High interest rate for FTB 90% LTV

bromine

We are looking to buy our first house. Checked with mortgage advisor before making an offer and were told the interest rate could be more than 3.2% (90%, 30yr, 5yr fix). It's not our dream/ideal home, but no other house in our budget and location has ticked so many boxes (after having viewed 30+ properties over 2+ years). What I am saying is that we can walk away if that's the right financial decision without too much heart break. We can afford monthly payments even at 3.2% but I am wondering if we should wait if better deals could be available in few months. I am not too keen on 2 year initial fix because I don't want the hassle again so soon, but I am happy to be convinced.

I am just surprised at the high rates given the historically low BoE rate. I guess the lenders are scared because of the pandemic and brexit.

My advisor says the rates are too high, so don't go for it. They suggest try to get 15% deposit, but that's out of question for us.

What do you fine people think?

Bromine

csgohan4

crystal ball sadly for how interest rates will be in future, understandably lenders are being very cautious and current interest rates reflect the current risk appetite

[Deleted User]

If you are struggling to contemplate buying at 3.2% then give up the idea of buying for the time. Being
Rates won't come down any time soon at 90% deals.  Every lender who launches does so at 3% or higher at moment with higher set up costs than previously. 

Bank of England rate has nothing to do with mortgage rates really.  It's more to do with uncertainty around housing market and employment prospects for clients.  They need to price in expected losses from reposessions and also increased costs from taking longer to underwrite cases due to extra care being taken

getmore4less

What are your housing costs now?

The rate is not that important if you reduce your housing costs the high rate should only be temporary(subject to valuations).

3.2% over 30 years will be £435 per £100k  and you will pay off 10% in 5 years
The rent on the money is £270 per £100k

whats the best 2year rate eg if you can get that down to 2.5% and pay the same as the 3.2% in 2 years you pay off 5% so the 2 years change will get you to 85% rates  overpay by £200pm per £100k and get 10% paid off
 
(HSBC have 90% rates under 3%)

ACG

The problem you have at the minute is that lenders are ridiculously busy, by that I mean it is taking lenders generally 1-3 weeks to assess an application without offering 90% Mortgages - pre covid, it was taking maybe 2-3 days with 90 and 95% LTV products. 

As it stands, lenders are filling their boots with mortgages that are a much lower risk and from a capital adequacy perspective, much cheaper. They do not need  to do 90% lending and typically the lenders who are, are charging a higher rate, tying you in for 5 or more years and/or putting in place various extra caveats (such as maximum 25 year term). 

I dont think you will see mainstream lenders coming in at 90% with decent rates this year because they do not need to and they do not have the resources to deal with the large influx in business it will generate unless 4-5 lenders all come into the market at the same time. 

It is a difficult decision to make at the minute, personally I would pay the higher rates if I could do it on a 2 year deal, I know you dont want the hassle of remortgaging in 2 years time, but hopefully the dust will have settled, normality will have returned and you can get a decent rate either because they are more freely available or because you fit the financials for an 85% LTV product. 

GoingOn30

My advice would be to really concentrate on absolutely minimising your outgoings and start making progress towards a 15% deposit, or accept the current rates on offer and go for a 2 or 3 year fix if you expect your income to rise over that time. 

Edi81

The rate is all about covering the risk at the moment. That is the risk if we have a really bad recession with mass unemployment with people unable to repay their mortgage.

amnblog

Your expectations are unrealistic. You are fortunate to have a 10% deposit option in today’s market.

Thrugelmir

The sooner you get on the first rung of the property ladder the better. If you want to borrow less. Save more. Simple as that.