Interest Rate Rises - Predictions....??

poppysarah

When mortgage rates burned trhough the roof at 15% (briefly wasn't it?) then mortgages were about a third of the amounts they are now.

So in theory mortgage interest rates only need to be 1/3 of what they were then to cause problems.

It's not just the debt, is the sheer amount of debt people have been suckered into taking on.

People clammering to buy 25% stake in a flat for goodness sake. That surely is a real shoeshine boy moment.

puddy

why didnt you ask me earlier, i could have told you exactly what will happen

in xmas 2007 i took out a 10 year fixed rate mortgage at a rage of 4.89%

from that instant, in fact probably the second that the mortgage was approved rates started to plummet

in june 09, we moved and ported the mortgage with us, thinking that rates cannot stay that low for much longer, so we didnt think that it was worth applying for a new fixed rate (which at that time were quite high) or going on a tracker which would introduce risk which i am quite averse to.

from that instant, rates went even lower

my fixed rate ends therefore in 2017, at that time, rates will come up to 5% and then steadily increase meaning that either way i am stumped again

hope that helps

nickpe

Well i did a brief calculation last night....

Based on me oweing 60k which i do, and interest rates on my nationwide standard variable being 2.5% that means i pay £300...however they will add 1.5% if they accept me to do a consent to let... this takes the cost the rate to 4% which is a monthly payment £350 per month for the mortgage...... now the rent received is estimated to receive £425/£450.......therefore interest rates would have to hit 7% before the mortgage payed would be greater than the rent received.
So thats where im stuck in making a final decision, is it likely they will hit 7% on my mortgage (5.5% BOE plus 1.5% Nationwide add on) and if they did how much further could i go before it became unaffordable.

Ive read this morning on the front page of the express that house prices are set to rise over the next 5 years......hence again giving me further considerations that if i can keep the property on for 5 years then sell - we might come out in a pretty healthy position.

Wyndham wrote: »

If you're going to be stretched if interest rates go up, then it seems a bad idea to even start to me. It depends how much it would take. Personally I'd be stretched if interest rates went about 10% - and I suspect they won't (but again, no one knows). But if I were going to struggle if rates went up by 1%, then that would be telling me something.

But I'm careful with money, I don't take risks. You may prefer to.

nickpe

ps - i know it sounds like im trying to convice myself that i should jump and do it but based on interest rates hitting 10%, that would mean the mortgage payment would be £560 per month.... this means we would have to find approx £100 a month ontop of the rent received.

When i put things into the above context i think i should stop messing about because it DOES seema affordable and it sounds like im being to cautious.

sonastin

In the context of believing that house prices are going to rise...

Would that extra £100 / month invested elsewhere offer you the same return as the increased value of the property? Just because it isn't self-financing, doesn't mean that it is a bad investment.

But it depends on what you think house prices are going to do just as much as it depends on what interest rates will do. And there is a whole other discussion board specifically for that topic!

nickpe

I guess (and im sure it seems evident from the manner i word my questions), that im seeking approval from other users to say "YES you can afford to move so do it" !!!..... however its important i consider the posting of people that can offer great advice in advising me why i shouldnt and what could happen if things go wrong.

As i say after breaking this whole scenario down it seems to me interest rates would have to hit say 12% before keeping the old house on would become unaffordable as i would have to finance the extra payments ontop of the rent received aswell as paying a mortgage on my new house..........and i suppose the truth of the matter is if interest rates did hit 12% im pretty sure i would not be the only guy in the UK to be struggling to pay the mortgage.

sonastin wrote: »

In the context of believing that house prices are going to rise...

Would that extra £100 / month invested elsewhere offer you the same return as the increased value of the property? Just because it isn't self-financing, doesn't mean that it is a bad investment.

But it depends on what you think house prices are going to do just as much as it depends on what interest rates will do. And there is a whole other discussion board specifically for that topic!

pararct

nickpe wrote: »

Snipped Ive read this morning on the front page of the express that house prices are set to rise over the next 5 years......hence again giving me further considerations that if i can keep the property on for 5 years then sell - we might come out in a pretty healthy position.

This is the funniest thing I have read this week on MSE..... The Express of course is the same newspaper that pursued the angle that Diana was bumped off for several years and that the Duke of Edinburgh was in on it.... The Express group owns a sizeable chunk of the local newspaper market across the UK. This market relies heavily upon their income from the local adverts from Estate Agents. They will print things Estate Agents want to see. Don't beleive what you read in the papers. Do your own research into the fundamentals behind the market.

There is plenty of evidence out there about what property values are going to do all you need to do is read and understand it. Only this morning there was a thread in this very forum where a lady was trapped. She was under direct threat of a repossession and was desperately trying to sell her house. The best offer she could muster was £5000 less than her outstanding mortgage..

I feel extremely sympathetic for these people as they have been suckered in by the drivel printed in rags like the Daily Express.

franklee

nickpe wrote: »

Well i did a brief calculation last night....

Based on me oweing 60k which i do, and interest rates on my nationwide standard variable being 2.5% that means i pay £300...however they will add 1.5% if they accept me to do a consent to let... this takes the cost the rate to 4% which is a monthly payment £350 per month for the mortgage...... now the rent received is estimated to receive £425/£450.......therefore interest rates would have to hit 7% before the mortgage payed would be greater than the rent received.
So thats where im stuck in making a final decision, is it likely they will hit 7% on my mortgage (5.5% BOE plus 1.5% Nationwide add on) and if they did how much further could i go before it became unaffordable.

nickpe wrote: »

ps - i know it sounds like im trying to convice myself that i should jump and do it but based on interest rates hitting 10%, that would mean the mortgage payment would be £560 per month.... this means we would have to find approx £100 a month ontop of the rent received.

When i put things into the above context i think i should stop messing about because it DOES seema affordable and it sounds like im being to cautious.

But, but, BUT you've already had experienced landlords and tenants lining up on your other threads to show you the faults with this reasoning. Given you've had the warnings I'll just say that anyone doing their sums based on full occupancy, no bad tenant, no repairs, no agent's fees, no gas service fees, no insurance fees, no legal fees blah blah is bonkers. However you seen like a nice guy so do please come back and tell us how you're getting on once you've done it.