Barclays Mortgage Warning!!

pjread

one problem really is that the impact would be hardest felt by those who purchased most recently at a high LTV (relatively high rate already, probably on a significantly larger mortgage than the 'average')

I don't see anything more than a 0.25% rise this side of the 2015/16 tax year and the next general election. Sure, I could be very wrong, but I wouldn't want to upset homeowners before an election.

Yeah, I know it's independent and non-political, of course...

Graham_Devon

wotsthat wrote: »

£21/ month won't register as a blip even in the short term.

Trouble with this is it's the average of all mortgage holders. So we can't really conclude anything from it.

A better way to look at it would be to look at those mortgagee's who would be in financial "distress" (by that I mean it could be based on several items) should rates rise.

You could then take those as a proportion of all mortgage holders.

Stating the average increase across all mortgage holders will be £21 a month doesn't really tell us that much. It could be used to look at how it may effect spending patterns across the economy, but can't really be used for much more.

For someone 5 years into a 150k mortgage, they will see their payments rise by maybe £100+ a month. It's these people that we should be concerned about, not the "average". I'm sure I saw some figures bandied about in the not too distant past stating that the average mortgage was £46,000 across all mortgage holders....and certainly no ones suggesting a person with a mortgage that size would struggle.

wotsthat

Graham_Devon wrote: »

Trouble with this is it's the average of all mortgage holders. So we can't really conclude anything from it.

A better way to look at it would be to look at those mortgagee's who would be in financial "distress" (by that I mean it could be based on several items) should rates rise.

You could then take those as a proportion of all mortgage holders.

Well we could conclude that, on average, there's a big fuss about nothing.

However, Barclays have done as you requested and reckon 20% of current mortgage holders are paying more than 50% of income on the mortgage and so would be in danger if rates rose. It doesn't seem likely that new mortgage holders would be given a mortgage that accounted for 50% of income. I suspect therefore the people in most peril are those that have been struggling for a while.

I'm sure there's a way to present the data to demonstrate things would be hellish if rates rose - suits me - keeps the monthly mortgage payments down.

It's a catch-22 for the crashers. They think mortgage holders live in peril but, if that's the case, it reduces pressure for a rate rise which they think would tip the frightened indebted homeowner over the edge.

Graham_Devon

wotsthat wrote: »

I'm sure there's a way to present the data to demonstrate things would be hellish if rates rose - suits me - keeps the monthly mortgage payments down.

It's a catch-22 for the crashers. They think mortgage holders live in peril but, if that's the case, it reduces pressure for a rate rise which they think would tip the frightened indebted homeowner over the edge.

I'm certainly not suggesting that that should be the case.

I'm sinply saying that looking at the average increase across all mortgage holders and forming the conclusion you have formed points to the wrong conclusion.

Your point, I believe, on this thread has been to suggest the average mortgage holder will only see an extra £21 leaving their bank accounts each month, therefore theres no real issue. (see your point 1. regarding the average mortgage holder being able to cope with £21 each month and 2. the affordability of £21 for most).

The issue I have with this is that is will be an issue as hardly anyone will actually see £21 leave their accounts each month. Many people will see amounts of £100 or more leave their acounts. Similarly some will see just a couple of quid leave their accounts each month.

Theres better ways to look at this data and therefore form better conclusions. Or at least better reflection on what it means.

I don't know why you have gone off on one about "crashers" and wanting the data presented in a "hellish way" to prove everyone is living in "peril". I was just making, what I believe, to be a valid and quite important point considering the slant you had aplied to this data. I certainly wasn't trying to offend or cause argument.

Another example of where a raw average would be of very little use is wages. Hence why so much work is done by the data providers to then split that average down into relative localities and job types (full time, part time etc).

wymondham

carslet wrote: »

I dont think this is true for most people, i think most people will have put this into their budget, when thinking about a mortgage.

Most younger people I know who have got a mortgage over the last few years are already maxed out and have no concept of interest rates rising. One couple I know didn't even know rates could vary!


With the rate now being the same for such a long time many will have forgotten about the possibility of them being higher - many people are just not interested in this sort of thing, especially when we get regular announcements telling us they wont rise - almost sounding desperate to try to believe it themselves?

wotsthat

Graham_Devon wrote: »

The issue I have with this is that is will be an issue as hardly anyone will actually see £21 leave their accounts each month. Many people will see amounts of £100 or more leave their acounts. Similarly some will see just a couple of quid leave their accounts each month.

Not sure exactly what you expected to see. It's hardly easy to present an excel spreadsheet that lists 11 million mortgages, the effect of a rate rise on each, and the % of income being spent in each house on the mortgage. Averages help us make a judgement - it would be nice to know the standard deviation but, at an average increase of £21/ month, it's not unreasonable to think that the effect will be minimal.

Graham_Devon wrote: »

Theres better ways to look at this data and therefore form better conclusions. Or at least better reflection on what it means.

I couldn't find the report so I look forward to your own analysis of the data and the resulting conclusions. Some more detail here...

http://www.mortgagesolutions.co.uk/mortgage-solutions/news/2330739/rate-rise-to-push-mortgage-repayments-up-gbp22bn-by-2015

Graham_Devon wrote: »

I don't know why you have gone off on one about "crashers" and wanting the data presented in a "hellish way" to prove everyone is living in "peril". I was just making, what I believe, to be a valid and quite important point considering the slant you had aplied to this data. I certainly wasn't trying to offend or cause argument.

I didn't go off on one. It amuses me that those most in favour of rates rises are the same people that are less optimistic about the finances of the average mortgage holder.

Graham_Devon wrote: »

Another example of where a raw average would be of very little use is wages. Hence why so much work is done by the data providers to then split that average down into relative localities and job types (full time, part time etc).

The link above splits the effect of rate rises by region - guess what - the regions with the highest prices will see the highest increases in monthly mortgage payments. Thank heavens they split that average down - who would have known that.

getmore4less

Graham_Devon wrote: »

For someone 5 years into a 150k mortgage, they will see their payments rise by maybe £100+ a month. It's these people that we should be concerned about, not the "average"..

Why guess and get it WRONG like more than double


do the numbers, more like £50ish on £150k over 20years (see below for 5 years in)

look at 0.5% increments stuck 1.25 in for reference to the rise being looked at

£150k over 20years
0.5% £657
1.0% £690
1.25% £706 £49 more than 0.5 5 years in will be £38 more
1.5% £724
2.0% £759
2.5% £795
3.0% £832 £37more
3.5% £870
4.0% £909
4.5% £948

5 years into the mortgage the difference is even less because you pay off more debt early on the lower rate
eg going from 2.5% paying £795pm for 5y to 3% the new payment over 15years is £824 £29 more

getmore4less

I guess many that don't understand the basics think they can just take the amount owing and multiply by the interest rate rise to estimate the rise in the mortgage.

This does not work.

Graham_Devon

getmore4less wrote: »

Why guess and get it WRONG like more than double


do the numbers, more like £50ish on £150k over 20years (see below for 5 years in)

look at 0.5% increments stuck 1.25 in for reference to the rise being looked at

£150k over 20years
0.5% £657
1.0% £690
1.25% £706 £49 more than 0.5 5 years in will be £38 more
1.5% £724
2.0% £759
2.5% £795
3.0% £832 £37more
3.5% £870
4.0% £909
4.5% £948

5 years into the mortgage the difference is even less because you pay off more debt early on the lower rate
eg going from 2.5% paying £795pm for 5y to 3% the new payment over 15years is £824 £29 more

I don't really understand your sums. You appear to have started at the point of them paying 0%.

They are more likely to be paying around 3% if on SVR.

So looking at your figures, a 1% rise from 3% would have them paying £832 a month at 3% and £909 a month at 4%.

So £77 more a month.

Add an extra 0.25% and you are close to £100 a month. And I did state "maybe £100 a month" to allow for variances.

wotsthat

Graham_Devon wrote: »

For someone 5 years into a 150k mortgage, they will see their payments rise by maybe £100+ a month. It's these people that we should be concerned about, not the "average".

The error you've made is assuming that the mortgage balance hasn't changed in that 5 years.

£150k mortgage @ 3% over 25 years = £708.16/ month

After 5 years the balance would be £128,157

Rates increase to 4.25%.

£128,157 @4.25% over 20 years = £788.09/ month

Difference = £79.93/ month

Seriously, you worry too much.