What low interest rates? Home loan costs rise as euro crisis sees banks hike mortgage

wotsthat

Going4TheDream wrote: »

I think that is fine if you have enough equity to get the best fix?

I would imagine being stuck on an SVR in a situation where rates could/may rise quickly in succession, as has happened in the past, makes life very hard for some to budget from month to month?

Higher equity allows access to better fixed rates that's not disputed. Yes rates could/ may rise quickly in the future - that's not disputed either.

What's the best advice for someone on an SVR with low equity? It seems that one suggestion is that they should spend their life worrying, losing sleep and let fear prevent them doing anything.

How about keep paying the mortgage? Trying to find more affordable accommodation? Trying to find a better paid job? Getting in a few extra hours? Reducing expenditure? Sell something on ebay? These are the sorts of things I'd be doing.

Yes easier said than done some might argue. Better to do something positive rather than let negativity take over.

HAMISH_MCTAVISH

Going4TheDream wrote: »

I think that is fine if you have enough equity to get the best fix?

I would imagine being stuck on an SVR in a situation where rates could/may rise quickly in succession, as has happened in the past, makes life very hard for some to budget from month to month?

Not when your svr is the same as the best trackers today and you know rates won't be rising for years. A lot of people are on the old svr rates capped at base plus 2% from Lloyds and nationwide, and no sane person expects base rates to be higher than 2-3% in the next 5 years.

ILW

HAMISH_MCTAVISH wrote: »

Not when your svr is the same as the best trackers today and you know rates won't be rising for years. A lot of people are on the old svr rates capped at base plus 2% from Lloyds and nationwide, and no sane person expects base rates to be higher than 2-3% in the next 5 years.

Are the majority of SVRs capped, or directly linked to base rate?

Is so, what happens if the banks have to start paying 5 or 6% for their money?

Going4TheDream

ILW wrote: »

Are the majority of SVRs capped, or directly linked to base rate?

Is so, what happens if the banks have to start paying 5 or 6% for their money?

Which was why I asked about SVR as I recently read that the LIBOR rate had risen making it more expensive for banks to borrow money to lend....

MacMickster

HAMISH_MCTAVISH wrote: »

no sane person expects base rates to be higher than 2-3% in the next 5 years.

Just over 3 years ago, no sane person expected base rate to be below 3.5% in the next 5 years, never mind down to 0.5% within 6 months.

You may not have noticed but the economic situation in the west is pretty volatile at the moment, so in my opinion no sane person would try to predict what is going to happen to the UK base rate over the next few years.

Road_Hog

ILW wrote: »

Fair point, but many did lose their home when rates went up in the early nineties.

The '90s was different. We had an accelerated house price increase over a short period, coupled with the boom years of the late '80s. There was also a rush to buy as the multiple MIRAS (tax relief for each person on the mortgage) was about to be withdrawn.

We then had a recession, and very high interest rates, which peaked at 15% (that's the BOE, mortgage rates were higher).

The combination of those things caused the massive loss of homes, as people couldn't afford to service their mortgage.

We didn't have a 2/3 bubble in house price increases, it happened as a steady continual yearly climb over almost a decade. There was no event that triggered a sudden rush. Whilst we do have unemployment, it still hasn't or has only just got as bad as it did in the early '90s and a lot of it is down to youth unemployment who are generally not homeowners.

The big thing is though, interest rates are low and only became low after the crash, so people bought their homes on higher interest rates and are currently finding it easy to service their mortgages even if family income has dropped a bit.

geneer

MacMickster wrote: »

Just over 3 years ago, no sane person expected base rate to be below 3.5% in the next 5 years, never mind down to 0.5% within 6 months.

You may not have noticed but the economic situation in the west is pretty volatile at the moment, so in my opinion no sane person would try to predict what is going to happen to the UK base rate over the next few years.

I quite agree.

Though its amazing how many bulls have tried, and keep trying and take credit for predicting unprecedented emergency base rates in the wake of the economic meltdown they spectacularly failed to see coming.

Theres a few examples in this very thread.