Mortgage Rate Rises

HACO said:
Sitting here waiting to find a cracking deal in the next 24 months :D
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Thought I might be paying over the odds with the Covid price rises as I'm hoping to sell up in London and buy a house further out but I guess the opposite might happen now - London maybe a bit more resilient and rest of the UK taking a hit.

Well unless all the nuclear threats keep on ramping up and cities become rather unattractive.

subbytna said:
Lots of members on here will not really remember anything but low interest rates. I remember mortgage rates at 12% and parents really struggling. Anyone now getting on the hosing ladder will be in negative equity fairly soon as the market takes a hit with reposessions and sellers wanting to unload. Batten down the hatches, the ride is just getting started....
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Also, houses were more affordable back then relative to average income so 12% interest rates back then is equivalent to a much lower % today in terms of affordability.

news.sky.com

Interest rates are high enough to dampen demand and cause real financial pain for millions of households

The problem is that the interest rate alone gives you no sense of how affordable mortgages are. This is not just a small point; it's everything. And here's where things get interesting, which is to say scary.
news.sky.com news.sky.com
The 1980s - seen as a period of astoundingly high interest rates - did indeed see the bank's rate in double digits throughout - an average of 12.7% between 1980 and 1989.

But because people were so much less indebted on average and their earnings were higher (compared to their mortgage payments) than today, actually those double-digit interest rates felt about the same as a 3.5% interest rate would feel today.

Even 1990 - the very high water mark for UK interest rates, where they rose to an average of 15%, triggering a miserable household recession and momentous housing crash - looks slightly different in this respect. In fact, if interest rates went up to 7% today, they would cause about the same amount of pain as they did in 1990.
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delta0 said:
We are so far from the subprime situation in 2008 that caused those kind of falls (albeit briefly, the UK average was actually 15%). Lending is far stricter as a result of what happened then. That’s why they are talking of mostly a plateau to slight fall with the extreme end suggesting the headline grabbing 15%
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The falls in Northern Ireland were far more than 15%. This situation is significantly worse than the financial crisis for the UK.
 
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smokedog said:
So let's say the LL sells and you have to find somewhere else to live but nothing is available to rent at a suitable price? How is that good for you?

There is a rental crisis right now in London. Tenants now are bidding for places before they have even viewed them or asking for up to years rent up front.
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I'm not a very complicated man, but one thing that's extremely simple about me is that I'm a man of community and social values. I believe that every family deserves a home to themselves, and anyone depriving a family of a home for their own personal gain is just a greedy bar steward.

To be clear, if I wanted to, I could've owned an entire plethora of property by now with a decent income stream, but I'd rather see my fellow humans on society own their own home, so I don't get involved.

Sitting on the sidelines like this, seeing people purchase property after property for the sole purpose of self-gain whilst having the side effect of not only depriving their fellow people the opportunity to have their own home, but also increase the cost of living for those same families due to pure greed just makes me sad.

And to that end, I really can not overstate my commitment to watching this whole system collapse like a house of cards. At one point in my life I was living in a caravan in my uncle's back yard, now I rent a lovely flat in one of the nicest areas of one of the richest cities in the world, and I've lived in everything inbetween. If I have to live in a caravan and rub sticks together to make heat for a year or so whilst these greedy landlords get bent over as a result of their incessant greed, then that's one pill I'll swallow with a smile on my face.

As for my own personal circumstances, my landlord has paid our place off, he bought it from the council back in the 80s and we get on well. I know he's not in it for the money, the only reason he's renting this place is because he emigrated to Australia for family reasons but wanted an anchor here in England for when he eventually wants to move back. People like this have my full support and I'll gladly hand over rent to them every month.

People who buy up blocks of flats and then smash it all out so they can fit 2 extra flats in at the cost of the quality of life of the people renting them? Burn the lot of them. For these people, I will eat popcorn whilst watching their "empire" collapse. And if they end up homeless, I'll gladly rent them a room for the full cost of my monthly rent, just like so many have done for the last decade(s).
 
Diddums said:
Sitting on the sidelines like this, seeing people purchase property after property for the sole purpose of self-gain whilst having the side effect of not only depriving their fellow people the opportunity to have their own home, but also increase the cost of living for those same families due to pure greed just makes me sad.
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So much of what you say resonates strongly with me.

I used to work with a guy who ended up buying 6 decent houses around Peterborough, yes he was apparently very competent with his finances and I'm sure he made plenty of money.

But I remember asking myself, "How much is enough?" this guy made plenty of money through IT contracting, he'd never be stuck for work - it just seemed like gross, excess whoring of what should be family homes for people to live in.
 
Screeeech said:
So much of what you say resonates strongly with me.

I used to work with a guy who ended up buying 6 decent houses around Peterborough, yes he was apparently very competent with his finances and I'm sure he made plenty of money.

But I remember asking myself, "How much is enough?" this guy made plenty of money through IT contracting, he'd never be stuck for work - it just seemed like gross, excess whoring of what should be family homes for people to live in.
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An IT contractor I used to work with had over 30 properties in and around the Birmingham area that he started buying in the 90's purely to rent out.
 
Chris344 said:
An IT contractor I used to work with had over 30 properties in and around the Birmingham area that he started buying in the 90's purely to rent out.
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Everybody wants to be a tycoon... five cars, Gucci belts, etc.

What happened to just enjoying life as a person with normal stuff, but things that are meaningful (like family, friends, pets, hobbies) not trying to live like some sort of tacky king...

I bet the guy you describe lives in a gigantic McMansion, with an electronic gate and tacky concrete Lion statues next to it..

meh /rant.
 
We took out a 5 year deal last summer for 1.54%. Glad we did, although knowing what we know now, we would have gone with 10 years. I think that would have been 1.84% from memory.
 
we were lucky to have done very similar. Avoided 10 years as were considering a self build in the next few years so wanted to avoid the exit costs. I was reflecting with my wife last night that it really was a function of luck, our fix ended in June and I booked the deal in March. If it was next year we'd have been 4-5k worse off per year.
 
SpeedFreak said:
we were lucky to have done very similar. Avoided 10 years as were considering a self build in the next few years so wanted to avoid the exit costs. I was reflecting with my wife last night that it really was a function of luck, our fix ended in June and I booked the deal in March. If it was next year we'd have been 4-5k worse off per year.
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I wish we were in such a position, unfortunately its looking like we're closer to your worst case scenario.

We face renewal of half of our mortgage (ported it when we moved) in July 2023, so we can start it in April. Alternatively, a fix now would look like a ~£1200 ERC and 5 years at 3.9%, a rise of ~2.4% on our current deal. That's ~£1800 a year worse off, locking in around £10k of additional payments over the life of the fix. I can't help but see that - in these circumstances - there isn't realistically a better option than this.
 
ChrisD. said:
We took out a 5 year deal last summer for 1.54%. Glad we did, although knowing what we know now, we would have gone with 10 years. I think that would have been 1.84% from memory.
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Really similar here we signed up to a 1.2% deal in January for 5 years wish we had taken the slightly more expensive 10 year option. I’m trying not to think about where that will leave us in 5 years time as we will still have a considerable mortgage debt at that time, hopefully the world will be in a calmer place and we will at least be able to get something palatable to replace the current deal even if it is vastly more expensive.
 
I can't see a scenario now where interest rates will come down, or even stay as they are for much longer. If we were working with a starting position of 5%, there may have been room to be bring rates down again once things have settled, but with the base rate being so low, I just can't see it happening.

Unfortunately, with the base rate being so historically low, it didn't leave any wiggle room.

It only takes a small amount of buyers to stretch themselves for bigger mortgages whilst rates are low, for prices to be pushed up. As we know with the housing market, once it goes up, it's very unlikely to come down.

You can't expect the majority of house buyers to have a thorough understanding of fiscal and monetary policy when looking to just buy somewhere to live. It's hard to blame someone spending an extra £100k to buy their dream house for all that's wrong with the housing sector.

When I paid the ERC fee and fixed for 10 years at 1.86%, I was basing it off the BoE base rate being 2.5% when we were due to remortgage in March 2023. I don't think I could ever predicted the uncertainty in the markets that meant lenders were pricing in much higher potential rates.
 
I could ERC out and lock in another 2 years for a 24% increase in monthly, however the ERC is £5k, essentially making the increase 50% in real terms over those 2 years.

ERC applies until 90 days from the end of the fix, which means the end of January is the first time I can do something without an ERC (porting to another provider isn't an option)
 
Diddums said:
I'm not a very complicated man, but one thing that's extremely simple about me is that I'm a man of community and social values. I believe that every family deserves a home to themselves, and anyone depriving a family of a home for their own personal gain is just a greedy bar steward.

To be clear, if I wanted to, I could've owned an entire plethora of property by now with a decent income stream, but I'd rather see my fellow humans on society own their own home, so I don't get involved.

Sitting on the sidelines like this, seeing people purchase property after property for the sole purpose of self-gain whilst having the side effect of not only depriving their fellow people the opportunity to have their own home, but also increase the cost of living for those same families due to pure greed just makes me sad.

And to that end, I really can not overstate my commitment to watching this whole system collapse like a house of cards. At one point in my life I was living in a caravan in my uncle's back yard, now I rent a lovely flat in one of the nicest areas of one of the richest cities in the world, and I've lived in everything inbetween. If I have to live in a caravan and rub sticks together to make heat for a year or so whilst these greedy landlords get bent over as a result of their incessant greed, then that's one pill I'll swallow with a smile on my face.

As for my own personal circumstances, my landlord has paid our place off, he bought it from the council back in the 80s and we get on well. I know he's not in it for the money, the only reason he's renting this place is because he emigrated to Australia for family reasons but wanted an anchor here in England for when he eventually wants to move back. People like this have my full support and I'll gladly hand over rent to them every month.

People who buy up blocks of flats and then smash it all out so they can fit 2 extra flats in at the cost of the quality of life of the people renting them? Burn the lot of them. For these people, I will eat popcorn whilst watching their "empire" collapse. And if they end up homeless, I'll gladly rent them a room for the full cost of my monthly rent, just like so many have done for the last decade(s).
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Echo this 100%.
I've done very well myself and could have bought a bunch of BTLs but the principle of it has always been repugnant to me.
I just invested excess cash in shares instead because they're not a zero-sum game, and companies with a stronger stock price can invest more in R&D to actually do productive things like make better technology or products.
Buying excess property is just making money by having money, at someone else's expense.

Unfortunately Britain is strong on the 'I'm alright, Jack' mentality of climbing the rope then pulling it up behind you.
I was talking about a lottery winner with a friend of mine, who, after complaining about not being able to save for a house and rent being too expensive for years, said "If I won £1m I'd buy five houses and rent them out".
Sigh.
 
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