How high can the interest rates get?

indianabones

Hi Guys,


I'm a FTB, have a big deposit (60k) for a 180k house. I am very good I think at saving money. I've saved £14-£16k each year for the last 4 years and now it's time for me to buy my own property.


I understand that interest rates are low right now, so what is affordable in 2015 might not be affordable in 2020. My question is what is the worst it's likely to get to?


Will the rates reach say 7/8%? If I plan on getting a mortgage I want to of course make sure it's affordable in 5/10/15/20 years and not just at this moment.


I've read financial articles which suggest it will never get to anywhere the all time high during Thatcher's reign, but we may get to 10% somewhere down the line. Is that likely?

maninthestreet

No one really knows the answer to those questions.

mattbuk

Nobody really knows, but I'd guess by the time we'd hit 10% you'd have enough equity in the property so the payments shouldn't be anymore than the first few years of ownership.

I've recently bought and I factored in the interest rate raising up to 10% after my 3 year fix. Which won't likely happen, but I like to have a cushion.

ViolaLass

If you get a long fixed rate, the changes won't affect you as soon. Not saying you should necessarily do this but it's an option (we went for a 5-year fix so that we wouldn't have to worry about changes during that time).

Jon_B_2

As above. Get a decent 5 year fix and overpay (make hay while sun shines).

Always worth going on the repayment calculator putting in various scenarios for after 5 years. If you can crank it up to 7/8% interest rate and feel you could just scrape by on current salary then you should feel comfortable that in the future repayment should never be a stress. (Unless of course there are unforeseen personal circumstances).

Thrugelmir

indianabones wrote: »

I understand that interest rates are low right now, so what is affordable in 2015 might not be affordable in 2020. My question is what is the worst it's likely to get to?

Under regulatory guidance lenders currently assess affordability at 7.5%. So lenders will be unlikely to offer you a mortgage you are unable to afford.

If you have wider concerns, i.e. longer term job insecurity. Don't over commit. Buy some comfortably affordable and overpay the mortgage. For most people outright home ownership is security in itself.

elmer

Our mortgage is up next year, it started at 7% ish for a few years went up to 11% then 15% eek, I think that was black monday or wednesday. It has dropped steadily since then and I now pay 1.25% since 2009. But the average over the period was about 5 to 7%.

The next 25years is your guess, good luck

elmer

amnblog

If you think you can assess today if you will be able to afford your mortgage in 2025, think again.

getmore4less

You don't say how you can save over 1k pm.

You need to add current housing costs to the pot remove the costs of owning.

The trick to future affordability is overpaying.

Depending on what you could pay it may be a non problem.

Eg if renting at 500pm then it won't be a problem (subject to maintaining income)

getmore4less

mattbuk wrote: »

Nobody really knows, but I'd guess by the time we'd hit 10% you'd have enough equity in the property so the payments shouldn't be anymore than the first few years of ownership.

I've recently bought and I factored in the interest rate raising up to 10% after my 3 year fix. Which won't likely happen, but I like to have a cushion.

Mortgages don't work like that.

To retain the same payment at a higher rate would require extending the term.

Cyberman60

If the rates go too high we cannot finance the National Debt, so interesting times ahead !!!