Mortgage Rate Rises

[ci_newman]

For me in retirement, my house is a place to live, which we are doing up with no expectation of selling on at a profit. We only need pay the bills and the world stays outside the front door unless invited in. It is a small haven.

I'm not in my "forever home" yet. My house is a place to live in and raise my family, but it's totally inappropriate for retirement (if only because its a 3-storey town house and my knees won't tolerate that when I retire) and I'd guess I'm not a minority in that either. When raising families, people prioritise location near schools, public transport links, gardens for the kids to play in, driveway space for multiple cars (with two working, commuting parents). I won't need any of that when I retire

 

[Uther]

I’m not “elderly” I’m 48

Pfft you're basically Grandad to some people on the forum.

 

[413x]

My main aim to pay off my mortgage is so I can fund some sort of retirement later in life. Because I have no confidence in the state pension or even my company pensions

 

[ChrisD.]

And how many of the UK population do you think are in a position to do that?

Anyone like you, who is obsessed with paying off a cheap debt early rather than investing spare cash.

 

[malachi]

Anyone like you, who is obsessed with paying off a cheap debt early rather than investing spare cash.

OK, let's have this conversation in about 30 years time.

 

[ChrisD.]

OK, let's have this conversation in about 30 years time.

Fine. I’ll be retired, house paid off, and loads in savings still from compounding, plus a sizeable pension. But I’ll probably be sailing somewhere so not sure I’ll have reception to get onto OcUK.

 

[ci_newman]

Anyone like you, who is obsessed with paying off a cheap debt early rather than investing spare cash.

It used to be cheap debt. At 5% interest rates it's no longer that cheap and the stock markets certainly haven't performed that well in the last few years. Some of my investments are still performing well below their pre-covid level, I still have 30 years until I can retire and so I'm not concerned however if I was much closer to retirement it would be an easy decision to put spare cash into the mortgage than into stocks.

 

[Liefrich]

My main aim to pay off my mortgage is so I can fund some sort of retirement later in life. Because I have no confidence in the state pension or even my company pensions

Conversely, to secure a better "retirement" you really want to try and stretch yourself with your mortgage as much as possible when you are young and your salary is likely to increase. Historically, houses have been appreciating assets and the mortgage is one of the best and most secure financial investments you can make.

I live in a trendy area of Cardiff and we bought our 3 bed terrace for £319,000 in November 2019. I am remortgaging now and our bank's HPI is £443,280. Obviously, it may be worth less and I expect the rises to ease off, but that's still a ridiculous increase within less than 4 years and it would be extremely unlikely you would achieve that in any other financial investment. The more money you have in your house come retirement the better your options.

I am not advocating this approach but in the UK it is the reality of the market as we set such a stall in home/land ownership.

 

[ChrisD.]

It used to be cheap debt. At 5% interest rates it's no longer that cheap and the stock markets certainly haven't performed that well in the last few years. Some of my investments are still performing well below their pre-covid level, I still have 30 years until I can retire and so I'm not concerned however if I was much closer to retirement it would be an easy decision to put spare cash into the mortgage than into stocks.

I don't think most mortgages are 5% now, maybe last year if people were fixing when things went mad but it's certainly calmed down a lot.

Personally I don't view S&S as a short term thing, for me I don't care if they are up or down year on year. History has taught us that the economy always recovers, so in 20 years time when I come to retire I know they will have grown nicely, and I'd be extremely surprised if they hadn't outperformed mortgage interest costs.

Edit I can fix at 5 or 10 years for less than 4%, or 2 years at 4.34% with the first lender I checked (Halifax).

The S&P 500 is not going to do less than 4% over the next decade, nor are global trackers. If they are less than 4%, we're all ****** tbh and house prices won't mean anything.

 

[EvilRob]

And how many of the UK population do you think are in a position to do that? Not many think about their future other than their joke of an pension.

Probably pretty much everyone who has other investments rather than pump all spare cash into overpaying their mortgage, who are exactly the people we are talking about who are indeed thinking about how best to invest for their future.

 

[malachi]

Fine. I’ll be retired, house paid off, and loads in savings still from compounding, plus a sizeable pension. But I’ll probably be sailing somewhere so not sure I’ll have reception to get onto OcUK.

The £600 a month I am saving now from being mortgage free and Im not even 40 years old yet. I will be investing into other things nicely (Apart from an high end CPU and GPU )

 

[Liefrich]

Fine. I’ll be retired, house paid off, and loads in savings still from compounding, plus a sizeable pension. But I’ll probably be sailing somewhere so not sure I’ll have reception to get onto OcUK.

ChrisD has the correct approach.

 

[EvilRob]

The £600 a month I am saving now from being mortgage free and Im not even 40 years old yet. I will be investing into other things nicely (Apart from an high end CPU and GPU )

You've taken a very cautious approach which is fine, but the opportunity cost to that is missing out on the gains other investments would have made, compounded over the last 20 years or whatever. Personally I prefer to do a bit of both - use some spare cash to overpay mortgage and some to make other investments.

 

[malachi]

You've taken a very cautious approach which is fine, but the opportunity cost to that is missing out on the gains other investments would have made, compounded over the last 20 years or whatever. Personally I prefer to do a bit of both - use some spare cash to overpay mortgage and some to make other investments.

Sorry, I probably should have said. I dont live in the UK, even though my house is in the UK. So my over all approach would be slight different from yours or ChrisD, which none of you are wrong about.

 

[Brok]

You've taken a very cautious approach which is fine, but the opportunity cost to that is missing out on the gains other investments would have made, compounded over the last 20 years or whatever. Personally I prefer to do a bit of both - use some spare cash to overpay mortgage and some to make other investments.

This is what I do, make reasonable but not maxed out overpayments to our mortgage and ensure that I'm taking full advantage of ISA+pension allowances then any remainder into general investments. Our mortgage is fixed until August 2025 at 1.72% and I'll take a view once we get to renewal time whether to make a substantial overpayment (up to and including paying it all off) based on the circumstances at the time. I can well understand the desire to be done with it. When its the only real debt you carry and it goes on for such a long time the thought of not shelling out each month feels extremely attractive, regardless of whether objectively it would be the most effective use of the money.

 

[200sols]

The S&P 500 is not going to do less than 4% over the next decade, nor are global trackers. If they are less than 4%, we're all ****** tbh and house prices won't mean anything.

Well, it could and quite easily all it would take is some sort of crisis. And it follows a a decade of increased returns, it never just does a flat 9% each year and the already high valuations of the S&P 500 is not conducive to big returns over the next decade.

Vanguard Predicts Stock Returns — You're Not Going To Like Them

Those future asset returns likely aren't what investors are hoping for.

www.investors.com

Remember, nobody knows what will happen in the markets and the certainty of a paid off mortgage is worth a lot more than potential returns to some people.

 

[413x]

Conversely, to secure a better "retirement" you really want to try and stretch yourself with your mortgage as much as possible when you are young and your salary is likely to increase. Historically, houses have been appreciating assets and the mortgage is one of the best and most secure financial investments you can make.

I live in a trendy area of Cardiff and we bought our 3 bed terrace for £319,000 in November 2019. I am remortgaging now and our bank's HPI is £443,280. Obviously, it may be worth less and I expect the rises to ease off, but that's still a ridiculous increase within less than 4 years and it would be extremely unlikely you would achieve that in any other financial investment. The more money you have in your house come retirement the better your options.

I am not advocating this approach but in the UK it is the reality of the market as we set such a stall in home/land ownership.

This is true enough over time.
Maxed out mortgage to get my First house. (in a not nice area of Cardiff! )

Why? Because moving is so expensive and I wanted to jump the 'typical first house' to get something nicer.

And it has appreciated a lot since Feb 2020.

That said I don't want to be mortgage bound forever. Life is for living. And old age looks pretty dire. You do need to live a little in the moment and not put everything into the "future". But financially, yes. When rates are low maxing out mortgage is financially the best thing

 

[apatia77]

The £600 a month I am saving now from being mortgage free and Im not even 40 years old yet. I will be investing into other things nicely (Apart from an high end CPU and GPU )

I shall join your club very from next month Cannot wait for this to happen.

 

[scarps]

Might be the wrong place but it's mortgage related.
Does anyone know if you are on a shared leasehold mortgage, one of those shared to buy ones are you allowed to buy another house, freehold mortgage?

I know you can't buy a leasehold if you already have a freehold but not sure about the other way round.
It's a complicated situation which I won't go into but if anyone had a answer that would help

 

[malachi]

I shall join your club very from next month Cannot wait for this to happen.

Nice.............!

When the final payment is made, you can kick back and relax