Martin Lewis on the agenda ripping Osbourne to shreds

wotsthat

N1AK wrote: »

Most people buying mortgages today on that 5 year fix, especially if availing themselves to HTB, will have mortgages lasting considerably longer than 5 years. Yes, some of us are currently doing nicely out of low rates, that doesn't mean someone buying near their limit today isn't in a very risky position./QUOTE]

The riskiest part of the mortgage is always at the beginning. However take advantage of a 5 year fix and that will insure against interest rate shock for that period.

Then factor in 5 years of repayments, 5 years of career progression, 5 years worth of bonuses and all of a sudden things look much less risky.

That's how life usually works.

N1AK wrote: »

If the market was so confident that we won't see interest rates anywhere near past levels for an extended period there should be products offering 5% life of mortgage fixes etc. The fact there aren't implies that higher rates aren't seen as that unlikely by the people who actually have skin in the game.

Yorkshire have a 10 year rate at 3.99%.

Longer term mortgages have never caught on in the UK so I'm not sure there's a demand anyway.

IveSeenTheLight

brit1234 wrote: »

Sorry I forgot on this money saving forum you want people to spend more money?

LOL, That reminds me of when my wife said she saved £1000's on a sofa we have ordered because it was in a sale.

The reality is still that she has spent thousands

N1AK

wotsthat wrote: »

Yorkshire have a 10 year rate at 3.99%.

Longer term mortgages have never caught on in the UK so I'm not sure there's a demand anyway.

Don't disagree with any of your points, and they're well made.

You're absolutely right that long term fixes have never been that popular. I almost didn't make the point because I appreciate that it is somewhat undermined by that. However 4% fix over 10 years when % fixes over 5 years are also available does still show that those with money riding on it aren't as confident rates will stay low 'forever' as some of the commentators.

wotsthat

N1AK wrote: »

You're absolutely right that long term fixes have never been that popular. I almost didn't make the point because I appreciate that it is somewhat undermined by that. However 4% fix over 10 years when % fixes over 5 years are also available does still show that those with money riding on it aren't as confident rates will stay low 'forever' as some of the commentators.

In the US they seem to be a normal way of holding a mortgage. Although not a proxy for the UK current 30 year rates are 4.28%. Not sure why they've never caught on here but there seems an attraction in fixing for a whole mortgage term at a rate which is affordable at the outset. In an inflationary environment the mortgage payment are then guaranteed to fall in value each and every month.

In the US, less so the UK, I think it's easier to shift between long term rates whereas in the UK charges can be punitive.

Thrugelmir

wotsthat wrote: »

In the US they seem to be a normal way of holding a mortgage.

The Fannies were state sponsored. In a way a form of HTB to extend home ownership.

Take the wrong turn in Miami (for eg) and you'll see a very different type of housing.

N1AK

wotsthat wrote: »

In the US they seem to be a normal way of holding a mortgage. Although not a proxy for the UK current 30 year rates are 4.28%.

Which is roughly the average of US interest rates over the last 25 years. So it certainly doesn't seem the banks are confident rates are going to stay abnormally low throughout that period. Account for the fact that rates are almost certainly going to stay rock bottom for another 2-4 years and that's a considerably increase they are covering themselves for.

wotsthat

N1AK wrote: »

Which is roughly the average of US interest rates over the last 25 years. So it certainly doesn't seem the banks are confident rates are going to stay abnormally low throughout that period. Account for the fact that rates are almost certainly going to stay rock bottom for another 2-4 years and that's a considerably increase they are covering themselves for.

They might be covering themselves for a considerable increase but that pricing indicates that low rates are expected effectively for more than a generation.

In the context of FTB's (who are most at risk) they have the opportunity to fix at 3.99% for 10 years. They can take interest rate shock out of their life completely because once they get past ten years they're 'past the worst'.

Humans are pretty terrible at judging risk - in terms of buying a house it might pay to be oblivious and keep it simple i.e. can I afford the mortgage and can I raise a deposit because, by and large, it'll work out. That's where this discussion started with Brit asserting that he had a better handle on the risks for FTB's but despite his superior risk assessment he gets worse off every single month when compared to the clueless 'sheeple' that just bought a house because they wanted one and were able to do so.

N1AK

wotsthat wrote: »

In the context of FTB's (who are most at risk) they have the opportunity to fix at 3.99% for 10 years.

Unfortunately I'm not sure that any 10 year fixes, especially at that rate are available with HTB, though I agree a 10 year fix would be a good option for many FTBs.

Additionally although a 10 year fix a 4% may make sense for them, if you're living in an area where you can not, or don't wish, to afford a 4% interest rate mortgage the temptation is to get a 95% mortgage at a lower interest rate on a tracker or discount.

Now we can probably agree on the wisdom, or lack, involved in doing that but it's happening.

will456

Bump for Martin's blog