Mortgage Rate Rises

SMN said:
Nice illustration.
I agree largely, the fixation on the initial cost of purchase is a perverse one, and the wrong one. The only likely benefit of a lower initial cost of purchase tends to be the gatekeeper for first time buyers who need x% deposit to get a mortgage.

However, it must be said your argument is predicated on the interest rate being the interest rate for the entire duration of the mortgage. It also doesnt take into account inflation, which is the spectre in all of this. £2638 now vs £2638 after 6 years of 10% inflation (smoothed out) are very different numbers.
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True, but I mainly did this due to a comment at work about lower housing prices making affordability easier for people who currently can't get on the ladder due to that aspect.

Was a bit of a reality check for them, as a 20% drop in house prices would be huge, and still they wouldn't be able to afford the monthly costs.
 
413x said:
Probably older than you think unfortunately. Late on the housing ladder. Much to my cost.

37 now.

I've only had a house 2 years. Due to poor decision making and generally being indecisive about it.

So I've never seen high rates.

5 pc is high for mortgages now. Especially for recent buyers who (like me really) over stretch to maximum.
The pull to max out is strong. Moving is expensive. You're likely in your first house 5 years at least. It makes choosing a lower option harder.

But end of the day 5pc will cripple many. Hopefully we have enough warning for people to pay ERCs etc and get on long term fixes so by time it is 5-6pc many have dodged it.


Also hoping it doesn't stick around that high too long. For the sake of everyone with new or recent mortgages
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Well that's the point. 5% is only high relative to the exceptionally low 0% rates people have got used to in the last decade and a half.

Normality is returning. It's going to be mighty painful for a lot of people, but it's the 0% rate that's exceptional, not the 5%.
 
mid_gen said:
Normality is returning. It's going to be mighty painful for a lot of people, but it's the 0% rate that's exceptional, not the 5%.
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But normailty is not returning in other aspects.
Pound value is so bad against other countries -( i went travelling in 2007 and the £ was king)
Wage growth and gdp growth has been non existent
We are more even import focused than before

There is no normal
 
I have a year left to go on my current fixed deal. By my working out paying my erc, cost increase for the 12 months of more interest against current rate (fixed) and assuming a rate of 5% next September, would put me better off by about £700. That said, if its at 6% I will be about £2500 worse off (presuming I fixed for 5 years at said rate). No way out for me being worse off, just a case of how much worse off and if doing nothing is the wiser move. I need a crystal ball if anyone has one going spare.
 
mid_gen said:
Well that's the point. 5% is only high relative to the exceptionally low 0% rates people have got used to in the last decade and a half.

Normality is returning. It's going to be mighty painful for a lot of people, but it's the 0% rate that's exceptional, not the 5%.
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It’s not just the % rate though, it’s the extent of the borrowing. Interest on a lower % rate on a high value loan can be greater in sum than a higher % rate on a low value loan.

So nobody before has had the burden of a so called ‘normal’ % rate on a necessarily higher loan (on the basis that house prices have increased so dramatically over the last couple of years).

Obviously it’s all dynamic but you get what I mean. People just coming off a 2 year fixed with a high value loan in all likelihood worse off than those coming of a 2 year fixed in years past (with a much lower loan).

Not aiming this at you specifically, just a generally comment off the back of yours :)
 
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I've been a bit like a doomsday prepper with our mortgage, wife and I started overpaying it a few years ago and living very frugally to get it paid off and done by the time she was 40. I've been convinced for years another financial crash was going to happen and geopolitical turmoil was on the way.

Don't feel so stupid now.
 
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MookJong said:
I've been a bit like a doomsday prepper with our mortgage, wife and I started overpaying it a few years ago and living very frugally to get it paid off and done by the time she was 40. I've been convinced for years another financial crash was going to happen and geopolitical turmoil was on the way.

Don't feel so stupid now.
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I wish I had done this. Only had the mortgage 3 years so far and was going to make overpayments but never got around to it. Got 2 years left on my initial 5 years fixed. I dread to think what I'm gonna be paying then.
 
Relatively speaking we are in a good position, with a low mortgage relative to our income and stable jobs. I have almost my whole mortgage covered in a mixture of investments, half of which I can access in a week if needed.

I honestly see the situation as an opportunity. The argument against house price inflation was always that if levers were needed by the BoE then mortgage costs could get out of control for many relatively quickly. All I can say is that it never gave me any pleasure to see my house value increase, not that this is any help to those trying to get on the ladder. Hopefully a crash helps them in the longer term.
 
ZeroG said:
I wish I had done this. Only had the mortgage 3 years so far and was going to make overpayments but never got around to it. Got 2 years left on my initial 5 years fixed. I dread to think what I'm gonna be paying then.
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I'm in the same position. 2 years left of my 5 year fix (first mortgage). Could have afforded over payments throughout but decided to enjoy life a little. Regretting it now. Although I did have a big deposit so if house prices don't drop insanely I should be on around 60%ltv so may not have got that much better a deal regardless.
 
I've seen tens of people posting on reddit and on here multiple times saying pay the bare minimum on your mortgage, and invest the overpayments in a S&S ISA instead.

When their mortgage reaches the end of its fixed term, I wonder if they'll empty their S&S ISAs to overpay the mortgage, or start paying the higher interest payments?
 
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jonneymendoza said:
All things being relative. Yes. Properties where a querter of the price, wages lower and mortgage as a whole was a lot cheaper
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Average salary of a full time worker was £6k in 1980 and today it’s £39k. The average house price was £24k and mortgage rates were around 20% which is £400 per month. Today the average is £293k with an average LTV of 75% that puts repayments at £1,280 at 5%. The 1980 equivalent in average pay terms is £2,600 which is about 14% interest today. Then of course we know that the average salary doesn’t automatically mean you own a home, that average price would require an above average salary which suggest that even higher interest rates would be possible to make it comparable to 1980.
 
Wouldn't mind some feedback on this:

Plan A
1. Next month, finish paying of mortgage. House = 3 bed semi down south, about £375-400k
2. Sell house. Buy a forever home for about £300-350k.
3. Housing market crashes. But I don't care because I'm not moving.

Plan B
1. Next month, finish paying of mortgage. House = 3 bed semi down south, about £375-400k
2. Soon after. Sell house. Move up north. Buy temporary 2 bed terraced house for £120k.
3. Housing market crashes.
4. Sell house. Buy a forever home for about £300-350k.

Do you think Plan B is worth the extra move to maybe get a better house or some spare cash as a result?
 
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