ability to afford a spot in this country of your own.

 

[Jono8]

I'm keeping phones longer and longer. (camera is only consideration now).

Yeh, phones are a ***** con.

They barely make any improvements now.

I only change when the battery starts to get rubbish now.