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

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  • wotsthat
    wotsthat Posts: 11,325 Forumite
    Bitter? - too right I am.

    Why? You've done pretty well both in and, presumably, out of the property market if you've managed to retire in your thirties.
    Now grow up, grow a pair, and accept some of the reponsibility - and possibility - that you might have to rearrange, and even reduce (shock!), your own little perfect existances too.

    I don't disagree with your advice at all - maybe you should take it yourself.
  • drewwa
    drewwa Posts: 107 Forumite
    First Anniversary Combo Breaker
    When I took my last mortgage out in 2005 I calculated the worst case percentage figure I could afford to repay. It was just under 10%. At the time interest rates were around the 4-5% mark so it seemed like a reasonable calculated risk, given that I remembered my parents suffering under the 14% figure back in 1988.

    I doubt many house buyers are factoring in the possibility of paying 14% interest at the moment, or even 10%. I do however, and my finances are based around that remote, but real possibility.

    By complete luck I took out a +0.95% BoE tracker which has hugely benefitted me for the last 20 months, but I'm under no illusions that the current interest rate is 'situation normal'. 6-7% is the historical average for the last 300 years. We'll be back there at some point and perhaps higher.

    I've taken full advantage of the ability to squirrel away the difference between my original payment and the currently much lower mortgage payment. It won't last forever, but it's been the single most positively influential thing on my personal statement of account, bar none.

    I feel I've been responsible, and I got lucky, for which I'm most grateful.

    Cheers,

    Drew.
  • dont let low interest rates fool you

    you have to compare wages to house prices

    even a 2% rise can become very painful
    £48515 interest £181 (2009)debt/mortgage-MFIT/T2/T3
    debt/mortgage free 28/11/14
    vanguard shares index isa £1000
    credit union £400
    emergency fund£500
    #81 save 2018£4200
  • I bought a house in May this year and sometimes wonder whether I did the right thing......

    As a FTB, at least I can take solace in the fact that I'm finally chipping away at the mortgage rather than paying a landlord. But then, in rented I could have been putting aside additional money - paying the landlord rent instead of the banks interest, and then saving substantially if/when house prices fall significantly.

    The other thing I keep semi-regretting is that we locked in to a 10 year 6.09%. The thing that swayed us to go for this mortgage was the unlimited overpayments feature - which has proved great in the last 6 months during which we have made several thousand £££s of overpayments. I'm not sure what long term mortgages are around at the moment which allow for unlimited overpayments as I have not looked since moving - but it would be interesting to know.....

    Of course, in 5 - 10 years we might be chuffed to be locked in at 6.09%. Who knows.... But then we are at the meaty end of the mortgage now and obviously a low interest rate would be far more beneficial at the moment than it will be in years to come when the capital is a lot lower.

    On thing I do wish we had done - and which no one advised us to do at the time - is split the debt over two mortgages. We could have taken some at the 6.09% 10 year fixed, and some at a much lower tracker rate...... Then put as much money as possible on the 6.09% mortgage and only pay the minimum on the tracker. Oh, hindsight!
  • Leemer
    Leemer Posts: 12 Forumite
    For those people on very low mortgage rates (2% or below) surely it is in your own interests not to overpay your mortgages but instead put it into an ISA paying 2.8% (Halifax) or if you have the full amount in those, a savings rate of 2.9% Gross (Post Office), this way you will be making a profit on your mortgage (stoozing). When interest rates do go up, you just make a lump sum overpayment.
  • drewwa wrote: »
    When I took my last mortgage out in 2005 I calculated the worst case percentage figure I could afford to repay. It was just under 10%.
    ...
    I feel I've been responsible, and I got lucky, for which I'm most grateful.
    Cheers,
    Drew.
    When I took my mortgage out I did a similar thing, however because we were expecting our first child I thought it more prudent to go for a fixed rate, to hedge against the rises being too much.
    I also feel I've been responsible, unfortunately I didn't get lucky!!
  • For those who are upset at us that have borrowed more that is responsible I can understand. I now KNOW I have been iresponsible but at the time I was blissfully unaware, I did not enter this thinking I was irresponsible.

    We brought our house in early 2005 when I was just 20. At the time house prices were rising and we felt the sooner we got on the housing ladder the better, my mother in law strongly encouraged us. So we brought our house with hardly any deposit on high income multiples.

    Now it is a decision I regret, we are trapped in a house which we have out grown (2 little ones) and has become a worry rather than a refuge. I suspect we would be financially happier if we had stuck to renting for longer.

    Luckily, both our wages have increased since we first got our mortgage so it is not as bad as it could be, and we are overpaying the mortgage as much as possible. we have saved 3 months joint income and cutback on day to day living (although we could cut back more if needed) I do still worry about how much rates will rise and where we will be when our fix deal ends. (sep 11)

    I know I am responsible for my own position and do not wish to shirk that. However when I brought my house I had no idea of historic interest rates, what the BoE base rate was and the notion that house prices could fall and what I would do in that circumstance. I guess it has made me realise that financial education is important and it is something I will be drumming in my little ones as they get older.
    Back on the MFW Wagon!
    MFW 2011 #195 OP £2500/£400/£9052:j
  • GAILEY
    GAILEY Posts: 134 Forumite
    First Anniversary Combo Breaker
    I think it is right that we can never conclusively plan for everything, there will always be the unexpected twist that sets all our good intentions aray...

    I remortgaged (away from Northern Rock) in 2005, taking a 10 year fixed deal at 4.99% - I thought it was good at the time and would give us some certainty while our daughter was growing up - have I lost out?? I am not sure, I look around and see the majority with very little mortgage outlay and feel a little disappointed....but then I think that I don't really know whether I'm winner or a loser until much further down the line do I - depends where rates go in the future.

    At the moment I am overpaying the maximum allowed, so my mortgage is £500 on the fix and £500 on the overpay - so it will be finished bfore my fixed rate finishes and at least I have certainty...but I must confess that I don't know whether I am doing things right - there is no back or white is there?
  • wildfrog---im approaching 50 and have only learned about mortgage/bank practices these last few years.(there after as much money they can get from you as possible)

    i could of been mortgage free years ago.

    1.first one sold to me was a dodgy endowment mortgage
    2.second was bank--sold me loans which unknown to me was there own product under a diff guise--with high commisions

    with the internet and mse i will completely change my financial situation in 3 years.

    1.MF
    2.no more bank loans
    3.no more over/drafts
    4.save/invest
    £48515 interest £181 (2009)debt/mortgage-MFIT/T2/T3
    debt/mortgage free 28/11/14
    vanguard shares index isa £1000
    credit union £400
    emergency fund£500
    #81 save 2018£4200
  • Interest rates are not going up for the forseeable future. Inflation will be used to erode the real value of government and personal debts.

    The government and more importantly the BOE know that any increase in interest rates will bring our housing market down like a pack of cards and the ramifications of that are unthinkable. The only thing that has saved us this time from a housing collapse and all the pain that goes with it the inherent shortage of properties for our burgeoning population.

    Expect interest rates to remain low for a number of years. Its only when the government has brought the budget deficit under control that anything like normal interest rates will be seen again. That is several years down the line.
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