If you where buying today at what rate would you stress test?

Conrad

PS - I've never had a single client with such a notion. You might as well stress test how your system will cope with all that mercury from eating fish.

carolt

Personally, I'm with StevieJ - -I'm only looking a buying with a long-term fix, 10 years+, so I know what to expect.

With any luck, one could hope to pay off the remaining capital during those 10 years anyway; my earning power ought to increase substantially as my kids get older. Obviously, it doesn't work for everyone eg those just starting families now or planning to a few years down the line, but the 10 year fix gives you time to plan for that.

JayScottGreenspan

Conrad wrote: »

Geoffky

If it had been down to those as cautious as you, Man would never have got to the Moon, Australia or anywhere else with a risk attatched.

What are the chances of mortgage rates hitting 10% next year? ~0% IMO

What are the chances of morgage rates hitting 10% within the next decade? Far enough above 0% to be worthy of some reflection, IMO.

(Mortgage rates breached 10% in the 90s, the 80s, and the 70s)

StevieJ

JayScottGreenspan wrote: »

Know many 20/30-somethings ready to downsize?

No, but know one or two who have had a cash injection from parents or grandparents, through gifts and inhertance.

Really2

I can do 15% at a push.

One thing about the stress test is forecasting inflation also. So that is 15% on todays terms (I have an offset so it depends on how much I have paid off).
If it was 15% in 10 years time I may be able to stress test at a lot higher because of wage inflation.

Thats the thing with a mortgage in 10 or 20 years time it will be a lot more affordable anyway as the debt is not affected by inflation.

Times of high inflation and high IR have always seen high wage inflation. people tend to forget the latter bit:)

StevieJ

I think it is high wage inflation that consolidates general inflation, in the past when wages were rising the increases were rarely given back whereas, commodity prices and exchange rates were cyclical and fluctuated.

JayScottGreenspan

StevieJ wrote: »

No, but know one or two who have had a cash injection from parents or grandparents, through gifts and inhertance.

Yes, house prices and social mobility do seem to have an inverse relationship.

JayScottGreenspan

As for the OP: I'd stress test at 9%.

Pobby

Wages. 6 day week, £24 in 1970. By 1980 I was on £200. Big interest rates, high pay increases.

carolt

It would be nice - if my wages had almost gone up by 1000% in a decade, I don't think I'd really object to house prices tripling over the same time frame.

Instead of which, wages have gone up c 40% over the decade, IIRC. Certainly not trebled!

At the moment, I can't see employers paying real inflation eg 2% per annum approx - most are freezing wages or even reducing them - let alone adding pay rises higher than inflation to allow house prices to 'catch up'.