Mortgage Rate Rises

[slinxy]

Same rate and time period as me.
So as someone who has not remortgaged ever before and this will be my first time, is it best to start looking the day it ticks over 6 months before your fixed period ends, on the basis that most agreement in principals last for 6 months? i.e. In case the rates go down the next day and forever up until your renewal?

And then assuming rates will come down gradually...keep checking rates what weekly? Monthly? And reapply if rates improve continuously over and over again, potentially with the same provider overwriting your original offer? Are there limits on how much you can do this? Are there limits on how many you can apply for with different lenders? Will applying for multiple and having multiple open damage your credit history?

And what if a rate drops massively days before your fixed period ends and you had previously agreed to starting a new deal? What is the point at where you have to commit and/or can't pull out?

It depends on the lender how far in advance you can agree a new mortage deal. my current lender would only agree 4 months in advance but 6 is the norm.
I would check websites a week before, so you know roughly what the rates are, who the cheaper ones are and how far in advance it can be agreed, so come the day you only have to check a few.

They do a soft credit check with the info that you give to them, then do a normal credit check to generate the paper work. Until you sign the paperwork and send it back, nothing has been finalised.

once I had one, I just kept a track of the BoE rates, if the rates went down then it's worth shopping around for another deal, there's no limit to the number of agreement you have in place but don't forget that there's paperwork and interviews for each agreement. It depends on how much work you want to put in to shave a few % points off but I managed to get mine down from 4.21 which was the lowest at the time down to 4.01%. Even if the bank you have the agreement with lowest their rates, they will not tell you, you have to find out for yourself and go though all the paperwork and interview again.

This is where a mortage broker comes in handy, they can do all the leg work for you and let you know the cheapest deals, or the one's that they are aware off. I still think that paying a fix cost for the life time of the mortage is worth having a broker for, if you are planning to remortage a few times. Saves time...

 

[Richie]

It's nothing to worry about as long as it any all your other essential outgoings fall under 50%, for the most simple method of budgeting..

Agreed. My total "bills" come to 83% of Nett but some of that goes into into some different pots each month (reason why at bottom):

Holiday Savings (pays for holidays through year)
Annual Expenses (Birthdays for people, Home Insurance, Factors Fees, Boiler Service and things like that)
Car Expenses (Insurance, MOT, RFL, Servicing, Maintenance)
"Fun" Pot (can buy what I want from this)

Every month I put money into them from my pay. It allows me to build up buffers in each pot and I don't need to touch my "living wage". I can save money by paying things annually rather than monthly e.g. Home Insurance or Car Insurance. It also means that if, for example, a big car repair expense came up or house repair, I can use that "pot" and not suddenly be struggling for a couple of months.


Horses for Courses though, everyone is different.

 

[Freakbro]

UK house prices fall as mortgage costs bite, says Nationwide

The Nationwide says the average cost of a home was down 4% on the peak seen in the summer of 2022.

www.bbc.co.uk

The UK's biggest building society said that UK house prices were down by 0.4% compared with the previous month.

Hardly the "crash" people have been expecting

But at least the benefit of the higher mortgage rates has started to filter through to put pressure on the ridiculous house price increases we've been seeing.

There was also a story the other day about rents coming down too (in London?) as tenants just literally can't afford them.

 

[200sols]

Hardly the "crash" people have been expecting

Adjust those figures for inflation.

 

[t2na]

UK house prices fall as mortgage costs bite, says Nationwide

The Nationwide says the average cost of a home was down 4% on the peak seen in the summer of 2022.

www.bbc.co.uk

Hardly the "crash" people have been expecting

But at least the benefit of the higher mortgage rates has started to filter through to put pressure on the ridiculous house price increases we've been seeing.

There was also a story the other day about rents coming down too (in London?) as tenants just literally can't afford them.

We were renting a place for the last 12 months when we relocated - and after we then moved out from the rental a few months ago the owners put the rent up by 300 quid on the advert for new tenants. No idea why, we always felt the rent was on the higher side anyway but sure, they want to make more money and they probably think they can justify that to any potential tenant.

They had 0 interest. Not a single viewing at all. We moved out at the end of Jan and they ended up dropping the rent back down to what we were paying originally and they've now got people living there. We were close with our neighbours and they said the house just sat empty for 3 months - and it was always funny to see the place relisted every month on Rightmove at a slightly lower price each time.

 

[Jono8]

Its just an exercise in curiosity.

Essentially he wants to see if the interest paid over the mortgage has been eroded away by the increase in house price e.g.

• Paid £100,000 for house in 1995
• Use the calculator in his link to estimate what £100,000 is now equal to in today's money - £198,000 (rounded from that calculator)
• House is now "worth" £300,000 today (price if you were to sell it today)
• £300,000 less £198,000 (value of house currently less value of house in 1995 adjusted for inflation) = £102,000 "gained value"
• Total Paid in Deposit+Mortgage Payments = £250,000 (so £100,000 for house (point 1) and therefore £150,000 paid in interest)
• £150,000 interest paid less £102,000 "gained value" = £48,000 in interest paid (comparatively)

At least I think that's what he is trying to see.

I still don't get the point being made. Isn't it obvious that the house prices increase effectively erodes away the interest paid?

Buying outright will always be the better option, unless you can guarantee a better return on your money than the interest being paid.

 

[BUDFORCE]

Adjust those figures for inflation.

Yea but....

It's still only a few percent.

The vast majority I see are still increasing in value.

 

[200sols]

Yea but....

It's still only a few percent.

The vast majority I see are still increasing in value.

More like 20% inflation adjusted.

 

[HangTime]

yub this....

on some sites/groups, they say it's better to pay for something now on interest free as the value of the pound lowers with inflation.

for example, rather than paying 10k for a watch outright in 2021, I took three years to pay off the watch interest free.. in theory I would have to spend £11,925.54 in today's money for it to be "worth" the same as the 10k I spent in 2021. Swiss watch prices are going bonkers at the moment. also if you had the cash it can be sitting there in a high interest account earning 5% APR.

Even if there was no inflation it's always* better to pay for something on interest free because you can leverage the money whilst waiting to pay it back, even if that's just sat in a savings account per your last point. Even with zero interest rates and zero inflation it's arguably still better because it gives you more liquidity so you have more cash at your disposal in the short term.

*barring the hassle of taking out the credit and a few niche cases like it meaning you have too much credit, or you lack the discipline to keep the money set aside for repaying it.

 

[dlockers]

I still don't get the point being made. Isn't it obvious that the house prices increase effectively erodes away the interest paid?

Buying outright will always be the better option, unless you can guarantee a better return on your money than the interest being paid.

I think it was a thought experiment

 

[HangTime]

Adjust those figures for inflation.

The inflation in summer 2023 was under 7%, and the latest figures for year to March was 3.2%, so inflation since summer 2022 in totality will be under 10% over the 21 months or whatever.

So really it all depends what one considers to be a 'crash', for me a 4% nominal fall against a backdrop of inflation under 10%, isn't really that huge. Some might call it a crash, I'd call it a fall or correction.

 

[200sols]

The inflation in summer 2023 was under 7%, and the latest figures for year to March was 3.2%, so inflation since summer 2022 in totality will be under 10% over the 21 months or whatever.

So really it all depends what one considers to be a 'crash', for me a 4% nominal fall against a backdrop of inflation under 10%, isn't really that huge. Some might call it a crash, I'd call it a fall or correction.

Inflation is cumulative. They'd already fallen a decent amount in real terms by October last year.

UK house prices drop 13.4% from peak in real terms

Inflation masks extent of decline from March 2022 record level

www.ft.com

I find some of the article interesting.

"Inflation has masked the true extent of recent falls in UK house prices, with many regions and nations of the UK no better off in real terms housing wealth than on the eve of the 2008 financial crisis, research has found. UK house prices have fallen by a modest 2.8 per cent in nominal terms since their peak in March 2022, but 13.4 per cent in real terms, according to analysis of the Nationwide house price index by estate agent Savills. After adjusting for inflation, average real house prices are no higher than they were in late 2015, Savills said."

I guess many will find that surprising and meaningless at the same time. Its very regional as well.

I think to see real nominal falls as well people actually have to be unable to afford housing, mortgage lending has to dry up etc. Basically a full financial crash and a deep recession.

 

[Jono8]

Hardly the "crash" people have been expecting

Don't speak too soon...

 

[dlockers]

no better off in real terms housing wealth than on the eve of the 2008 financial crisis

Makes no sense I didn't even own a house in 2008!

 

[NotAGolf]

Don't speak too soon...

What's your prediction then?

 

[Jono8]

What's your prediction then?

I don't have a hard and fast prediction as such.

I just fear we might not be out of the woods yet, and things could get worse before they get better.

Still a lot of people on 1-2% fixed deals to come off them over the next year or so, and it looks like the banks dont think interest rates will be dropping much, if at all, anytime soon.

 

[tonys]

I don't have a hard and fast prediction as such.

I just fear we might not be out of the woods yet, and things could get worse before they get better.

Still a lot of people on 1-2% fixed deals to come off them over the next year or so, and it looks like the banks dont think interest rates will be dropping much, if at all, anytime soon.

The help that was put in place after the mass repossession of houses during the last recession has spread the problem.

 

[200sols]

I don't have a hard and fast prediction as such.

I just fear we might not be out of the woods yet, and things could get worse before they get better.

Still a lot of people on 1-2% fixed deals to come off them over the next year or so, and it looks like the banks dont think interest rates will be dropping much, if at all, anytime soon.

We'd need a deep recession and meaningful job losses for it to get a lot worse. In my opinion of course but it looks unlikely right now.

 

[fez]

I guess many will find that surprising and meaningless at the same time. Its very regional as well.

I think to see real nominal falls as well people actually have to be unable to afford housing, mortgage lending has to dry up etc. Basically a full financial crash and a deep recession.

Completely meaningless. Unless my salary has increased massively and I somehow don't have to pay tax on that increase and somehow I am not paying silly interest rates on a property I buy its complete BS. Its using numbers to prove something that simply isn't true in reality.

Purely on affordability its BS. Based on what we could have afforded to move into before interest rates rose vs now we are looking at ~1/3-1/4 less buying power. Neither of us have had a 25-33% payrise and thats ignoring the fact that everything else has shot up massively in that time. We are worse off and housing has got way more expensive as well.

How on earth they come up with these statements with a straight face. "Yes I know you haven't had a pay rise that keeps up with inflation. Yes I know that you are actually spending 20% more on everything other than your mortgage and I know that your mortgage has also gone up by 30-40% but fun fact, in "real terms" house prices have dropped. No, when you go to buy a new house you will find that actually you can afford far far less than you could 3 years ago but...real term drop."

 

[200sols]

Completely meaningless. Unless my salary has increased massively and I somehow don't have to pay tax on that increase and somehow I am not paying silly interest rates on a property I buy its complete BS. Its using numbers to prove something that simply isn't true in reality.

Purely on affordability its BS. Based on what we could have afforded to move into before interest rates rose vs now we are looking at ~1/3-1/4 less buying power. Neither of us have had a 25-33% payrise and thats ignoring the fact that everything else has shot up massively in that time. We are worse off and housing has got way more expensive as well.

How on earth they come up with these statements with a straight face. "Yes I know you haven't had a pay rise that keeps up with inflation. Yes I know that you are actually spending 20% more on everything other than your mortgage and I know that your mortgage has also gone up by 30-40% but fun fact, in "real terms" house prices have dropped. No, when you go to buy a new house you will find that actually you can afford far far less than you could 3 years ago but...real term drop."

Thats because its talking about house prices and not affordability. Even if prices dropped in nominal terms you'd still find them less affordable if you need to finance it after rate hikes.