Mortgage Rates next Year

Gorgeous_George

I think base rates will fall to 2.5% by March 2009 starting with a 0.5% cut in November.

Mortgage deals will average around 5% with trackers being set at BofE BR +2%.

100% mortagges will return within 3 months of house prices stopping falling (mid 2009).

GG

confused31_2

GDB2222 wrote: »

Nope.

I just don't see how the banks are going to make much money selling new mortgages at interest rates barely higher than they are paying on deposits? The strategy I have outlined is what the banks have done in the past.

or maybe you have a lot if savings, i dont mind people having their own opinions, but when they start coming out with things like thats why your confused makes me laugh, just because i dont agree with you.

Why would the bank loose out? if the libor rate and the bank of england rate went down to 3% and the banks lent customers say at 4.25 to people who had a 20% deposit they would make money and it would be low risk lending.

Now your goingon a previous time when there was recession and interest rates were put up to 15% and loads of people lost their houses, how will the bank gain by making everyone go bankrupt?

This time is different the tax payers are forking out for this mess, i dont agree with it, but the only way the banks are going to get back , are to lend to safe customers and keep the ones they have got by not driving up interest rates to loose them.

confused

StevieJ

casper_uk wrote: »

I can see rates staying the same or going up, we are heading into a recession and banks get very nasty in recessions. Add in that they are desperate for cash and will be for the next few years, remember they have to pay back what they have borrowed from the BoE plus interest. This means they are going to want to maximize profits so i don't think they will pass interest rate cuts on what so ever.

You are joking of course?

GDB2222

confused31 wrote: »

or maybe you have a lot if savings, i dont mind people having their own opinions, but when they start coming out with things like thats why your confused makes me laugh, just because i dont agree with you.

Why would the bank loose out? if the libor rate and the bank of england rate went down to 3% and the banks lent customers say at 4.25 to people who had a 20% deposit they would make money and it would be low risk lending.

Now your goingon a previous time when there was recession and interest rates were put up to 15% and loads of people lost their houses, how will the bank gain by making everyone go bankrupt?

This time is different the tax payers are forking out for this mess, i dont agree with it, but the only way the banks are going to get back , are to lend to safe customers and keep the ones they have got by not driving up interest rates to loose them.

confused

As it happens, I put my money on fixed rate deposit with Northern Rock a few months ago. I could see that the response to the housing crisis would be to lower rates for savers.

Some of that saving in interest will be passed to borrowers, particularly as you say for low-risk new borrowers. (Although I would query whether 20% deposit is actually enough for a low-risk loan.) However, the banks will definitely want to widen their margins between savers and borrowers as much as they can get away with. If defaults are costing them say 2% a year of their loan book, then they will need to make an interest margin of 2% on the rest of the book to cover it - preferably a bit more in order to rebuild their capital base.

The £40 billion the govt has put into the banks as capital is only just over 1% of the mortgage loan book. That's not going to pay for all the defaulting loans over the next 5 years.

confused31_2

You imagine when houses have dropped and stabalised, hopefully a first time buyers property will be about 100,000 pound at the most, so if they can get 20,000 pounds together the remainder of their loan will be 80,000 pound, which will be managable if the interest rates are right for them..

I think 20% would be a risk today but we are talking about next year, but when the housing market bottoms out 20% would be plenty.

I dont think the first time buyers will be back for a bit anyway as the house prices havnet fell enough, but im sure they will, and thats when we will see the banks lower their rates and the housing market start to pick up.

The banks will have a strategy, we will just have to wait and see what they do.

confused

kennyboy66_2

GDB2222 wrote: »

A

The £40 billion the govt has put into the banks as capital is only just over 1% of the mortgage loan book. That's not going to pay for all the defaulting loans over the next 5 years.

Are you sure that the UK mortgage loan book is £4 trillion. Looks a bit high to me.

Generali

kennyboy66 wrote: »

Are you sure that the UK mortgage loan book is £4 trillion. Looks a bit high to me.

And to me. I think the UK's housing stock is 'worth' about £3,000,000,000,000.

According to The Times today the total liabilities of the UK banking system are £4,100,000,000,000.

casper_uk

StevieJ wrote: »

You are joking of course?

No not at all, i was talking about Mortgage rates not the BoE rate. Mortgage rates will stay the same if lucky or go even higher imo. BoE interest rates will be cut but that won't solve anything apart from make things more expensive to buy as the £ will tank even more. Like i also said, don't expect the cuts in the BoE interest rate to be passed on either....

ad9898_3

I think mortgage rates have little to do with interest rates anymore. Banks will 'gap' to re-build their balance sheets. 100% mortgages have no chance of returning until house prices start to go up, which may happen and I stress may happen about 2 years after we come out of recession (as is the normal model in this scenerio).

I don't think we can underestimate the severity of this downturn though, unlike the 90's which took 6 years for prices ro start rising, this time banks are on the edge of the abyss, something that didn't happen last time.

I believe house prices have little chance of rising for a minimum of 4 years and probably longer than that. It is then we may see the return of 100% mortgages.

However, my argument would be that they should be outlawed altogether, along with interest only mortgages without proper investment vehicles to repay the capital. Relying on HPI as the investment vehicle is pure 'pyramid selling' and should be stopped with immediate effect.

This is one of the reasons we are where we are.

StevieJ

casper_uk wrote: »

No not at all, i was talking about Mortgage rates not the BoE rate. Mortgage rates will stay the same if lucky or go even higher imo. BoE interest rates will be cut but that won't solve anything apart from make things more expensive to buy as the £ will tank even more. Like i also said, don't expect the cuts in the BoE interest rate to be passed on either....

Never heard of trackers? Never heard of falling commodity prices?
Falling rates WILL be passed on just may take a little time.
As an example I only have a small mortgage but the rate is BaseRate + 0.95 as the normal rate.