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Mortgage prices - gone nuts.

russdx1

russdx1

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Joined
Jul 7, 2018
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Bristol
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russdx
What’s you guys new rates looking like? Mine going from 1% to 5.6% so from £1k a month to £1.6k not end of world but will sting a little.

I’m not sure if they will ever significantly drop in the future again. I think they are just returning to what they should of been and we have just got way to comfortable with crazy low rates so appears a shock when they raise.
 
I think a whole generation of people became adults and the rates have been so low for so long it’s the norm for them. They are gonna get a shock in the coming few years as fixed rates come to an end. Interest rates are never going back to where they were in my opinion and the best case scenario would be stabilising around 4%. I’ve got a cousin who is 32 married with two kids. They have a 600k mortgage currently fixed at under 1% but it expires in December. I just can’t see how they will be able to afford it and maintain their current lifestyle with their salaries as I don’t think they have much disposable income once everything is paid. Look back through history interest rates now are the norm. I bought my first place in 97 and was delighted to get a rate on my mortgage of 8%. I was brought up to pay down extra on the principal every year if I could afford to and am reaping the benefits of that now
 
russdx1 said:
What’s you guys new rates looking like? Mine going from 1% to 5.6% so from £1k a month to £1.6k not end of world but will sting a little.

I’m not sure if they will ever significantly drop in the future again. I think they are just returning to what they should of been and we have just got way to comfortable with crazy low rates so appears a shock when they raise.
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If you can lock in at 5.6% for a few years, my guess is that would be sensible. There's still a long way to go to get inflation under control, and using interest rates to cause a recession (no politician will ever say this, but this absolutely is the intention) is the only tool they have, unfortunately.
 
It's cyclic every 10 or so years. Credit is readily available and then they pull the rug from under. Rinse and repeat.

I see it going to 5.25% then coming down to 4.5. The "fixed" energy market is coming down to normalish values and the food prices should trickle down by November.
 
Youre right about people being too used to the low rate, I remember the first mortgage I had on my current house was like 5.4% only about 15 years, just before the rates started dropping.

Fixed on 1.79% at the moment until end of 2024, but lucky enough to be in a position that I could pay it off now but with the interest rates being so high I'm sitting on the money in a savings account, as it earns more than it would save paying off early now.

Could be worse though as I remember my parents saying they were paying 15%+ in the 80s.

Didn't there used to be affordability checks where they tested if you could still afford to pay if the rate jumped several percent?
 
first flat was 6.5% (mid 90's i think). All thats happening is rates are going back to historic normals rather than historic lows. If they wanted to be safe first time buyer generation should of checked historic interest rates, taken a median and worked out what they could of afforded but of course the banks or a "financial advisors" wouldn't have told them that.

Managed to fix a rate at 1.6% i think for 5years just before interest rates started climbing. It finishes as i hit 55 so can take a pension lump sum and clear the rest off so works out perfect but theres going to be a real mess for everyone that bought in the last few years.

Lack of decent financial planning or advise if there is such a thing, never found any decent "independent" financial advise in all the years. Its a self serving industry.
 
Yeah I'm gonna fix at 5.6% for 5 years for now (can change this until dec if rates drop a bit but looking unlikely) but can lock that current rate in case they rise.

One thing that I never quite understood is do higher rates pay your mortgage off faster? or does just more of it go into the banks pocket?

I guess i'm still quite young (compared to you old bastards haha) so still early in my house payment journey so not really in a position to just pay it all off yet but hopefully one day in the future :)
 
I went about 15yrs without ever opening a bank statement or knowing my bank balance. I'm better at keeping an eye on finances these days but I still wouldn't have a clue what my mortgage rate is. It gets paid and that's that.
 
We were lucky that around the time our 5 year fixed 5.5% rate came to an end the base rate had dropped to the all time low we've been experiencing, so we jumped to a tracker mortgage which followed the low around 1.5% then continued paying the same towards our mortgage that we did when we was at 5.5% and then eventuality got the mortgage paid off early
 
We should not target any criticism on younger folks who haven’t know higher interest rates. What was the alternative? Rent for higher than the mortgage and get a smaller place?
I hear they are not seeing repossessions like before. Many are extending out the term to keep the repayment affordable. 40 years terms are being talked about.

My fixed rate is up next year. I will look to pay a lump of it off rather than finish the renovation work. Last time I set up to reduce the term which led to the interest being proportionally lower as part of the monthly payment and then I still overpay which means I can absorb the rate rise and just not be over paying.
 
Only been paying a mortgage for 8 years now and only ever known 2-1% rates :D
 
russdx1 said:
One thing that I never quite understood is do higher rates pay your mortgage off faster? or does just more of it go into the banks pocket?
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On a capital repayment mirtgage higher interest rates pay your mortgage off slower.

If you paid no interest the amount you remain owing goes down in a straight line month by month.

Paying interest results I you paying g less off the capital in the early years and more in the later years so the amount outstanding is a curve that starts falling slowly but falls quickly off a cliff in the later years. The Higher the rate the flatter the curve at the start and the bigger the cliff at the end.
 
In 1991 when I purchased my first home I worked for barclays and was delighted to be able to get a staff mortgage at 9.5% which was 3% lower than customers were paying at the time. They also allowed me 4x salary whereas customers got 3x main income plus 1x second income.

My monthly mortgage payment was 55% of my monthly take home pay.

Things have been different over the past 15 years.
 
s000m said:
Managed to lock in at 10 years at 2.3% just before prices were going crazy. A lot of people don't realise you can get a mortgage in principle 6 months before you current term is up. Previous rate was 1.5%.
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Wow 10 years! Did not know that was even possible.
 
Fantazia2 said:
Youre right about people being too used to the low rate, I remember the first mortgage I had on my current house was like 5.4% only about 15 years, just before the rates started dropping.

Fixed on 1.79% at the moment until end of 2024, but lucky enough to be in a position that I could pay it off now but with the interest rates being so high I'm sitting on the money in a savings account, as it earns more than it would save paying off early now.

Could be worse though as I remember my parents saying they were paying 15%+ in the 80s.

Didn't there used to be affordability checks where they tested if you could still afford to pay if the rate jumped several percent?
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Yeah there was such an affordability test . Then when rates went up and so the affordability test would mean no one could get a mortgage they scrapped them to avoid a crash . Fact is houses are too expensive but no government will do anything about it as devaluing your house ain't a vote winner. While I'm on the subject our short term electoral system won't allow other long term problems like climate change, issues arising from ageing population etc to be solved either
 
Asiapinball said:
Paying interest results I you paying g less off the capital in the early years and more in the later years so the amount outstanding is a curve that starts falling slowly but falls quickly off a cliff in the later years. The Higher the rate the flatter the curve at the start and the bigger the cliff at the end.
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I think very few people realise this. I remember going to see a mortgage broker about a re-mortgage 20+ years ago and asking to see the capital versus interest curve for the mortgages they were proposing - they just looked at me like I was talking Chinese, they didn't even have that info in their IT comparison systems. All they could talk about was what the overall repayment per month would be.
 
Affordability stress tests were introduced around 2014 when the fca did the mortgage market review and made lenders responsible for checking affordability. They assumed 3% was added to the current base rate to see whether you could still make payments if you had a mortgage at that rate instead of the one you were getting. This test was officially scrapped in 2022.

Prior to 2014 the banks just used income multiples and many didn't even bother checking income. They just trusted you. In 2007 around half of new mortgages were completely unverified. And around a third of new mortgages were interest only.

2007 was very different to now.
 
I remember taking out a mortgage of £45000 when we bought our first house in 1995,and thinking omg how am I ever going to pay that back,how times have changed,the best advice I can give is overpay each month,we took out a 25 year mortgage and I managed to pay it off in 12 years by overpaying,it's a life changer once it's gone,me and the mrs both went part time in our jobs and have not looked back since.
 
stevebm1 said:
I remember taking out a mortgage of £45000 when we bought our first house in 1995,and thinking omg how am I ever going to pay that back,how times have changed,the best advice I can give is overpay each month,we took out a 25 year mortgage and I managed to pay it off in 12 years by overpaying,it's a life changer once it's gone,me and the mrs both went part time in our jobs and have not looked back since.
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100% agree with this. But no one is taking out 45k mortgages these days :( house prices are insane. It’s hurts my generation to get one I can’t see how the next is even gonna do it unless literally left a house by there parents.
 
russdx1 said:
100% agree with this. But no one is taking out 45k mortgages these days :( house prices are insane. It’s hurts my generation to get one I can’t see how the next is even gonna do it unless literally left a house by there parents.
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Yeah, it's a nightmare. Imagine moving on to one of those 40-year mortgages @Calimori mentioned to avoid a repossession, then put that repayment duration against @Asiapinball's graph of interest v capital. People will only have paid off a tiny fraction of the capital after 25 years or 30 years. Must be depressing.
 
JT. said:
Yeah, it's a nightmare. Imagine moving on to one of those 40-year mortgages @Calimori mentioned to avoid a repossession, then put that repayment duration against @Asiapinball's graph of interest v capital. People will only have paid off a tiny fraction of the capital after 25 years or 30 years. Must be depressing.
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Yup mine was 33 years, then I dropped a few years and gonna drop a few this time so be left with 20 on 250k ahhhh. Totally picked wrong time and rate but will try and overpay as much as I can and drop that 20 years down as well. One day I’ll own my own home :D Wish I’d done all of this on the lower rates though!!!
 
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I remember self certified mortgages. I was 18 and doing my a levels. A local 2 bed flat in Bounds Green came up for sale as a repossession for 59k. I went to abbey national and asked them for a mortgage of 55k. Can you afford it they said. Yes I said. Ok sign here and give us your ID and proof of address. It was as easy as that - no questions on employment nothing. Plus you could walk into a solicitors with 4K cash in a carrier bag as a deposit no questions asked. Mortgage cost me £360 a month and I rented it to the council on a 5 year lease for £837 a month. Should have bought 10 more but was too interested in going to uni to have fun.
 
russdx1 said:
100% agree with this. But no one is taking out 45k mortgages these days :( house prices are insane. It’s hurts my generation to get one I can’t see how the next is even gonna do it unless literally left a house by there parents.
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Depends where you live and job, bought my first flat in London in 1991 for £52k when I was 23. Tuff times for me and my mrs with kids for years.

Had this debate with my kids, they are better off than we was but due to location and they have decent incomes.
Houses here - 3 bed avg £240k, if you have a household income of nearly £100k you ain’t doing bad!
 
s000m said:
Managed to lock in at 10 years at 2.3% just before prices were going crazy. A lot of people don't realise you can get a mortgage in principle 6 months before you current term is up. Previous rate was 1.5%.
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That’s a great move 👍
I fixed for 10 years at 2.24% in 2018, purely so I knew my outgoing and hated remortgaging every 2 years.
Also been overpaying £400 a month since 2016 as I’ve kinda worked it that when the 10 years is up it will be roughly paid off.

Though now saving the £400 in a 5% fixed rate saver rather than overpaying the mortgage.
Hoping that has the same end result.

I’ve never been good with money, hence me ending up on here. Throwing money as a pretty wooden box with a ball! 😂
 
It’s insanely tough for younger buyers. My first mortgage was fixed at 6.99% but was only £80k.

Now the same starter flat sold for £750k.
In some ways WFH helps as people don’t need to be as close to work but the trade off is they then need more space to actually do it. You also don’t have the choice if you are in customer facing roles so less and less young people are opting for those careers.

Renting is becoming more and more expensive. Coupled with a decrease in private landlords. There was someone getting slated on our local Facebook page for offering a bog standard small 3 bed terrace for just under 45k a year 😱. But that is actually now the going rate.

I’ve had offset mortgages for the last 25 years and absolutely love the freedom after you get used to the scare that you essentially have a 500k overdraft. Great for when life gives you a curveball but potentially dreadful if you are bad with money (my first provider had no demand at all to pay off the capital each month which is insane).

We’re so overdue a house price correction but demographic changes, stamp duty and crucially a lack of housing stock are keeping prices high. Again it’s younger buyers who are likely to get potentially hit with negative equity and don’t have the hindsight to realise it’s not that big a problem if you’re looking to upsize in the future provided those prices have also fallen.

There’s also a real lag between mortgages/rents increasing and people actually realising they are significantly worse off. I was in Camden yesterday and the place was heaving. No sign yet of people cutting back (£7 a pint and all the pubs were full to the extent of people being turned away). It’s got to all be going on credit cards so there will be a shock for people who are used to being able to easily obtain further credit when they change cards.
 
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