Households Enjoy £4bn Mortgage Windfall

Pimperne1

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/8838935/Households-enjoy-4bn-mortgage-windfall.html

"Almost 2m households have saved an average of £2,600 a year by switching to their lender’s standard deal after their original fixed-term loan expired, according to research by the Council of Mortgage Lenders (CML)".

Didn't realise that some SVRs are tied to BoE rate:

"Nationwide and C&G offer SVRs of 2.5pc – or two percentage points above base rate. By comparison, a two-year fixed taken out in June 2008 would have cost 6.6pc, according to the Bank of England.
Economists have raised concerns about the potential “payment shock” when rates start rising from their current historic low of 0.5pc, but the CML played down those fears. Markets currently expect rates to rise to just 0.9pc by the end of next year, and 2pc by the end of 2014.
If the markets are right, “the CML estimates that 85pc of borrowers who have reverted to variable rates would still be paying less than their original mortgage payment by the end of 2012, and around 58pc would still be paying less than their original payment throughout 2014”.

This is encouraging though:

"In addition, the research found, 967,000 of the 1.8m borrowers have equity in their homes of at least 10pc and 733,000 having a 20pc stake. “These borrowers are likely to be in a relatively strong position if they wish to refinance,” the report said".

IveSeenTheLight

Pimperne1 wrote: »

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/8838935/Households-enjoy-4bn-mortgage-windfall.html



Didn't realise that some SVRs are tied to BoE rate:



This is encouraging though:

I would wonder if future mortgages will remain tied to the BOE rate or if they will migrate to the banks own level.

Blacklight

This is what most of us have known for years. People with fixed rates that are due to expire or have expired recently fixed their rates when the BoE rate was 5%.

Even the massive hike in rates predicted by some would have left most people better off after the end of their fixed term.

Thrugelmir

Not good news for everyone though.

This week, Bank of Scotland and The Mortgage Business, both owned by Lloyds and closed to new business, said they will increase their SVR from 4.84 per cent to 4.95 per cent on November 1 due to higher funding costs.

Three-month Libor has risen from 0.85 per cent in August to 0.96 per cent. Since bank rate was reduced to 0.5 per cent in March 2009, 17 lenders have increased their SVRs. The most recent rise, the only change so far in 2011, came from Earl Shilton Building Society, which raised its SVR from 4.95 to 5.19 per cent in April.

IveSeenTheLight

Thrugelmir wrote: »

Not good news for everyone though.

This is simply a slow squeeze to get people off the SVR's.
there comes a point though when it's better to re-mortgage and incur the arrangement fee's

Thrugelmir

IveSeenTheLight wrote: »

This is simply a slow squeeze to get people off the SVR's.
there comes a point though when it's better to re-mortgage and incur the arrangement fee's

HBOS was at the centre of self cert lending. So many won't have a choice.

RenovationMan

I'm years ahead of my mortgage repayments. I can't imagine I'm alone in this.

As I said right at the start, the current period of low interest rates are a once in a lifetime opportunity for ordinary people to get on in life and increase their personal wealth. I'm taking maximum advantage of this and I would suggest that others do the same (if not already).

Thrugelmir

RenovationMan wrote: »

As I said right at the start, the current period of low interest rates are a once in a lifetime opportunity for ordinary people to get on in life and increase their personal wealth.

Unless the money supply increases then deflation is still a significant risk.

RenovationMan

Thrugelmir wrote: »

Unless the money supply increases then deflation is still a significant risk.

Which means we get a more sustained period of low rates. Instead of 25 year mortgages we'll all be free in half that time. I doubt even the most pessimistic amongst us really believes we will still be in the economic mire in 14.5 years time.

Thrugelmir

RenovationMan wrote: »

I doubt even the most pessimistic amongst us really believes we will still be in the economic mire in 14.5 years time.

Like Japan.......

Pimperne1

Thrugelmir wrote: »

Like Japan.......

Thank God for Japan (must have been the answer to about 1% of all HPC related questions).