MSE Ness: Home owners told to prepare for 5% base rate

hunnie

Hi,
I am disappointed at those who are gleeful at the prospect of an increase in interest rates
The majority of those who would struggle are the first time buyers who bought on the crest without any experience to know any better.
Young families being repossessed is never good news!
I just hope the increases are slow and well thought out to mitigate the impact.
I, myself am retired with no mortgage so I have no vested interest in this just a good memory for how hard it was when my family was young.
Two parent families with young children have always had it hardest - unless perhaps you are on benefits!!!

Regards
Hunnie

de1amo

Hunni---i thought i was the only one feeling your way!--i could be mortgage free if i chose to be and also i have a pension but i feel for the new generation of home owners--they will get frightened off and then no one will want to buy homes and thus adding another reason for the collapse of prices and any chains ever building!

penwise

I whole heartedly agree with the last two posts.

Times are very hard for many young families at the minute who are struggling to cope financially as it is - living in homes that are in negative equity with little or no hope of selling even if they wanted to.

Like hunnie - I just hope that the increases are properly thought out.

Gorgeous_George

Such good news for the Condems. Higher VAT, unfair child benefit cuts and unaffordable mortgages coupled with huge, Cameron-engineered unemployment. Exactly what the Conservative ideals are all about.

I'd welcome a return to normal as this would signify the end of the world's economic woes. I doubt we'll see it within this Parliament.

GG

JodyBPM

Again, like others, I am finding the idea of people being gleeful because others' are likely to not be able to pay their mortgage very distasteful.

Although only in our 30s, DH and I have pretty much paid down our mortgage to next to nothing, and are likely to be completely mortgage free within the year, so I don't have a vested interest in keeping rates low, but I know many, many people who will really struggle to survive if interest rates rise sharply. Whilst some people might say its their own fault for borrowing large sums, it was often the only way that they could get onto the housing ladder and many people are not that financially literate. Families could well be ruined by a sharp rise in interest rates which they cannot afford, couple possibly with crashing house prices and negative equity. I wouldn't wish that on anyone.

I'd be interested for Martin to do a poll on whether or not those on SVR or trackers have made provisions for a rise in interest rates by 2%, 4% an 6% - It would be interesting reading.

laurel7172

I think quite a lot of people have started to think of ultra low interest rates as a right, rather than the aberration they really are. I know quite a few who have simply upped their spending to match their new disposable income, and I'm genuinely worried about them.

My heart goes out to anybody in negative equity-I've been there and suffered that. It took seven long years to save my way out of it. But that was with interest rates at up to 17%. A drop like this would have been like a gift from the gods.

It's really not so long ago since the lucky few (bank employees on subsidised rates) paying only 5% on their mortgages gloated about it at every possible opportunity.

Keane16

Can't wait. Rates have been kept artificially low for long enough. Hopefully this will help help knock house prices down a peg or 2 to somewhere closer to their long term average, rather than the ridiculous levels they're at currently.

JodyBPM: I don't think anyone intends to be 'gleeful' at others that can't pay their mortgages. But anyone who is only just getting by with rates at 0.5% are... fools? Surely these people weren't expecting rates to stay at 0.5 % forever - simple research would've shown the recent average rate is around 5%: Google "bank of england rate history" first hit (Noob can't post links grrr ). And as laurel7172 mentions above a lot of people have simply not taken advantage of the low rates - anyone who did their research would've used the breathing space provided by the low rates to overpay and build up some sort of cushion for when the inevitable rate rise did come. If with the rates at 0.5% you had no breathing space then I'm afraid you're in over your head. Mortgages are not for kids and if FTBs can't be bothered researching before getting involved then they are right to get burnt.

Negative equity is a nightmare. But houses like all other investments can go up or down. If you bought at the crest of the boom for the short term (<3 years) and are now unable to get off the ladder due to negative equity then you made a bad investment choice. Suck it up. Personally I wouldn't be playing such risky short term games with the housing market if I couldn't afford to take a loss. If you bought for the long term and are currently in negative equity you'll be fine.

I'm 26 and have been unable to get on the ladder. I really hope prices come down because average house prices 5-6x the average salary is daft, if it takes 2-3 years for the prices to adjust to a more reasonable level then so be it. This coupled with the new tighter lending rules (forcing people to save 20-25% deposits to get decent mortgage rates rather than the silly 100% and 125% that we saw at boom time) should see things getting better. Won't happen overnight but it will help to start fix what appears to be a pretty broken housing market.

I plugged my figures into lots of 'rent vs buy' calculators and in my circumstance I'm better off renting for the next 3 years and using extra cash to build up a full 25% deposit - if (as I think) house prices do fall over the next 1 to 3 years. I hope it pays off, and I can buy a half decent first house before I'm 30. Who know what will actually happen...

ILW

penwise wrote: »

I whole heartedly agree with the last two posts.

Times are very hard for many young families at the minute who are struggling to cope financially as it is - living in homes that are in negative equity with little or no hope of selling even if they wanted to.

Like hunnie - I just hope that the increases are properly thought out.

What about the young families who currently cannot afford to buy, but could if prices dropped substantially. I suppose they do not count. There will be winners and losers whatever happens with rates and prices.

Henry_P_Chester

Three years ago the average mortgage rate was around 7.5% people could afford it then and there is no reason (assuming they havent lost their job) why they can't afford it again. The people who will be ib trouble are those who stupidly bought house because of low interest rates did not think ahead. Low rates were a temporary bonus for those in debt and normality now has to start returning.

With inflation so high and GDP above it's long term average a rise in rates is well overdue.

nzseries1

JodyBPM wrote: »

Again, like others, I am finding the idea of people being gleeful because others' are likely to not be able to pay their mortgage very distasteful.

I would like you to point out one single post where this has happened. I personally said it's good news because, for me, I will get a higher return on my savings, and also sterling may strengthen, which is good since I send money back to New Zealand from time to time.

At no point did I say I was gleeful because of others' (sic) being unable to pay their mortgage.

With any major budget decision there are going to be winners and losers. It's sad that some people will struggle to pay their mortgage. However, it is my opinion that people should be armed with all the facts before making such a large decision to purchase. It's clear that rates were going to go back up sometime. If a purchaser who was close to the edge did not know this, then you can't blame the rest of us for that person being uneducated.

As someone's signature states on this board: "It [a mortgage] is not like buying an iPod, so stop treating it like one".