Mortgage Rate Rises

[fez]

I thought paying off my mortgage would change my life massively.

Instead I'm just stressed about retirement now and saving/investing aggressively and still living like a pauper.

Its very hard for people to change their habits. If it wasn't, they wouldn't be habits. Its the same reason people ask millionaires why they became billionaires when the sane amongst us would have retired after a few million was sitting in our accounts. The sort of person who is in that position is the sort of person who won't ever be satisfied. If they were, they probably wouldn't be there in the first place.

The sort of person who aggressively pays down their mortgage and lives a frugal life is always going to find other reasons to remain frugal. "What if I can't work, what if I get an illness that needs money, what if the house needs the roof replacing".

 

[mitch212k]

At least rates look like they should be reducing at some point soon. Fingers crossed .......

 

[413x]

Its very hard for people to change their habits. If it wasn't, they wouldn't be habits. Its the same reason people ask millionaires why they became billionaires when the sane amongst us would have retired after a few million was sitting in our accounts. The sort of person who is in that position is the sort of person who won't ever be satisfied. If they were, they probably wouldn't be there in the first place.

The sort of person who aggressively pays down their mortgage and lives a frugal life is always going to find other reasons to remain frugal. "What if I can't work, what if I get an illness that needs money, what if the house needs the roof replacing".

Yeah for most people they'd bail long before. Millions gets to billions. It's a different breed of person. And you just have to endlessly want more.

Be it power, status or just a bigger net worth. It baffles me. But everyone is different.

 

[Derek W]

Its very hard for people to change their habits.

https://jamesclear.com/atomic-habits this guy would disagree with you very good book if you haven't read it.

 

[fez]

https://jamesclear.com/atomic-habits this guy would disagree with you very good book if you haven't read it.

There’s a difference between how hard something is and how willing people are to make that effort. There’s a reason we are a nation of fatties and it ain’t because cooking nutritious food is hard…

 

[slinxy]

not sure if this has been posted, but the governement is considering (vote for us) a 1% deposit on mortgages...

What 1% deposit mortgages could mean for the housing market

Rumoured scheme could help renters struggling to save a deposit - but experts say repayments could be too high for some, and it could push up house prices even further.

www.thisismoney.co.uk

I can see how this may help people who are renting to buy for the first time but there's more possible negitive outcomes than positive ones.

In general, the quicker you can pay off your mortgage the cheaper it is, the better it is for yourself. So not putting down a 5% or 10% deposit just increases the mortgage period making it more costly.

 

[Goodie]

not sure if this has been posted, but the governement is considering (vote for us) a 1% deposit on mortgages...

What 1% deposit mortgages could mean for the housing market

Rumoured scheme could help renters struggling to save a deposit - but experts say repayments could be too high for some, and it could push up house prices even further.

www.thisismoney.co.uk

I can see how this may help people who are renting to buy for the first time but there's more possible negitive outcomes than positive ones.

In general, the quicker you can pay off your mortgage the cheaper it is, the better it is for yourself. So not putting down a 5% or 10% deposit just increases the mortgage period making it more costly.

a plaster for a much bigger problem.

 

[dlockers]

The model of unaffordable (i.e. you never own 100% of your house) does make some sense in the grander economic point of view. People stop paying landlords who only take value in exchange for flexibility (i.e. you leave a rental much easier than an owned home); they never own (same as long-term renters), but they do build some equity and can downsize (freeing up houses for people moving up the ladder). The issue is now we have a two party system of affordable and non-affordable.

It is a shame proper council housing became unaffordable/we started chasing metrics on a spreadsheet.

/pub chat probably not well thought through or well structured.

 

[EvilRob]

I think it's going to be a bit of a non factor, but if it did work as intended it's simply going to make the problems with the housing market worse without a plan to significantly increase stock available to buy.

 

[200sols]

The people with a 1% deposit are also the same people who cant afford a 99% mortgage. Its a headline grabber pre election and its blatantly obvious.

 

[danlightbulb]

I agree that it's a headline grabber. But I also agree with the policy. Saving for a deposit is the most difficult part of buying a house, and many people simply can't save enough especially if renting at the same time. If you have a good enough salary for the multiplier and you pass the affordability checks then why shouldn't you be able to get a mortgage. Clearly the interest rate will be higher on these products anyway to reflect the increased risk for the bank.

And of course I agree we also need more houses to be built.

 

[dlockers]

The people with a 1% deposit are also the same people who cant afford a 99% mortgage. Its a headline grabber pre election and its blatantly obvious.

I'm not totally sure I agree with that - I have tonnes of friends paying way more in rent than mortgage; unable to get the deposit "quick enough" because their rent eats up most of their pay.

 

[200sols]

I'm not totally sure I agree with that - I have tonnes of friends paying way more in rent than mortgage; unable to get the deposit "quick enough" because their rent eats up most of their pay.

Thing is 99% mortgages will be more expensive, when we hear the average rent is more than the average mortgage we need to be careful, these are not average mortgages.

 

[danlightbulb]

Thing is 99% mortgages will be more expensive, when we hear the average rent is more than the average mortgage we need to be careful, these are not average mortgages.

Even if the mortgage is technically more expensive than renting, you're paying down your own house which is a massive benefit in the future.

If this policy has been around 10-15 years ago I could have bought a house after I got divorced instead of renting for 12 years. Id have been 12 years into a 25 year probably 130k mortgage instead of 2 years into a 200k one.

That is worth a hell of a lot to younger people who have a decent enough job and income but can't raise the hefty deposits required.

 

[200sols]

Even if the mortgage is technically more expensive than renting, you're paying down your own house which is a massive benefit in the future.

If this policy has been around 10-15 years ago I could have bought a house after I got divorced instead of renting for 12 years. Id have been 12 years into a 25 year probably 130k mortgage instead of 2 years into a 200k one.

That is worth a hell of a lot to younger people who have a decent enough job and income but can't raise the hefty deposits required.

Even if it worked as you say all it will do is push prices even higher. It doesn't fix any of the fundamental problems in the housing market, actually just makes everything worse.

 

[danlightbulb]

Even if it worked as you say all it will do is push prices even higher. It doesn't fix any of the fundamental problems in the housing market, actually just makes everything worse.

I completely agree that we need more houses and more social houses.

But regardless of that, I think it's the right policy to allow low/zero deposit mortgages. Provided the right affordability checks are done, there really is no concern. The problems in the early 2000's were caused by irresponsible lending, there's no reason a 100% mortgage still can't be lent responsibly.

The house building problem is unlikely to be fixed any time soon, and so holding back on schemes like this is just making it even harder for younger people.

 

[dlockers]

I completely agree that we need more houses and more social houses.

But regardless of that, I think it's the right policy to allow low/zero deposit mortgages. Provided the right affordability checks are done, there really is no concern. The problems in the early 2000's were caused by irresponsible lending, there's no reason a 100% mortgage still can't be lent responsibly.

Totally agree. The deposit is somewhat irrelevant. There almost "no risk" in providing mortgages unless the owner destroys the place. Banks are laughing their way to ... the bank?

 

[fez]

I think it's going to be a bit of a non factor, but if it did work as intended it's simply going to make the problems with the housing market worse without a plan to significantly increase stock available to buy.

Sounds like a perfect government policy then. Kick the can down the road with horrible consequences but at least they might be able to stay in power a bit longer.

Even if it worked as you say all it will do is push prices even higher. It doesn't fix any of the fundamental problems in the housing market, actually just makes everything worse.

Exactly. People seem to forget that you can't apply a policy that makes houses easier to buy without simply inflating the market.

Super low interest rates - inflate the market
Stamp duty holiday - inflate the market
1% mortgages - inflate the market by flooding it with demand from people who can magically buy a £400k house with £4k they can almost certainly get instantly.

There won't magically be more houses for all this extra demand, prices will just rise to meet the demand and if anything, people renting might get shafted even more when landlords say "this isn't a £200k house, its a £250k house so I want more rent".

And I would be amazed if the banks are going to be on the hook for the risk on this so it would be a government guaranteed scheme. Yay.

Literally the only way to sort out the housing crisis is to limit bad immigration and build more homes. Thats it. Supply and demand. Reduce demand, increase supply.

 

[fez]

Totally agree. The deposit is somewhat irrelevant. There almost "no risk" in providing mortgages unless the owner destroys the place. Banks are laughing their way to ... the bank?

Its not though is it? In plenty of parts of the country prices have fallen around 10%. People might be tempted to borrow more if they only have to find a 1% deposit. I could probably borrow £4k off some mates tomorrow and then walk into a bank and say "can I get a £400k mortgage"

Lets say they gave me that 1% mortgage on a £400k house 2 years ago. Lets say the valuation was a bit off because the house wasn't in great nick and needs £30k spending on it to replace the roof and sort out some other issues. Lets say the market drops 10% where I bought. I remortgage after those 2 years and ****, I can't afford it all or I simply don't want to. I have to sell or default.

The house is now worth £360k and everyone who offers on it offers £340k ish because of the work that needs doing. The bank will now have an asset that they are about £50k in the hole on.

How is that no risk?

Fundamentally there is a supply of houses out there changing hands and I would think the banks would rather have safer buyers buying those houses than make slightly more money with a raft of far more dangerous ones.

 

[dlockers]

People might be tempted to borrow more if they only have to find a 1% deposit. I could probably borrow £4k off some mates tomorrow and then walk into a bank and say "can I get a £400k mortgage"

That's why there is affordability checks. Your point is misdirected if the point you are making is about people overreaching.

The house is now worth £360k and everyone who offers on it offers £340k ish because of the work that needs doing. The bank will now have an asset that they are about £50k in the hole on.

This example is greater than 10% anyway. Was that the illustration you intended to make? Was the £50k number meant to be a big scary number? Because even in a 10% deposit situation the bank has still lost £10k.