Help req - budgeting for rise in mortgage rate interest as a FTB.

JustAnotherSaver

Oh and what interest rate would you assume to work off? Looking at previous tables & charts it seemed to hover around 5%~6%, but as said went up to 9.25%.
Looking further back to the 70s & such & the rates were very high. I don't have the chart to hand right note but IIRC then just shy of 20%?? And this was the case for many many years. Why was this the case around these years & when it approached the 80s/90s/00s the rates were more in single figures?

But yeah, in short, what rate to work off as a rule of thumb guide?

Yorkie1

JustAnotherSaver wrote: »

Risking seeming dim here, but what is "the balance"? Is it the mortgage (as in the above examples - £100k (so £10k overpayment is allowed) or is it some other figure (such as the £500pm (so £50 overpayment is allowed))or is it something else altogether?

Depends on the product / lender. NWide is £500 per month, irrespective of size of mortgage. If it's a %, then it's often related to the outstanding balance at the beginning of the year, or the original advance - need to check the T&Cs.

JustAnotherSaver wrote: »

Overpayments, I asked in an earlier post (but I waffled on so you probably missed it) do they go towards paying off just the capital then?

Yes.

JustAnotherSaver wrote: »

Oh and what interest rate would you assume to work off? Looking at previous tables & charts it seemed to hover around 5%~6%, but as said went up to 9.25%.

I suggested 6% earlier, but if you want to be really cautious you might try the maths at 8%.

JustAnotherSaver

Sorry, you did. It's been a long day

I know that it's all talk as nobody will know, but what's the general feel regarding interest rates?
Is it that when they rise they will rise rapid & go off the scale, or that they'll gradually build towards being sky high?



Regards these rates - as i'm only 30 & only really getting into all of this now, i have to ask what on earth was going on between 1973-1992? The reason i ask is the following link:

http://blog.moneysavingexpert.com/2010/11/04/a-mortgage-warning-take-a-look-at-the-uk-interest-rates-history-since-1694/

Open up the Excel spreadsheet link from that URL (http://www.bankofengland.co.uk/statistics/rates/baserate.xls). For just shy of 20 years the rate was at 10% +/- & at times was flirting with 20%.
To stand this over a year or so perhaps, but 20 whole years? That's the vast majority of some peoples mortgage terms. Those rates are really high. I wonder who could afford a spike of 10-15%.

I don't know how this tied in with the savings rates interest & pay rises (if at all), so maybe the impact on mortgage rates wasn't as much as what i am imagining right now, but those are some pretty high figures.

And what happened in 1992? As from the back end of that the rates seemed to peter out into a steady 5-6% or so (aside from the drop off when the world collapsed in 2008)?

R_P_W

Look you are right to consider changing interest rates. You could debate this forever. As others have said try the numbers based at 6 and 8 per cent.

If your waiting for certainty you will be waiting a long long time.

What's to stop rent prices increasing fast as well?

JustAnotherSaver

I was only asking what happened around the 70s (as i wasn't around then) & 80s (as i was only a little one) out of curiosity....? The link i provided being the basis of my question.

Mattygroves2

Very brief answer - 1970s very high inflation and associated wage rises, 1980s boom and then bust at end of the decade when the ERM debacle happened and the big stock market crash.

I survived the early 90s when interest rates hit double figures but it was tough and I was training towards a professional career so I had very good pay rises. Still meant alot of belt tightening though but when we had to we managed.

I think you are down playing your chances of income rises too much - if you are not the boss yet then there will be opportunities for promotions and if I was you and had no rises for more than a year or two I'd be looking for another job with a different employer.

Thrugelmir

JustAnotherSaver wrote: »

As for dream home - we're really not looking to move. It costs money, so wherever we decide to move to as our first home we plan on that being very very VERY long term. Things chan change, but those are the plans now.

So does borrowing money! The more you borrow the more interest you'll pay. Worth crunching the numbers.

Don't assume that you'll pocket a capital gain on the back of spiralling house prices (as was the case 1995 -2007). So many factors that could blow the market in any direction. Most of which are unrelated directly to the property market itself.

dawyldthing

I know when I was talking to the halifax woman she seemed to think it will be 2014/2015 when it will rise. But with job prospects as they are I can't see it going up that much. Do use the calculator here http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator as you can play around with different percentages and different overpayments and see what a difference they can or don't make. Like I know with mine 1% rise would equal a couple of quid a month, but overpaying a couple of hundred over the year knocks quite a bit of time off the mortgage. Overpayments do go off the capital owed, but you can either reduce the term and still pay the same mortgage amount or reduce the amount you pay each month.

In regards to the overpayments with he Halifax it is 10% for the balance at the end of the previous year, but i have overpaid more on it and I believe they charge 3%, which is still less than what they would have been charging so it works out for me better, but it hasn't gone on yet and i've been doing it these past 2 months

JustAnotherSaver

Mattygroves - thanks for the clear up on that. I wonder if folk will have learned their lesson from the 70s & 80s then? But at the same time i suppose we're always a step away from yet another disaster. Maybe i'm too pessimistic.

Regards downplaying rises - with the greatest of respect, you don't know my boss. If i told you half of what my boss (when i say my boss i mean owner of the entire company) says about us then you'd just be gasping & not believing me - saying a boss can't say that to their workers they're not allowed. Well, it happens. I also can't just jump jobs. For 1) i'm looking to get a house & i imagine any sudden job change wont do me any favours & for 2) i'm not trained in anything. I've no qualified skills or i suppose even skills in general. In short i'm a bit knackered as things stand.

Thrugelmir - i'm not looking to pocket any gains. As said, ideally we don't want to move house again. I'm not interested in buying to sell for profit. I'm interested in buying somewhere i'd like to spend the rest of my time. I don't like change.