What kind of interest rate would topple you?

kwmlondon

I have 21 years left to repay £170,000 and my payments are £1060 a month, about 5.1% until January 2016.

Interest rates are at a historic low. If bank rates went up to a more normal 5% then I'd probably be paying about 8% which would see me paying about £1350 a month, which would be a hammering, but I could cope.

At 10% I'd be repaying about £1600 a month and at that point I'd be in at my limit.

How much could other people manage before they went to the wall?

buglawton

Any serious interest hike would reduce affordability of homes, so house prices would definitely fall. It is this govts unstated policy to shore up house prices as much as possible, fearing revolution in middle England if (especially S.E. England) house prices were to be threatened. So no need to fear. Rate might rise gently but not enough to cause that revolution.

Thrugelmir

A couple of months after buying my first property. Interest rates by 1% a month for 4 consecutive months, lifting the rate from 10% to 14%. Was difficult for a while. Just get on with life as the storm will pass in time.

ACG

I cant see rates being 10% for a LONG LONG time.

If they jumped to 10% tomorrow i would probably manage it but it would be a stretch. I would probably just call my lender and ask them to extend the term.

HAMISH_MCTAVISH

kwmlondon wrote: »

I have 21 years left to repay £170,000 and my payments are £1060 a month, about 5.1% until January 2016.

That's an absurdly high rate.

Why?

High LTV or bad credit?

Interest rates are at a historic low. If bank rates went up to a more normal 5% then I'd probably be paying about 8% which would see me paying about £1350 a month, which would be a hammering, but I could cope.

The chances of base rates hitting 5% in the term of your mortgage are very low.

The chances of the bank margin above base remaining at record highs of 3% in the presence of the economic conditions which would warrant a return to 5% base rates, are virtually zero.

At 10% I'd be repaying about £1600 a month and at that point I'd be in at my limit.

How much could other people manage before they went to the wall?

I could manage 20%+ if I had to.

But anyone that thinks there's the slightest possibility of seeing mortgage rates in double digits within the next couple of decades is economically illiterate.

Prothet_of_Doom

I remember paying 15.5% on my mortgage. And selling my house at a 20% loss. Happy Days.

HAMISH_MCTAVISH

Prothet_of_Doom wrote: »

I remember paying 15.5% on my mortgage.

I remember paying 17% on mine.

Very different conditions prevailed then though.

Now, the biggest worry is not whether or not interest rates will ever hit double digits, but rather whether or not the recovery will be strong enough for them to even hit 3% in the next decade.

maninthestreet

HAMISH_MCTAVISH wrote: »

I remember paying 17% on mine.

That must have been hard for a Scotsman.

HAMISH_MCTAVISH

maninthestreet wrote: »

that must have been hard for a scotsman.

..........

Southend1

Currently paying 3.54% until next month then I should be able to fix at 3.39% for 4 years.

6% would be the tipping point for me. Any higher and I would be needing a lodger/second job/term extension or a combination of these to survive.

Having said that, I'm assuming salary increases in line with inflation, which I certainly haven't had for the past 5 years. If inflation continues at the current rates and salary does not catch up then the tipping point becomes lower and lower.

CLAPTON

It's unlikely that interest rates would rise to those levels unless general inflation started to rise substantially.

As interest rates don't really affect inflation unless the inflation is home produced, then it's likely in those circumstances that wage inflation has taken off too.

With higher nominal or real wages then mortgages with higher interest rates would be affordable.