HTB2 details released, initial mortgage rates from 4.99%

HAMISH_MCTAVISH

PaulF81 wrote: »

I question the affordability of a 170k loan on 4.99pc for anyone not on a higher rate salary!

A young couple each on average-ish wages, say 30K and 20K, would find it easy enough to buy a 200K place at up to 6% interest.

Provided the deposit was 5% to 10%.

And 200K would buy an average or above-average house within a 45 minute commute of almost every major employment hub in the UK. (with the possible exception of central London, and I'll bet you'd even find a few within an hour or so of there)

And those same people wanting to buy a small, starter, FTB place could do so on one salary, at up to 6% rates, in most of those same areas.

It has never been the case that the average income of all people is the same thing as the average income of house buyers.

The lowest earning 30% to 40% have almost never been able to buy, other than a few in the very cheapest areas at the very bottom of troughs in the cycle.

wotsthat

Graham_Devon wrote: »

Can just see you sitting there with a massive grin on your face, smug in the knowledge that someone else is having a hard time, but you are just dandy. Sure, it helps that you are so open about your very simple pleasures!

Can I just say that when I saw your claim that you would have said something similar to Brit if he'd been engaging in schadenfreude at Hamish's expense I made a snorting noise accompanied by a 'pull the other one it's got bells on' face.

If people didn't try to time house purchases all this could be avoided. If people want to buy and are able then, apart from practical considerations I really don't understand why they don't.

It's easy with hindsight but Brit (who really really wants to buy a house) would have been somewhat better off if he'd bought in 2008. He'd still be better off even if prices had fallen because he'd have spent 5 years already being what he wants to be in life i.e. a homeowner.

Financially, he might have been in negative equity but most people would choose the risk of that vs the risk of being priced out (note recent transaction increases). 5 years into a mortgage and, who knows, he might have used that money he invested in gold to make some overpayments instead.

Another day - another life lesson.

Loughton_Monkey

PaulF81 wrote: »

4.99 is horrendous! Over double what I am paying on my mortgage, with a single salary in the uk, I think I would struggle. Despite having half the cash banked now to pay it off in toto, even on a top rate salary I question the affordability of a 170k loan on 4.99pc for anyone not on a higher rate salary!

When you ask for a mortgage, you might expect to get, say, 3½ times salary. If the rate being charged is 5%, then multiply 3.5 by 5% and you get 17.5%.

So in "affordability" terms we are talking about the interest costing you 17½% of salary, whether you earn £20K or £200K. Either are "affordable" in anyone's book.

Given that a 'standard' rate of about 4% currently applies (BR=0.5%), then an extra 1% for the risk of 95% LTV doesn't seem unreasonable, and most of us have spent our lives paying mortgages at far more than 5%.

The amount of £170K requires a salary of around around £48.5K (at 3.5% multiple). Given that Higher Rate starts at about £42K then you would indeed need to be on HR tax if single.

How often, I wonder, do we get single people who don't bother to buy a house until well into their career - when on higher rate tax - before waking up, deciding to buy, and calculating that they need 95% mortgage? OK divorcees are in the frame for this, but their financial issues originate well outside the ambit of mortgage rates....

mystic_trev

Loughton_Monkey wrote: »

Given that a 'standard' rate of about 4% currently applies (BR=0.5%), then an extra 1% for the risk of 95% LTV doesn't seem unreasonable, and most of us have spent our lives paying mortgages at far more than 5%.

IR were high but it didn't really matter because high Inflation was, in effect, paying off our mortgages. It was this more than anything else which enabled me to buy my first home, buy my second and pay off the Mortgage all in 10 years.

Loughton_Monkey

mystic_trev wrote: »

IR were high but it didn't really matter because high Inflation was, in effect, paying off our mortgages. It was this more than anything else which enabled me to buy my first home, buy my second and pay off the Mortgage all in 10 years.

It is difficult to check mortgage rate history for a long time back, but my memory over the last 40 years of house ownership tells me that it has gone through every possible cycle you can imagine - combinations of high rates/low rates - high real rates/low real rates.

I cannot believe that the next 40 years will be any 'different' (although the exact phases will be different). But I tend to think this is irrelevant in the context of buying a house now. It's just impossible to foresee future interest rates, wage inflation, and general inflation with any accuracy. But what you can say with reasonable certainty is:

1. Normal mortgage rules these days will only allow you to have a mortgage which costs a reasonable amount compared to your income.

2. Over time, because the amount you borrow is fixed, the mortgage cannot fail to get smaller and smaller over the borrower's lifetime.

3. Personal tragedies apart, one's own income pattern would generally be expected to do better than mere wage inflation (because pay tends to increase with experience & promotions).

It is obvious from a lot of comments on these boards that there is a tendency for people to think that every component of economics we see today will continue for ever (it won't). There are swings and there will be roundabouts. Look at recent history:

• Prices crashed around 20% after the GFC. People moaned, because they couldn't save for a deposit.
• People started saving, and the slower ones moaned, because prices were coming back up again.
• Help to buy was mooted, and builders rushed to build. People still moaned that prices were going up further and they still couldn't get a mortgage.
• Help to buy is here, so you only need 5%. People are moaning because they think it's a "bubble".

The next thing we will see is an increase in mortgage rates. People will moan. House price increases will level off as a result. People will moan. Real salaries will start to recover, inflation will rise. People will moan about the cost of living leaving them nothing to pay a mortgage......

purch

Loughton_Monkey wrote: »

It is difficult to check mortgage rate history for a long time back,

The Building Societies Association can help you.....takes you all the way back to when my Mum was born.

http://www.bsa.org.uk/docs/statisticspdfs/interestrates.pdf