Mortgage Rate Rises

Reading this article on the BBC and some people's plan B is to sell and rent. But some people don't realise the rental landscape is more messed up than the buying market. Private housing stock is at a low due to the high taxation for landlords, loads have sold up or passing on interest rates to the tenants.
"We will now have to take serious decisions on where our money goes," he said, adding that in two years' time if rates did stand at 6% or 7%, they might have to consider selling and renting instead
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www.bbc.co.uk

Mortgage rates: 'I was ready to buy a house, now I'm totally lost'

Some economists predict the Bank of England will raise the interest rate to as much as 5.8% by next spring.
www.bbc.co.uk
 
Someone mentioned this a few pages back but to prevent over-whelming levels of defaults, they're going to have to offer people insanely long mortgages or interest only versions whilst they try and sort this mess out.

For people with very large mortgages, 5-6% rates will slaughter them.
 
robgmun said:
So, someone please explain to me like I'm 5 years old. If houses are too expensive and everyone is unable to get on the housing ladder. How is it that prices are so high in the first place and where are people finding all this money to buy them? I just can't seem to wrap my head around it. I've been thinking that these prices are unsustainable for at least 10 years and yet prices just keep getting higher and never crash.
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Leverage. Deposits used to be bigger and amount lended used to be a smaller multiple of salary.
In recent times, deposits have been 5% (or 0% if guaranteed by a parent) and leverage upto 4.5x salary.
When you increase the amount of leverage available to people bidding in a supply-restricted market, many will max out that leverage in order to win the bid.
Add schemes like LISA, HTB, shared ownership. Cash-rich buyers, foreign buyers (recent BBC article on Hong Kongers coming here mentioned the ones using an intermediary firm having an average £700k wealth for example).
People being gifted or inheriting money from parents.
 
Paracelsus said:
Leverage. Deposits used to be bigger and amount lended used to be a smaller multiple of salary.
In recent times, deposits have been 5% (or 0% if guaranteed by a parent) and leverage upto 4.5x salary.
When you increase the amount of leverage available to people bidding in a supply-restricted market, many will max out that leverage in order to win the bid.
Add schemes like LISA, HTB, shared ownership. Cash-rich buyers, foreign buyers (recent BBC article on Hong Kongers coming here mentioned the ones using an intermediary firm having an average £700k wealth for example).
People being gifted or inheriting money from parents.
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Hong Kong buyers that I know we're already laughing given the insane overinflation of property in their market.
 
Quick question - If I offered you an investment with a 100% guaranteed tax free return of 5% p.a. over 3 would you take it?

A) Basically, I can sell a load of investments and fully offset our interest only mortgage (0.5% above base) on the assumption that interest rates are going to average out at 4.5% over the next 3 years. Frustratingly they have lost about 7% of their value in the last 18 months - grrr.

B) Or take the gamble that the stocks and shares ISAs in question will go up by more than 5% p.a. over the next 3 years.
 
smokedog said:
Reading this article on the BBC and some people's plan B is to sell and rent. But some people don't realise the rental landscape is more messed up than the buying market. Private housing stock is at a low due to the high taxation for landlords, loads have sold up or passing on interest rates to the tenants.


www.bbc.co.uk

Mortgage rates: 'I was ready to buy a house, now I'm totally lost'

Some economists predict the Bank of England will raise the interest rate to as much as 5.8% by next spring.
www.bbc.co.uk
Click to expand...

That relies on being able to sell, as the first step, presumably not at fire sale rates. Which might be an issue.
 
HungryHippos said:
Someone mentioned this a few pages back but to prevent over-whelming levels of defaults, they're going to have to offer people insanely long mortgages or interest only versions whilst they try and sort this mess out.

For people with very large mortgages, 5-6% rates will slaughter them.
Click to expand...

They should have thought of that before they mortgaged themselves to the hilt. We have become a credit card society and it has to burst eventually.

I have a very small mortgage myself that I can realistically finish by 40 and then prepare for early retirement.

I could have maxed out my mortgage on a massive 5 bed that I didn't need and had all the flash cars on the drip but I would be paying for it until I was 60.
 
adam cool dude said:
They should have thought of that before they mortgaged themselves to the hilt. We have become a credit card society and it has to burst eventually.

I have a very small mortgage myself that I can realistically finish by 40 and then prepare for early retirement.

I could have maxed out my mortgage on a massive 5 bed that I didn't need and had all the flash cars on the drip but I would be paying for it until I was 60.
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They will prop it up some more
 
Slam62 said:
Nationwide have apparently put up some new rates , look a bit tasty
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Yeah, pretty brutal. I lost out on the energy game as my fix ran out a few months ago, so I have lost out there, but luckily, I fixed my Nationwide mortgage at 2.79% for 10 years 2016-2026. So I have 4 more years at 2.79% and hopefully that will be long enough to ride out the current financial storm. It also gives me a bit of time to over-pay as it's advisable to do that when you're locked into a low rate, as it makes a big different later on.
 
Part of me is glad I kept losing out to property this summer, I can see how people fall in the trap though, we were offered up to 300k mortgage, but we both just looked at each other and laughed. We stuck to a budget that ultimately wasn't competitive in the market at present, fortunatly, we have a place and a pretty modest mortgage that we have had for 5 years now, still fixed until 2025/6.

But I bet many young couples, or whoever would fall into the trap of getting the max amount the banks would lend, just to get on the ladder, not fully understand that in time a few % changes and it blows the already stretched budget out the window.

I am not looking forward to paying more on ours in a few year, but we should be ok.... well as long as the country doesnt implode and we need a wheel barrow full of cash to buy a pint of milk, otherwise game over.
 
Well i bit the bullet, took a 10 year fix at 4%, was on the BMR which was 3.75, so will only cost me £8 extra a month. Seemed like it would only take one rise and i am ahead, and figure that 4-5 will become the new normal when it all settles back down so even if it goes down to 3 i will still only be paying a small amount over. No fee, no charges, so i may be paying a little more than i could, but got peace of mind, which seemed worth it.

Thanks for sounding me out . Helped a lot
 
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