Making A Profit On My Mortgage?

indigo739X

In the current situation I think I am making a profit on my mortgage - do you think I'm right. Have I got the figures correct?!

I took out a tracker mortgage nearly 10 years ago, the terms were 2.5% over base.

Current Inflatation is around 4-5% - talking real inflation here - not the massaged indexes ( just my view!)

Bank rate is 1/2 %. So the cost of my mortgage is 3%. But inflation is reducing the value of my mortgage by 4-5% ( in real terms) . To me that looks like I'm better off by 1-2% of my mortgage per year! :rotfl:

What do you think?

ACG

indigo739X wrote: »

What do you think?

You have too much time on your hands.

bossymoo

Lol.

I think what you are saying is that although you are paying 3%, since inflation is higher than that, you are better off?

It's not inflation that is the issue. It's house prices. And the rate they appreciate / depreciate varies by region. Indeed, a house is only worth what another will pay for it. So it's a moot point.

Some lenders, including Halifax and Nationwide have a house price index calculator on their website. You put in what you bought, and when, and it tells you the "value" now.

You can then compare your outstanding loan and how that has changed over time. But 10 years ago, it was the other way round! Rates were higher than inflation. Although house prices were on the up too. My guess is your home is probably worth less now than in say, 2007?

I would just enjoy the rates whilst they are lower, and more importantly, pay of extra if you can afford, as this will come directly off the capital, reducing the interest you pay overall.

The only ones to make a profit on a mortgage, is the lender, I'm afraid ;-)

indigo739X

bossymoo wrote: »

I think what you are saying is that although you are paying 3%, since inflation is higher than that, you are better off?

Yep thats the argument. And You are right - I'm sure the value of my house has dropped. But So has the price of similar properties, so that kind of cancels out the impact.But of course the current value of my property doesn't really change the premise of the argument - which is looking just at the mortgage only - I'm effectively making a profit on my mortgage - in a sort of weird, off centered way!

The reason I've brought it up is not that I have "too much time on my hands"! (Thanks ACG :j) but because I want to understand it! Thanks for your views.

Thrugelmir

Wage inflation is what matters. As that's what will determine the future direction of house prices. Not the price of oil.

kidmugsy

A friend of mine has a mortgage costing BoE + 2%p.a. and an ISA paying BoE + 2.75% p.a. That's what I call making a profit.

bigadaj

kidmugsy wrote: »

A friend of mine has a mortgage costing BoE + 2%p.a. and an ISA paying BoE + 2.75% p.a. That's what I call making a profit.

Yup, that's the only way you can make a tangible profit.

If house prices are falling in your area then you're actually making a loss, ie the asset value is decreasing but the loan amount stays the same, but if you want to think you're making a profit then by all means do.

snarffie

You are not making a profit from your mortgage unless interest (actual £cash not %) on your savings exceeds the interest you are paying on your mortgage.

Do you make more money on your savings each month than you pay in interest each month? Probably not.

Inflation is a different thing as it erodes the value of the mortgage in relation to the cost of living. This is completely irrelevant if you don't get a pay rise though!

harvey115

Too much time at hand and trying to feel better from the current financial crisis I would say.

All the perks are usually short term:

- If you are paying tiny interest on your mortgage, at some stage that will change and you will be back in line with other interest rates once the market picks up speed
- If you are paying far too much interest due to a fix or similar deal, again once it ends you will again get in line with the current market performance etc

Although the perks are short term and change often it does not mean even then that you are making money on your borrowing, its the lender making money if not at the same rate as others...

indigo739X

Thanks everyone for your comments. Of course there are many other factors that could work against the idea of making a profit. But if one confines the view to the realtionship between the bank and the borrower ( which is what the question was ). Then for now - the bank appears to be making a loss nd the borrower a sort of profit.

Given that is the case - then it offers one reason (amonst others) why banks etc are currently less willing to lend or grant mortgages.

Thrugelmir

[QUOTE=indigo739X;54301073
Given that is the case - then it offers one reason (amonst others) why banks etc are currently less willing to lend or grant mortgages.[/QUOTE]

Lenders will recoup the loss. By charging new borrowers a higher margin.

The lack of willingness to lend is unrelated. As that's to do with actual availability of capital. Coupled with the fact that many lenders are actively contracting their mortgage books. Nationalised lenders still account for around 45% of outstanding mortgage debt.