Interest Rate rise

ladyraver

Saw last night the BofE is going to possibly moving to rates of 5% won't this just crucify people who have bought in the last 5 years?

How much are you talking of an increase on say a £1000 per month mortgage?

scope

It shouldnt do, as we all knew it had to come up sooner or later anyway... It would be foolish to base your outgoing on the rate staying at this level forever.

Thrugelmir

Why last 5 years? Lax lending started around 2003 and boomed until 2007. Finally demising in 2008 with the full nationalisation of Northern Rock. Going to be a real squeeze for those on interest only mortgages bought in the credit boom years. Many of whom are already struggling to find the capital.

Hence affordability checks already being performed at 7% on new applications.

katejo

ladyraver wrote: »

Saw last night the BofE is going to possibly moving to rates of 5% won't this just crucify people who have bought in the last 5 years?

How much are you talking of an increase on say a £1000 per month mortgage?

5% was a pretty 'normal' and not exceptionally high rate until the recession. I have kept my monthly (over) payments at a level equivalent to about 5% to avoid a nasty shock when the time came. When my Dad had a mortgage to pay in the 70's, the interest rate rate never fell below 5%.

Thrugelmir

In the ten years before the crash of 2008. Bank base rate averaged 6.5%. Something that soon gets forgotten. The credit boom of 1999-2008 has created a generation who have no concept as to the true cost of borrowing money.

katejo

Thrugelmir wrote: »

In the ten years before the crash of 2008. Bank base rate averaged 6.5%. Something that soon gets forgotten. The credit boom of 1999-2008 has created a generation who have no concept as to the true cost of borrowing money.

I got my current (2nd) mortgage in late 2005 just before completing purchase in Jan 2006. My interest rate was then 6%.

dang

They are talking 10 years + for that rate -

http://www.bbc.co.uk/news/business-28077154

In 5 years they are expecting rates of 2.5%.

Thrugelmir

dang wrote: »

They are talking 10 years + for that rate -

In 5 years they are expecting rates of 2.5%.

Mortgages last 25 years.

So there's a reasonable possibility that after even 20 years you would only have repaid around 66% of the capital balance. Takes around 15 years to even get to 50%.

Hence the concern now. As the can cannot be kicked down the road indefinately.

dang

I was pointing out to the op that the 5% rate is not a short term time scale, not saying do not prepare for when rates do go back to a more normal level.
However concern now over a prediction of what could happen in 10 years seems a little misplaced.