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Interest rate pain.

Generali
Generali Posts: 36,411 Forumite
10,000 Posts Combo Breaker
in House buying, renting & selling
What level of interest rates would cause you serious financial pain? By that I mean force you to seriously adapt your lifestyle, bankrupt you or have you facing reposession of your home, assuming that you didn't lose your job or face another financial catastrophe.

What level of interest rates (base rates) would cause you financial pain? 120 votes

I have no debts and have some savings. The higher the better for me!
43% 52 votes
My mortgage and other debt is at a fixed rate - no problemo.
18% 22 votes
10%+
16% 20 votes
8% - 9.75%
18% 22 votes
5.5% - 7.75%
2% 3 votes
I'm in trouble already!
0% 1 vote
«134

Comments

  • thesaint
    thesaint Posts: 4,324 Forumite
    Part of the Furniture Combo Breaker
    I know you are good with figures, could you give an example of what a 1%, 3%, 5% increase would mean to someone with a mortgage of 50k, 100k etc.
    Well life is harsh, hug me don't reject me.
  • Uncle_Rico
    Uncle_Rico Posts: 53 Forumite
    thesaint wrote: »
    I know you are good with figures, could you give an example of what a 1%, 3%, 5% increase would mean to someone with a mortgage of 50k, 100k etc.

    Anyone that can't work those figures out for themselves is already in serious trouble!
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    According to the BBC, FTBs on £40k pa were borrowing an average of £130k in August 2006..

    According to the mortgage repayments calculator on the very wonderful Motley Fool website, repayments of 130k at various interest rates over 25 years are as follows:

    Rate....Int only....Repayment

    6%......£650.00.....£837.59
    7%......£758.33.....£918.81
    8%......£866.67....£1,003.33
    9%......£975.00....£1,090.96
    10%...£1,083.33...£1,181.31

    The average amount of a remortgage was £163,547. Using a 25 year period again:

    Rate....Int only....Repayment

    6%.....£817.74......£1,053.74
    7%.....£954.02......£1,155.92
    8%.....£1,090.31....£1,262.28
    9%.....£1.226.60....£1,372.48
    10%...£1.362.89....£1,486.15

    As you can see, a repayment mortgage has a dampening effect on how rate rises feed through into mortgage payments.
  • thesaint
    thesaint Posts: 4,324 Forumite
    Part of the Furniture Combo Breaker
    Uncle_Rico wrote: »
    Anyone that can't work those figures out for themselves is already in serious trouble!

    Is this a fact, or something you said for effect?
    Well life is harsh, hug me don't reject me.
  • doitmyself
    doitmyself Posts: 1,042 Forumite
    Good post, and as someone who pretty much fits the profile described the at-a-glance numbers there are interesting, so thanks for that Generali.

    Currently on a variable discount, was it the wrong decision? Hmm, still remains to be seen I think, despite current predictions of doom inc. on this board.
    Personally I'm more concerned about the changing tactics of the CC's currently than even a fairly substantial hike in the BoE rate...
  • thesaint
    thesaint Posts: 4,324 Forumite
    Part of the Furniture Combo Breaker
    I have repayment mortgages. A rate rise of 3-4% wouldn't have a devastating effect. If I'd bought a house in the last year I wouldn't be so optimistic.
    Well life is harsh, hug me don't reject me.
  • Uncle_Rico
    Uncle_Rico Posts: 53 Forumite
    thesaint wrote: »
    Is this a fact, or something you said for effect?

    What effect would it acheive? It was stated as fact. That's primary school maths. You should have to take a test like that before you are allowed to take out any loan, including a mortgage.

    Do you not agree that it is basic mathematics?
  • thesaint
    thesaint Posts: 4,324 Forumite
    Part of the Furniture Combo Breaker
    Uncle_Rico wrote: »
    What effect would it acheive? It was stated as fact. That's primary school maths. You should have to take a test like that before you are allowed to take out any loan, including a mortgage.

    Do you not agree that it is basic mathematics?


    By giving an example of the increases relative to mortgages, it would show those who had purchased a house the effect of interest rates.

    The fact that it is something reguarly done by the media tells me there is a point of it.

    My grandmother could not work out the 'Basic' mathematics of it, but I disagree with you about her already being in serious trouble.

    That's why I asked if it was a 'Fact'.
    Well life is harsh, hug me don't reject me.
  • Paul_Herring
    Paul_Herring Posts: 7,484 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    thesaint wrote:
    Uncle_Rico wrote:
    theaint wrote:
    I know you are good with figures, could you give an example of what a 1%, 3%, 5% increase would mean to someone with a mortgage of 50k, 100k etc.
    Anyone that can't work those figures out for themselves is already in serious trouble!
    Is this a fact, or something you said for effect?

    I'd say fact - the following is essentially what you asked for:

    1% x £50,000 = increase of £500 per year
    1% x £100,000 = £1,000 per year

    3% x £50,000 = £1,500 per year

    5% x £100,000 = £5,000 per year
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • Uncle_Rico
    Uncle_Rico Posts: 53 Forumite
    thesaint wrote: »
    By giving an example of the increases relative to mortgages, it would show those who had purchased a house the effect of interest rates.

    The fact that it is something reguarly done by the media tells me there is a point of it.

    My grandmother could not work out the 'Basic' mathematics of it, but I disagree with you about her already being in serious trouble.

    That's why I asked if it was a 'Fact'.

    Bet your Grandma isn't about to take out a mortgage though is she? I didn't mean to sound like a smart-!!!!!, I'm just tired of reading about people that simply don't have a clue about what they have got themselves into, with regards loans and then blaming other people for it, usually the banks!

    I never said there wasn't a point to the figures being posted. The media regularly tell me lots of things but I choose to find out the facts for myself.
This discussion has been closed.
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