How much will doomsday interest rates affect mortgage repayments

fc123

Wages are roughly double nowadays to back then for comparable work....thinking our Saturday staff or similar.
Can't compare to our own salaries as we are zig zag salaried as have own business.

fc123

vivatifosi wrote: »

My £36k mortgage hit £452pm on SVR back then. Really hurt. I can't get that worried about rate hikes when people should have taken into account the historical low we're at. More worried about the hikes in everything else, like tax. Ouch...

Dopestars deflationary thingy theory keeps rattling about in my head.....I think I am getting it now.

fc123

HAMISH_MCTAVISH wrote: »

Very true.

People forget how much harder it was in those days, overall.

I don't think 'harder' per se.......just equally as hard though...same for my parents and grandparents but for different reasons.

sjaypink

Thats a point I often wonder about- how high rate would have to be before people actually started defaulting (as opposed to just struggling).

Personally I would do anything to avoid losing my house (if I had one ), but it is surprising how many people seem to still spend out on rubbish whilst getting into mortgage arrears. Same goes for rent too actually...

I think many presume there are more laws/ rights protecting them than there actually are- thats not to say there are too many or few BTW- just an observation that many don't take arrears seriously until too late

fc123

sjaypink wrote: »

Thats a point I often wonder about- how high rate would have to be before people actually started defaulting (as opposed to just struggling).

Personally I would do anything to avoid losing my house (if I had one ), but it is surprising how many people seem to still spend out on rubbish whilst getting into mortgage arrears. Same goes for rent too actually...

Not much difference to back then really. I know of a family who got repo'd in 1992 and it could have been avoided easily with a bit if effort.

The problem with this site (and chat and info on internet) is it gives the impression that a DFW or BR post writing about difficulties is representative of the majority. I don't think it represents a snapshot of the whole population either.

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I am more Cleaver/Davesnave in approach now. You cut your cloth according to the moment....if it feels too tight, then hold off a while or go for something more modest. One can put life on hold for ever quite easily....and then Armageddon never came.

Cleaver

ln1234 wrote: »

So here's an example.

Mr. and Mrs Smith have a £100,000 mortgage on their current house and are currently paying £505 a month based on their lenders standard variable rate of 3.5%.

To control inflation the BOE raise interests substantially to 6.5% and the Smiths bank increases their SVR to 8%. How much extra will the Smiths be paying each month?

Current payment at 3.5% = £505
New payment at 8% = £780
Difference = £275

So the question is for the average Mr. and Mrs. Smith, would £275 a month extra be make or break for them in terms of mortgage payments?

I understand your point, but I don't know if that really is the question. There are far too many variables in the real world to try and make a judgement. Maybe one of them has lost their job, or taken a pay cut. Maybe they've had a kid or become carers. In which case this increase could be very serious.

On the other hand, maybe they have new better paying jobs, or were smart enough to fix their mortgage in late 2010 at 6% for five years.

The other, rather huge, question is whether this Mr and Mrs Smith were paying 6%+ before the recession and, if they were, what have they been doing with the additional disposable income in their wages? If they were 'upsizing' their life accordingly, then the going back to similar payment rates or higher could be a real shock. If they've been paying down additional debt then they might be in a better position than they would have been in the first place.

I don't know what to think to be honest. I see regular stories on here that personal debt is higher than ever before and then the next day a link to an article stating that we're paying down debt faster than we have for years.

Radiantsoul

Cleaver wrote: »

I don't know what to think to be honest. I see regular stories on here that personal debt is higher than ever before and then the next day a link to an article stating that we're paying down debt faster than we have for years.

Both of those things could be true.
We have a large stock of personal debt, but the flow is slightly negative.
It all depends on how you measure it.

ManAtHome

Cleaver wrote: »

I don't know what to think to be honest. I see regular stories on here that personal debt is higher than ever before and then the next day a link to an article stating that we're paying down debt faster than we have for years.

Personal debt still going up (but creeping rather than surging these days)

Total UK personal debt at the end of December 2009 stood at £1,460bn. The twelve-month growth was 0.7%.

http://www.creditaction.org.uk/debt-statistics.html

Guess that some people are paying down debt, and others are increasing their debt...

wymondham

The_White_Horse wrote: »

to be honest is 8% doomsday? i would have thought 12% is more doomsday.

that's nothing, what about the 15% about 15 years ago? I would imagine very few current variable people could survivie that one!

chewmylegoff

The_White_Horse wrote: »

i think the people that will struggle more are the ones with 250k plus mortgages - which is most people in and around London who have bought a house post 2004.

250k at 3% is 1264 a month - that is already a struggle for some

250k at 8% is 1956 a month - an increase of 687

if they've got a £250k mortgage, they're likely to have an income of about £70k, which is £4k a month after tax...