understanding interest rates - new buyer here

spaceboy

What sort of interest rate can you expect on a repayment mortgage? The base rate is 0.5% isnt it, but obviously you wont get that as banks need to make a profit. So how much do they typically offer?

Thrugelmir

Much will depend on the amount you are looking to borrow and the value of your property. Then there's added complications of your personal circumstances which may or may not impact.

spaceboy

How do I calculate the change when the base rate increases?

ACG

http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml - this will help you get an idea as to how payments will change if the rates fluctuate.

Rates will vary depending the size of your deposit and your situation.

Thrugelmir

spaceboy wrote: »

How do I calculate the change when the base rate increases?

Lenders assess affordability at 7% interest rates. That's more like the level interest rates should be at. If economic conditions were normal.

spaceboy

How likely is it for the interest rate to reach something like 12%? I think we're being offered about 3.84% just now.

HappyMJ

spaceboy wrote: »

How likely is it for the interest rate to reach something like 12%? I think we're being offered about 3.84% just now.

It's a good bet that one day in the future interest rates will be 12%. The time when that will happen is a mystery. Don't worry about it. If interest rates do increase up to 12% it's highly likely a response to high inflation. Higher inflation will mean your pay packet will also increase as well making the higher interest rate affordable.

spaceboy

We're trying to decide how much shared equity grant to take. The minimum is 10% but our mortgage adviser says for 10% the interest rate would be worse, and 15% is better. But cant decide if we should go for this or maybe 20%. Max is 40%. Also how mch deposite to put down. Initially were were thinking 10% of house value, doesnt seem to make much difference if we increase it from that, which we could do.

To many decisions with hazy outcomes!

kingstreet

You get a choice in Scotland?

In England it's 10% or 20% equity loan on HTB - Equity Loan.

spaceboy

kingstreet wrote: »

You get a choice in Scotland?

In England it's 10% or 20% equity loan on HTB - Equity Loan.

It's not an equity loan, we are going for a repayment mortgage. However we are using the Lift shared equity scheme, basically they buy a percentage of the house, which means the mortgage you have to take out is lower. You can buy them out any time after 2 years and they get the percentage of the house value at that time. So if the house increases in value they will get a bit more. If it drops in value they get less than they initially paid.

I'm just not sure whether to take a larger shared equity grant or lower. If it's lower we own more of the house ourselves from the beginning, but we take out a larger mortgage to cover it.

Thrugelmir

spaceboy wrote: »

How likely is it for the interest rate to reach something like 12%? I think we're being offered about 3.84% just now.

The world is far more financially sophisticated now. Then was the case in the past. So an unlikely occurrence.