What Interest Rate Should we Plan for?

matt99b

Hi,

We've first time buyers. I've heard so many horror stories about people buying during low interest rates and then being re-possessed when they rise.

Can we trust a mortgage broker to give us good advice on what interest rate to plan for?

How much interest rate should we plan for?

Thanks!

jockosjungle

How much deposit and what percentage of value is it? What sort of house prices are you looking at?

Yes you can be hit badly with interest rate rises so be careful, before agreeing to a mortgage you should consider how much it'd be if you're paying back at a rate of 15%, could you be able to afford it?

Lots of banks have a ready reckoner for interest rates online, HSBC definitely do so may be give that a go as a starting point

R

iceage3

15% dont worry them!!!!!!!!

matt99b

Thanks for your advice. I know there are house owners on this forum with more experience than us, so it makes sense to listen to them!

jockosjungle wrote: »

How much deposit and what percentage of value is it? What sort of house prices are you looking at?

Yes you can be hit badly with interest rate rises so be careful, before agreeing to a mortgage you should consider how much it'd be if you're paying back at a rate of 15%, could you be able to afford it?

R

Thanks Jockosjungle. Our deposit is likely to be around 30k. Our joint income is around the £50k mark, possibly higher. Is the deposit and percentage value relevant for the maximum interest rate we should consider?

We're looking to see how much we can safely borrow before we look in depth at properties.

TrickyDicky

You should plan for whetever rate you've been offered + 5% (or maybe more in really bad times). If you could afford a mortgage at this rate, you'll have no problems. Obviously if you're on a fixed rate, look at the SVR and add 5%+.

Some people can only just afford the mortgage when rates are low, then get surprised when rates go up. If you stick to the rule above, you should be more confortable.

jockosjungle

Maybe 15% interest rate is a bit much admittedly, I was just old enough to remember my parents having to pay that much.

Your deposit of £30k is pretty decent, the higher the depositt compared to the value the better. If you were looking at a house of £150k you'd get a LTV of 20%, and give you access to some of the better deals, if you can get a house for less the deals get better and if you pay more the deals get worse - you'd need 10% minimum but some pretty shoddy deals.

Where abouts are you looking to buy?

Again have a play on the HSBC mortgage calculator (or anyones), look around for a deal to see what you'll be paying each month, then consider what will happen when rates rise. I don;t suppose rates will hit 15% ever again, however you don't want to be in hardship because you can't afford any sort of rate increase

R

Pee

I would plan to be able to cover a 15% interest rate for a short period i.e. it could go up to that, it probably won't stay there for long and if it does, I'll be eating beans on toast once a day, but I could manage it.

Of course, I am not sure my bosses could afford that interest rate on their borrowings and without a job, I wouldn't be able to manage it.

Congratulations on considering this.

Thrugelmir

If you based the amount you wished to borrow on 3 to 3.5 times joint salary thats a reasonable guide.

If interest rates remain low you have the option of overpaying the mortgage thereby reducing the capital debt. If they rise then you aren't overstretched.

Also base your decisions on how secure your employment is, whether you intend starting a family etc. As these events impact more than a % or two increase in interest rates.

ray123

If you want security, go for a fixed rate mortgage for 5 years, or even 10 years. Whatever the base rate, you will pay a fixed amount each month.

matt99b

jockosjungle wrote: »

Your deposit of £30k is pretty decent,

R

That's what we thought but apparently it's not enough. We've been in touch with mortgage brokers today, and they said we ideally need a minimum of £60k.

I need a house or my business will go bust (not a flat unfortunately), and my partner's job is in central London, so the situation is not exactly ideal in terms of house prices! According to house prices, the minimum we need is around £250k and that's for a shoddy end of terrace house in a very cheap area.

We have been offered a mortgage with 10% deposit, but it's extremely expensive, and there's no way we could afford it at any interest rate rises.

We have been saving and trying to buy a house for many years, we're middle-aged now and not getting any younger. A few years ago, we were told the system had changed in that I can no longer self-certify my income, so I have spent a fortune on chartered accounts for the past couple of years for the sake of the mortgage. But it looks like even now, after all our efforts to get chartered accounts and save a big deposit, we're still priced-out.

Thrugelmir

The obvious statement would be , move further out of London.

Have you considered it?