How many would be in trouble if rates went to 10%?

ILW

It would be interesting to know if people who are now on 3 and 4% rates could sevice their mortgages if rates went up to say 10% in a year or so. Talking to some people I know it appears many do not even know how much a 1% rise increases their payments.

Gorgeous_George

If rates are 10% in a 2010 I'll bare my backside in Burtons' shop window.

Of course, if rates rose sharply, some people who have decided to spend their windfall (from the lower rates) on loans for cars, home improvements and holidays will struggle to find the extra needed. Those who have saved their windfall or overpaid their mortgage will be far better placed to deal with the rate increase.

I fear that many of the less savvy mortgage holders will struggle when rates rise.

GG

getmore4less

If rates are 10% in a 2010 I'll bare my backside in Burtons' shop window.

If they are still trading

some people who have decided to spend their windfall (from the lower rates) on loans for cars, home improvements and holidays will struggle to find the extra needed. Those who have saved their windfall or overpaid their mortgage will be far better placed to deal with the rate increase.

As I showed on a previous thread 2 years of low rates, paying the higher rate, and the rates can go up to over 7% for 3 years and they would still be better off after 5 years.

Getting you borrowing down is the best protection against higher rates long term.

kier333

Well when taking my recent Mortgage i allowed for an increace to 10%, i strongly believe that come 3yrs or so rates will be up to 7% anyway.

maveli

kier333 wrote: »

Well when taking my recent Mortgage i allowed for an increace to 10%, i strongly believe that come 3yrs or so rates will be up to 7% anyway.

That will never happen in a country which is totally dependant on property market and currently in deep recession. Just think this way how many in UK will be able to afford such a high interest rate ? May be 20-30%. As a result Banks will start repossession and the housing market will collapse. Economy again into recession. This is not the Britain in 1970s when manufacturing (hard working people) sector dorve the economy, today Britain's economy is driven by Financial institutions (lazy dishonest b***s) and property market. For that reason interest rate will stay low.
Stop listening to those 'advisors' predicting dooms day for tracker mortgages. They are against this just b'cos the best trackers out there do not pay any commission to them.

beecher

maveli wrote: »

Stop listening to those 'advisors' predicting dooms day for tracker mortgages. They are against this just b'cos the best trackers out there do not pay any commission to them.

that's nonsense. Most trackers available now only look attractive because base rates are at 1%. Once they go to normal rates of 5-6% they will be paying 4-5% more than they are right now and many will be paying more than 7%. Suddenly they won't look quite so attractive, and this isn't a doomsday scenario, but a reverting to norm.

I could afford 10% quite easily, but then I didn't buy into the 'prices can only go up, buy an investment not a home' madness.

maveli

beecher wrote: »

that's nonsense. Most trackers available now only look attractive because base rates are at 1%. Once they go to normal rates of 5-6% they will be paying 4-5% more than they are right now and many will be paying more than 7%. Suddenly they won't look quite so attractive, and this isn't a doomsday scenario, but a reverting to norm.

Most of the good trackers in the current market are lifetime one and with no early exit fee. So go for this when the IR is down and switch when the IR goes up. What I believe is the IR will not go up above 5% for the next 5 years.

I am glad that I went against the advice of all the mortgage advisros I consulted in the start of 2008 and chose a lifetime BoE + 0.23 mortgage which was not available thru any "whole of the market advisors". The IR may go up to 5%, but I already saved more than 5K by choosing this compared to the best fixed mortgage I could get in Feb 2008.

ILW

maveli wrote: »

That will never happen in a country which is totally dependant on property market and currently in deep recession. Just think this way how many in UK will be able to afford such a high interest rate ? May be 20-30%. As a result Banks will start repossession and the housing market will collapse. Economy again into recession. This is not the Britain in 1970s when manufacturing (hard working people) sector dorve the economy, today Britain's economy is driven by Financial institutions (lazy dishonest b***s) and property market. For that reason interest rate will stay low.
Stop listening to those 'advisors' predicting dooms day for tracker mortgages. They are against this just b'cos the best trackers out there do not pay any commission to them.

I would guess you are pretty young and missed out on the last blip. I took out my first mortgage in 1989 at about 5%, within a year it had gone up to 12% and briefly to 15%. Nobody at the time believed it could happen.

maveli

ILW wrote: »

I would guess you are pretty young and missed out on the last blip. I took out my first mortgage in 1989 at about 5%, within a year it had gone up to 12% and briefly to 15%. Nobody at the time believed it could happen.

I don't consider myself as pretty young. But I did miss out the last blip.

As I mentioned in the previous post the driving forces of today's British Economy is totally different that of the previous blip. So no point in comparing the two.

System

ILW wrote: »

I would guess you are pretty young and missed out on the last blip. I took out my first mortgage in 1989 at about 5%, within a year it had gone up to 12% and briefly to 15%. Nobody at the time believed it could happen.

I think the difference was that back then we weren't so reliant on credit and house prices were so much cheaper. IR's quite simply can't hit 12% again as half the country would be homeless in a shot.

Peelerfart

I think Getmore4less got it spot on -

"Getting your borrowing down is the best protection against higher rates long term "

And we all better hope and pray that interest rates don't hit the magic 10 % figure or it's george's ar53 for all of us !

:doh: