Mortgage rates going up

shortchanged_2

breadlinebetty wrote: »

Oh FGS! Why all the outpouring of horror? Interest rates are STILL really really LOW, I could understand people moaning if they were like they were back in the early 80s or 90s when they jumped up to 17% - but these rates are PEANUTS!:money: The trouble is people have got used to paying almost zero interest - get over it and cough up the few extra quid each week. If you're squeezed for an extra few bob a week either take up a paper-round, or give up your iPhone/SKY/extra Sat box/one night a week spending £30 in the pub.....with your Friday night kebab

Another good thing to try is meditation. Totally free and makes you feel fantastic!

Yes but that is the problem today in that many people have much bigger mortgages in relation to income these days.

I wouldn't be at all surprised if interest rates went up to say 8 to10% these days we would see a massive default rate.

DervProf

shortchanged wrote: »

Yes but that is the problem today in that many people have much bigger mortgages in relation to income these days.

I wouldn't be at all surprised if interest rates went up to say 8 to10% these days we would see a massive default rate.

I would be suprised if rates went that high, but I don't think it is impossible.

One thing is almost certain, rates will be a fair bit higher than where they are now during the lifetime of many existing mortgages. The best thing a mortgage holder can hope for is that rates don't increase rapidly, and that any rises come about during/after an improvement in the economy.

Like any saver who moans about poor returns on his/her savings account(s), it is a good idea to shop around. That's all well and good, but switching mortgages can cost money, and isn't always possible without paying exit penalties.

shortchanged_2

DervProf wrote: »

I would be suprised if rates went that high, but I don't think it is impossible.

One thing is almost certain, rates will be a fair bit higher than where they are now during the lifetime of many existing mortgages. The best thing a mortgage holder can ask for is that rates don't increase rapidly, and that any rises come about during/after an improvement in the economy.

I agree that rates are not likely to go that high DervProf. I am just making a statement that I think many people would be far less prepared these days if rates did go that high.

Graham_Devon

Were we not all warned on taking out our mortgages about the cost at 8-12% though?

I know I wasn't. The only real advice I got about mortgages was the fix and switch, fix and switch.... oh and fix and switch. The only advice was about my initial 2 years, with the years after that pretty much written off as everything would be going swimmingly at that point. None of this advice assumed that I wouldn't actually have the LTV to fix and switch, as it was all based on rising prices and therefore lowering LTV.

On the BBC mortgage calculator, it's always warned what your repayment would be at 8%. That's what I used when I first got my mortgage, and I know it's do-able. I don't really understand why some families would strangle themselves quite so much as to be unable to afford rates at 8% (all things being equal, rather than facing a loss of income).

wotsthat

Graham_Devon wrote: »

On the BBC mortgage calculator, it's always warned what your repayment would be at 8%. That's what I used when I first got my mortgage, and I know it's do-able. I don't really understand why some families would strangle themselves quite so much as to be unable to afford rates at 8% (all things being equal, rather than facing a loss of income).

If someone bought an average house at £160,000 and their mortgage payment went from 3% (say) to 8%. On a 100% mortgage (for dramatic effect only) their interest payments would increase by £666 per month.

How many people have a spare £666 per month especially if they are a FTB and just bought a house? To me, and I'm fairly cautious, that seems like far too timid an approach.

People also need to factor in pay rises, bonuses and remember that as their mortgage debt reduces the effect of an interest rate rise reduces with it.

Graham_Devon

wotsthat wrote: »

If someone bought an average house at £160,000 and their mortgage payment went from 3% (say) to 8%. On a 100% mortgage (for dramatic effect only) their interest payments would increase by £666 per month.

How many people have a spare £666 per month especially if they are a FTB and just bought a house? To me, and I'm fairly cautious, that seems like far too timid an approach.

People also need to factor in pay rises, bonuses and remember that as their mortgage debt reduces the effect of an interest rate rise reduces with it.

Nice figures.

But who can buy with a starting rate of 3%?

Try it from 4.5-8%. It's not exactly a huge range. And that would be your choice as to whether it's too timid. You'd be the one losing the house, not me

wotsthat

Graham_Devon wrote: »

Nice figures.

But who can buy with a starting rate of 3%?

Try it from 4.5-8%. It's not exactly a huge range. And that would be your choice as to whether it's too timid. You'd be the one losing the house, not me

Your wish is my command.

A 3.5% increase on the same house is still £466 - I don't think many people include a £466/ month buffer in their calculations on the off chance that their mortgage might go up by 3.5%.

I wouldn't be losing the house because unfortunately I've been too timid in the past. I purchased a 3 bed detached in 1999 - the house seemed very expensive at the time but I could easily afford the payments. We really wanted a 4 bed and could have afforded that without a problem too but decided to play safe. The difference in price was £38,500.

Fast forward to today. The price difference is now £81200 and I could have bought for a piffling c£100/ month extra mortgage interest.

There's a lot of hindsight investment there but I wish I'd borrowed more.

breadlinebetty

smamst wrote: »

House prices going to tumble on this news.

About bloody time too, enough of this crap of low interest rates and printing money to keep house prices 50% above what they should be.

http://www.dailymail.co.uk/news/article-2109335/Mortgage-rate-rise-hit-millions-Banks-lining-heap-misery-squeezed-families.html

Anyone stupid enough to have bought a house at inflated prices over the last ten years deserves everything that's coming their way.

Oh dear, this means it's going to be even HARDER for the sad Brit1234 types to get their wee feet on the property ladder!:D Mind you, seeing as interest rates are still PEANUTS it's hardly going to affect most people - just the sad little wannabe homeowners who are in pain at the thought of forever renting and never owning any assets!

CRASH_BANG_WALLOP

breadlinebetty wrote: »

Oh dear, this means it's going to be even HARDER for the sad Brit1234 types to get their wee feet on the property ladder!:D Mind you, seeing as interest rates are still PEANUTS it's hardly going to affect most people - just the sad little wannabe homeowners who are in pain at the thought of forever renting and never owning any assets!

Brit1234 really gets up your nose :T

Graham_Devon

wotsthat wrote: »

Your wish is my command.

A 3.5% increase on the same house is still £466 - I don't think many people include a £466/ month buffer in their calculations on the off chance that their mortgage might go up by 3.5%.

And that's the problem. I reverted to SVR just before the "crash". I was paying 7.75%. That's basically 8%. That was only 4 years ago.

You make it sound as if 8% rates are somehow rare and shouldn't be thought about. Therefore I find your argument that rates at 8% shouldn't be factored in a little worrying.