Interest rate will go up in new year

Cleaver

Graham_Devon wrote: »

I'd imagine the balance of the weight falls towards people looking after their money.

However, pretending that people are not spending any savings they gain, is just applying the blinkers.

I'd suggest when interest rates increase, we look at how spending decreases. Then, you can measure it.

However, if people wish to blindly suggest that no one out there is spending the savings made on mortgages, then they would also have to suggest spending in the economy will stay the same when interest rates increase.

I don't think anyone thinks the above....therefore the only conclusion there can be, is that we are spending while mortgage rates are low. The increase in spending, and increase in debt, would suggest this.

Like I say though, wait until interest rates go up, to measure the drop in spending. That will show us what were discussing.

Here's my very simplistic take on all of this.

The majority people in life are pretty sensible. You can see this by looking around you: they have jobs, houses, families, holidays etc. and seem to do okay for themselves. I imagine these people are probably intelligent enough to understand that some mortgages are low at the moment and will be saving or overpaying at the moment and will have one eye on the future (maybe by fixing for five years at 4%, like we did this year).

A minority of people in life aren't sensible. These people will be spending money they've saved on their mortgage on stuff and aren't thinking of the future. They are the idiots that ILW refered to earlier.

I reckon the 80/20 rule applies to the sensible / idiotic ratio.

And I keep saying this, but there will be many of us out there who have had our mortgage rates stay the same throughout all of this, seen our pay remain the same and seen our general outgoings remain the same. We all have one eye on what could happen as we're in dark times, but for a lot of people there's been no surface change to money in and money out every month.

chucky

if this is all true... it would mean that:

Mortgage Payment 2007 = £1,000
Mortgage Payment 2010 = £400
Mortgage Payment 2012 = £600

can someone explain why people can't afford the mortgage in a couple of years time if they were paying £400 more a few years ago?

Pete111

ILW wrote: »

True, it is purely anecdotal and I could only make a vague guess at the percentage of people who are in this position. Talking to friends of mine, it appears that about half who are on trackers are just going with the good times and not overpaying at all whilst putting the money saved into mainly cars (on finance) and holidays. These may be the only ones in the country doing it, but I somehow doubt it.

I would guess there are figures somewhere about how many are overpaying on mortgages but I have not seen them.

Straw poll in the pub the other day incicated that 100% (ok 5 people..) were overpaying and a similar 100% were enjoying low fixes or very low trackers currently allowing both overpayments and extra money to spend.

Only one group of people admittedly but I suspect most reasonably savvy homeowners are taking the opportunity to reduce their debt at this point.

ILW

chucky wrote: »

if this is all true...

Mortgage Payment 2007 = £1,000
Mortgage Payment 2010 = £400
Mortgage Payment 2012 = £600

can someone explain why people can't afford the mortgage if they were paying £400 more a few years ago?

Commited to other things?
Cut down working hours as can afford it?
Etc etc.

Not for eveeryone but I would suspect a fair few.

Look at the amount of people who say they in financial trouible as they have been forced to take a 10% pay cut, a £200 increase in mortgage payments would be much more severe.

chucky

Pete111 wrote: »

Straw poll in the pub the other day incicated that 100% (ok 5 people..) were overpaying and a similar 100% were enjoying low fixes or very low trackers currently allowing both overpayments and extra money to spend.

Only one group of people admittedly but I suspect most reasonably savvy homeowners are taking the opportunity to reduce their debt at this point.

i'll take that a little bit further for you...

overpaying reduces the term of the mortgage and obviously the capital.

the reduced mortgage payments mean that the length of the mortgage stays the same.

these people aren't doing anything wrong - they're still repaying their mortgages as they are meant to be doing.

chucky

ILW wrote: »

Commited to other things?
Cut down working hours as can afford it?
Etc etc.

Not for eveeryone but I would suspect a fair few.

Look at the amount of people who say they in financial trouible as they have been forced to take a 10% pay cut, a £200 increase in mortgage payments would be much more severe.

92% of people are still employed. exceptions are not the rule.

a £200 increase in mortgage payments is assuming that the spread between Libor and the mortgage rate remains the same - it won't it will reduce as rates increase.

the only people it will hurt is those that are unable to remortgage to a better rate.

wotsthat

chucky wrote: »

if this is all true... it would mean that:

Mortgage Payment 2007 = £1,000
Mortgage Payment 2010 = £400
Mortgage Payment 2012 = £600

can someone explain why people can't afford the mortgage in a couple of years time if they were paying £400 more a few years ago?

You won't be able to get a job at the Daily Mail. For a start you are not on-message and secondly your charts are nowhere near sexy enough.

Graham_Devon

chucky wrote: »

if this is all true... it would mean that:

Mortgage Payment 2007 = £1,000
Mortgage Payment 2010 = £400
Mortgage Payment 2012 = £600

can someone explain why people can't afford the mortgage in a couple of years time if they were paying £400 more a few years ago?

I'll attempt it.

- Everything is going up in price, i.e. living costs. Tax, fuel, energy, food, so that eats into some of the budget.

- Your above figures only seem to apply to interest only on trackers?

- Base rates and mortgage rates have a larger difference between them now than they have done at any point I'm aware of? Mortgage rates will not automatically align with base rates when base rates start going up. People suggest this will happen, but thats just an opinion. Could be that mortgage rates stay much higher than base rates. Infact thats what the CBI suggest today. Have to remember the banks have bigger costs now than they did in 2007, what with the surplus they have to build up.

- A lot of people have found themselves in part time jobs. Although not hitting the job figures, it's well known that many many people are in part time jobs, looking for full time. So not everyones income has stayed static, which you suggest above.

Overall: Most people will be able to afford the increase. But not everyone who was paying £1000 in 2007 will be able to afford the increase. Which means basically, we have less people able to afford what they could in 2007, in 2011.

ninky_2

ILW wrote: »

I would guess there are figures somewhere about how many are overpaying on mortgages but I have not seen them.

there are quite a few people on the mfw boards. maybe not enough to be statistically significant?

chucky

Graham_Devon wrote: »

I'll attempt it.

- Everything is going up in price, i.e. living costs. Tax, fuel, energy, food, so that eats into some of the budget.

- Your above figures only seem to apply to interest only on trackers?

- Base rates and mortgage rates have a larger difference between them now than they have done at any point I'm aware of? Mortgage rates will not automatically align with base rates when base rates start going up. People suggest this will happen, but thats just an opinion. Could be that mortgage rates stay much higher than base rates.

- A lot of people have found themselves in part time jobs. Although not hitting the job figures, it's well known that many many people are in part time jobs, looking for full time. So not everyones income has stayed static, which you suggest above.

Overall: Most people will be able to afford the increase. But not everyone who was paying £1000 in 2007 will be able to afford the increase. Which means basically, we have less people able to afford what they could in 2007, in 2011.

how many of these rent, how many have a mortgage, how many live with parents, how many no longer have a mortgage?

i'd love to agree with you but i don't do urban myths...