FTB mortgage rates now higher than in 2007, despite fall in base rate from 5% to 0.5%

silvercar

An example.

property bought for 200k in 2006 on life time tracker mortgage at base rate + 0.5%. 10% deposit of 20k and 180k mortgage.

If you reckoned on a mortgage pay rate of 5% that would have equated to £750 a month interest only. You actual payment would be 1% ie £150 a month. Allowing you to overpay by £600 a month ie £7,200 a year. After 3 years, you could have saved £21,600, leaving £158,400 mortgage. You still have mortgage payments based on base + 0.5% rather than the current tracker rates which are at base rate +3% minimum, so you will continue saving £4,500 a year compared to anyone taking a mortgage now.

Any buyer coming along now will probably pay 15-10% less than 2006 (not the peak) prices. So the 200k would now only cost £170-180. Same 20k deposit gives a similar mortgage size.

So 3 years later we have a similar property and similar mortgage size. Difference is that the person who bought 3 years ago has had the benefit of living in their own home for 3 years plus they now have a much better mortgage deal for the life of their mortgage.

Lotus-eater

Lot of assumptions there silvercar, not least that the interest rates are going to remain at 0.5% for three years.

Do you know something the rest of us don't?

bdl1brick

quite ironic really that even though the house prices have dropped its now a lot harder and more expensive to buy than it was pre 2007!

carolt

silvercar wrote: »

But surely all the clued up buyers who have been holding back on buying for the last two years will now have built up massive deposits and be able to access great mortgage deals. Or was that just the theory?

Bit of a dilemma then in retrospect. Should someone have bought two years ago on a low fix or base rate tracker at base -0.74% (I think that was the lowest possible) but paid 15-20% more for their property, or have held out and now get the house cheap but face a much higher interest rate?

It's not really a dilemma, is it?

Unless you have a time machine.

The only dilemma is deciding whether or not to buy now.

Yes, a few of those with the luck and/or foresight to go for a tracker 2 years ago would now be sitting pretty - provided they'd gone for a low lifetime rate. But we've no way of knowing how that will play out over the lieftime of their mortgage if rates shoot up. And of course, most peole 2 years ago didn't go for long-term trackers as all the suggestions were we were heading for inflation - that's why they were offering such good deals on trackers. Anyone who went for short term trackers or short term anythings will face problems as the deal runs out, and they discover problems remortgaging as their LTV has fallen in the last 2 years; at least as soon as interest rates return to normal levels let alone higher.

I'm with Lotus Eater - I'd rather buy cheaper - rates may fluctuate but amounts of capital borrowed still needs to be repayed. Your premise only works when long-term fixes are cheaper - but actually, the 0.03 of a percent the article quoted is not enough of an inducement to vastly overpay to buy versus rent an equivalent property.

dopester

Chris2685 wrote: »

Ah, I thought so but wasn't sure. I like some of the topics in there, but they just get big too fast and I cba reading them if I haven't been keeping up. I know what the zoo reference is in aid of though, it's a shame so much bickering (rather than good debate) goes on in there!

I think the zoo contributed a bit to you not proceeding with that W-Green purchase... when you seemed desperate to buy. As I see it, if you'd proceeded, you'd have regretted it for life.... and you've already seen the asking price fall drastically since.

dopester

silvercar wrote: »

So 3 years later we have a similar property and similar mortgage size. Difference is that the person who bought 3 years ago has had the benefit of living in their own home for 3 years plus they now have a much better mortgage deal for the life of their mortgage.

Yes, I was trying to find a thread where you made the excellent decision to trade-up in 2006. The difference is - you totally misunderstand the crash playing out, and the loss in values to come.

MissMoneypenny

carolt wrote: »

The 'zoo' as you correctly call it, is only 'open' to those who are logged in - not many - I'm not usually logged in when I pop in. I'm a regular, and didn't even know it was there!

I have only just found it now I have read your post carol! I wondered where that board went. I too don't log on very often to read this site.What was the point of Martin doing that

MissMoneypenny

Running_Horse wrote: »

Yes, because as we all know FTBs are too stupid to read the words "house price" or "mortgage" on a list of forums.

There's a sticky on this board about FTB mortgages, instead of being on the mortgages board, as the title would suggest. So you may be right.

silvercar

dopester wrote: »

Yes, I was trying to find a thread where you made the excellent decision to trade-up in 2006. The difference is - you totally misunderstand the crash playing out, and the loss in values to come.

The threads are around if you can be bothered searching. Nothing very exciting, made the decision to trade up in 2006 because it was the right time to do so for my family and my finances. I also benefitted from a great mortgage deal that was fixed for two years and then a base rate lifetime tracker at base + 0.75% and the lender kindly agreed to give me that deal on the new mortgage 3 times the size. The fact that the mortgage deal is now so good was lucky, but I had calculated that I could afford it at higher rates.

Loss in values only counts when I sell and as I see this as a "forever home" I'm not predicting what it may or may not be worth in 20 years time.

So I don't misunderstand the crash playing out. In 20 years time I'll look back and think that I moved at the right time for my family, not whether I would have been better off financially if I hadn't moved until 2011. Incidentally, prices here are around 2006 levels, so by waiting 3 years I would still have another couple of years to wait.

carolt

MissMoneypenny wrote: »

I have only just found it now I have read your post carol! I wondered where that board went. I too don't log on very often to read this site.What was the point of Martin doing that

Apparently there were too many controversial threads eg racist overtones, politics etc - don't know exactly as I was offline for a couple of weeks while it was all happening, but came back and this appears to have been the case.

Shame, as it means intelligent discussion has now been relegated to the depths, and few newbies are likely to either benefit from the wider focus of the board, or likewise, contribute to the discussions, leaving it to become even more cliquey and 'on the edge'.