'A mortgage warning, take a look at the UK Interest rates' history..' blog discussion

Coveredinbees!!!!

Like a previous poster I have been over paying while the going is good, I was talking to a mate about what he was doing and he said it was great he had load of spare cash at the moment and has 25 years to pay his mortgage. Fine until the rate hit 10% again.

MSE_Martin

michaels wrote: »

WE were discussing on the economy board how sensitive borrowers were to rising rates and the replies thus far illustrate the range - some on fixed for who it is likely to make little difference, others on trackers who are likely to see big increases of who some like me could afford rates up to abut 11% and others who would be hit by any rise.

I wonder what info the BoE have on this IR sensitivity when deliberating.

I agree - what goes up is much more painful than what comes down. In the money diet I call it "fools gold" that we absorb our new income / disposable income quickly and find it hard to adjust downwards.

I think I wrote about it in this too http://www.moneysavingexpert.com/news/mortgages/2009/11/the-mortgage-margin-scandal

mdr86

I've made a graph here of the base rate changes over the last 2 centuries from the link Martin gave: http://www.madanra.com/base-rate-graph.pdf if anyone's interested...

ailuro2

I paid interest all those years ago when it was up around the 14% mark and never forgot it... there were so many news reports of thousands of people just posting their house keys through the bank / building societies door and walking away because they couldn't pay the mortgage.

Make the most of the low interest and pay the mortgage as if interest rates were still at 5%, that way you'll not get used to the extra money and will be well placed to cope when they return to normal.;)

Gemmzie

MSE_Martin wrote: »

I agree - what goes up is much more painful than what comes down. In the money diet I call it "fools gold" that we absorb our new income / disposable income quickly and find it hard to adjust downwards.

I think I wrote about it in this too http://www.moneysavingexpert.com/news/mortgages/2009/11/the-mortgage-margin-scandal

Exactly, and that's one reason I never let a wage increase go into my general account - it goes to something specific but short term (debt payment, holiday, savings)

ailuro2 wrote: »

Make the most of the low interest and pay the mortgage as if interest rates were still at 5%, that way you'll not get used to the extra money and will be well placed to cope when they return to normal.;)

My parents can cope with a return to 6% mortgage so a 4.5% base rate - roughly where it was three years ago - because we've always kept the "spare" for mortgage overpayments, debt overpayments and a little for spending.

sarahs999

It is a time bomb and I'm acutely aware of it too. Sadly I'm not in a position to make overpayments; I've been ploughing all my spare money into my credit cards to clear them with the aim of overpaying on my mortgage after that. I managed to secure a tracker at a very good deal just before everything went crazy so have really benefitted from this past couple of years of low rates, but I know it can't last much longer. As soon as they start to rise I will be going back to my usual, a fixed rate. Even though I know all this it still feels 'normal' now to have such low rates as they've been around for a couple of years... there will be a mass wave of reposessions when they do start to go up. Worrying times.

50Twuncle

But with such low interest rates - savings rates are low.
It depends on your circumstances - whether you want rates to rise.

I feel that if the base rate rose to 3% - we would (all ?) be happy....

ie) - Those of us with no mortgage and savings (that at present are stagnant) and those on mortgages - will have to grin and bear it - they obviously didn't have the forethought to budget for inevitable interest rate rises !!

Any comments ?

Clowance

Back at the end of the 70's - early 80's I had a mortgage at 15.5 (yes Fifteen and a half) percent. I don't know if that was the highest its ever been, but it was tough to pay it. I think the flat cost 17000 (it was in a cheap area - Hastings - and the mortgage was about 15000 but my salary back then was about (I think) 7000 per annum. If I was doing the same job now I imagine I would be getting about £28000 but the same flat would be at least 100000 - 4 times salary compared to 2.5 times. I sold the flat for the same as I paid for it 4 years later, having only had it as an "investment" since I lived 50 miles away (had only used it for holidays). Property not always a good buy, looking back I should have rented it out.

ilurvfree

Historical trends are always good to look at, however nobody (especially our politicians) actually knows where the future rates will go. It's a total gamble like most things financial. Personally it looks to me like there is a lot tighter control over interest rates and inflation than there has ever been compared to 20 30 40 years ago and long may it continue.

Mass property ownership hasn't really been going on in this country long enough for trends to be accurate. You just have to look at what the so called financial experts predict, they contradict one another constantly regarding future interest rates.

In Germany the majority of the population rent, as we did 30 plus years ago, with a great deal of legislation that benefits mainly the tenant as opposed to the landlord.

PParka

Are people really basing the affordability of their mortgage on the base rate staying at 0.5%?

Surely when taking out a tracker mortgage, say of 2% + base, one of the first things to do is think what would the repayments be if the base rate went back up to 5% or higher.