What kind of interest rate would topple you?

Southend1

CLAPTON wrote: »

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.

Mmm I would generally agree but politics play a part too and I currently work in a university - there has been a massive concerted effort by the authorities over the last 5 years to reduce real wages in education and I wouldn't hold out hope of this changing if the Tories stay in government. So I could easily find myself with rising mortgage payments, rising general prices and no prospect of a nominal salary increase.

hcb42

I would be ok at 20% too, though I cant see it happening. although i too remember paying 15.4% in the 1990s

leveller2911

HAMISH_MCTAVISH wrote: »

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.

A 20 year prediction is a guess at best. Not even the legendary Hamish Mc T would have predicted the 0.5% base rates we currently have 10 years ago let alone 20 yrs.:)

ch3101

When my mum and dad got their first house in around 1980 the rates flew up and it stretched them but they adapted and ended up keeping their payments just as high when rates fell which allowed an upgrade pretty quickly

As has been said, rates wont go up very quickly but from looking on here there are probably many many people that have stretched themselves just because the rates are low and will be in financial ruin if rates were to shoot up 5% overnight

Southend1

ch3101 wrote: »

When my mum and dad got their first house in around 1980 the rates flew up and it stretched them but they adapted and ended up keeping their payments just as high when rates fell which allowed an upgrade pretty quickly

As has been said, rates wont go up very quickly but from looking on here there are probably many many people that have stretched themselves just because the rates are low and will be in financial ruin if rates were to shoot up 5% overnight

I don't think people have necessarily stretched themselves just because rates are low. I think a lot of those who would be repossessed of rates went to 5,6,7% would be first time buyers who had to stretch themselves in order to buy any kind of home at all.

Thrugelmir

ACG wrote: »

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.

My point was that rates could rise sharply at some point in the future. While rates may not hit the same heady heights. The amount of debt people are carrying is far higher. So will be painful for many.

My mortgage was only £26,500 at the time.

ch3101

Southend1 wrote: »

I don't think people have necessarily stretched themselves just because rates are low. I think a lot of those who would be repossessed of rates went to 5,6,7% would be first time buyers who had to stretch themselves in order to buy any kind of home at all.

True, most will, but there'll be a fair few people with say household incomes of 3000ish and 1k mortgage payments. Interest rates rise sharply they're going to be troubled.

Having said that, the boe have promised not to raise rates quickly so it's an irrelevant hypothetical scenario

Kynthia

ch3101 wrote: »

True, most will, but there'll be a fair few people with say household incomes of 3000ish and 1k mortgage payments.

I don't think there's much wrong with that, as in that scenario there's £2k to play with. I would consider one third of your take home when you are buying your first or second place to be fairly sensible. I suspect many of those buying now and a good portion of ftbs over the last few years have actually committed themselves to nearer 50% of their take home pay and don't take home £3k or more, which doesn't leave them anywhere to go if rates rise or their income drops.

Southend1

Agreed, £1k out of £3k is absolutely not a problem. Mine is more like £600/£1500 which doesn't leave much room for rate rises.

kwmlondon

HAMISH_MCTAVISH wrote: »

That's an absurdly high rate.

Why?

High LTV or bad credit?

I took out my mortgage as a first time buyer in 2009 with a 20% deposit but the rate was for 5 years - my crystal ball wasn't working at the time so none of us knew that there would be better rates available within a couple of years.