Fixed rate mortgages below 2% axed from the market as interest rates continue to rise

[Deleted User]

theartfullodger said:

In November 1979 under Thatcher's government BoE base rate hit 17%.

I had a for then large mortgage. Was "lucky" as building society only demanded 15%...

Good luck you young folk...Could get much worse

Back then houses cost around 3-4x the average wage. These days they cost around 10x the average wage. It's actually worse than that because income inequality has rocketed too, pushing up the average but not what most people actually earn.

In other words, it's already worse than 1979 and it's not going to improve.

propertyhunter

Thrugelmir said:

nicknameless said:

Richiem1987 said:

AFF8879 said:

I’m currently fixed until late 2026, guess we all now need to overpay as much as possible until our fixes end! As it seems rates are only headed in one direction.

Is the correct course of action. 

Err no - not for most.  Overpay low interest debt which is inflating away?  Not on your nelly.

Low interest debt for how long?  Perhaps global markets will tank. Then a double whammy. Leveraging has always been a double edged sword. Magnifies both gains and losses. 

The sell off of tech stock has started already. Look a the meme stocks that did well in the pandemic (Tesla, Zoom, Amazon, Netflix) - all down year to date. 

fewcloudy

nicknameless said:

Richiem1987 said:

AFF8879 said:

I’m currently fixed until late 2026, guess we all now need to overpay as much as possible until our fixes end! As it seems rates are only headed in one direction.

Is the correct course of action. 

Err no - not for most.  Overpay low interest debt which is inflating away?  Not on your nelly.

@nicknameless

Is this still the case even if you had a crystal ball and saw that BoE rates were say 3%+ in a few years time?

I presume the answer is yes, because you would have the money that you DIDN'T overpay with, sitting in a savings account that paid a higher rate of interest than your mortgage currently is?

But is the problem with that strategy not that some folks might find they can only use some of that money saved each year to make extra mortgage payments hurry if rates went higher than savings rate, as the amount they can overpay per year is often capped?

simon_or

propertyhunter said:

Thrugelmir said:

nicknameless said:

Richiem1987 said:

AFF8879 said:

I’m currently fixed until late 2026, guess we all now need to overpay as much as possible until our fixes end! As it seems rates are only headed in one direction.

Is the correct course of action. 

Err no - not for most.  Overpay low interest debt which is inflating away?  Not on your nelly.

Low interest debt for how long?  Perhaps global markets will tank. Then a double whammy. Leveraging has always been a double edged sword. Magnifies both gains and losses. 

The sell off of tech stock has started already. Look a the meme stocks that did well in the pandemic (Tesla, Zoom, Amazon, Netflix) - all down year to date. 

Amazon a meme stock?!

nicknameless

Thrugelmir said:

nicknameless said:

Richiem1987 said:

AFF8879 said:

I’m currently fixed until late 2026, guess we all now need to overpay as much as possible until our fixes end! As it seems rates are only headed in one direction.

Is the correct course of action. 

Err no - not for most.  Overpay low interest debt which is inflating away?  Not on your nelly.

Low interest debt for how long?  Perhaps global markets will tank. Then a double whammy. Leveraging has always been a double edged sword. Magnifies both gains and losses. 

It would have to be a pretty stupendous tank to negate gains from the recent bull market.  Past returns are no indication and all that and investing not for everyone.  Was just pointing out that this (often) received wisdom is nothing such.

nicknameless

fewcloudy said:

nicknameless said:

Richiem1987 said:

AFF8879 said:

I’m currently fixed until late 2026, guess we all now need to overpay as much as possible until our fixes end! As it seems rates are only headed in one direction.

Is the correct course of action. 

Err no - not for most.  Overpay low interest debt which is inflating away?  Not on your nelly.

@nicknameless

Is this still the case even if you had a crystal ball and saw that BoE rates were say 3%+ in a few years time?

I presume the answer is yes, because you would have the money that you DIDN'T overpay with, sitting in a savings account that paid a higher rate of interest than your mortgage currently is?

But is the problem with that strategy not that some folks might find they can only use some of that money saved each year to make extra mortgage payments hurry if rates went higher than savings rate, as the amount they can overpay per year is often capped?

Not talking about savings accounts.  Perhaps we are going off topic a little.  I just don't like to see overpayment of neglible interest debt touted as good financial sense for all.

Connoisseurus_Rex

Question on this, although it’s probably a scary situation for FTB, is there an argument to say they’re in a better position than some? As they can lock in a sub-3% rate now whereas many existing homeowners will be coming to the end of their first fix in the next year or so.

anotheruser

If you can afford to overpay...  wehey!
But many cannot.

I pay £565 a month - already into the 60% LTV bracket - but my mortage is going up to £698 or something similar (and that's re-fixing).  The mortgage advisor still suggested to fix for just two years.

But then we're lucky, bought in 2016 with a 25 year term, so 19 years left.  I have already accepted I will be paying this mortgage for 19 years as there is rarely any other spare money to put towards it.

We save in other accounts for other things, even if we used that money (£80 a month) to over pay, it will take off a few years but not many and we'd then have no savings for what we're specifically saving for (we're saving for 10 years exactly).

We also put away £1000 a year to be able to gift to our child so they have a large-ish deposit for a house when they're much older.  Just a simple savings account, nothing special.

We very much discount interest as for a lot of the measily 3%, it's barely worth having a whole different bank for that.  Even the 1.5% chase account could earn us £100 a year but so far, I have not bothered to move the savings to them.

Sarah1Mitty2

Thrugelmir said:

Jaybee_16 said:

theartfullodger said:

In November 1979 under Thatcher's government BoE base rate hit 17%.

I had a for then large mortgage. Was "lucky" as building society only demanded 15%...

Good luck you young folk...Could get much worse

Maybe companies were more lenient back in the day. When my mortgage became unaffordable the Woolwich allowed the term to extend, so my 25 year mortgage became 40+ years. When the interest rate reduced the term came back to before.

Mortgage terms for many people are already extended well beyond 25 years. 

True, but mortgage rates won`t hit 17% again

Windofchange

anotheruser said:

If you can afford to overpay...  wehey!
But many cannot.

I pay £565 a month - already into the 60% LTV bracket - but my mortage is going up to £698 or something similar (and that's re-fixing).  The mortgage advisor still suggested to fix for just two years.

But then we're lucky, bought in 2016 with a 25 year term, so 19 years left.  I have already accepted I will be paying this mortgage for 19 years as there is rarely any other spare money to put towards it.

We save in other accounts for other things, even if we used that money (£80 a month) to over pay, it will take off a few years but not many and we'd then have no savings for what we're specifically saving for (we're saving for 10 years exactly).

We also put away £1000 a year to be able to gift to our child so they have a large-ish deposit for a house when they're much older.  Just a simple savings account, nothing special.

We very much discount interest as for a lot of the measily 3%, it's barely worth having a whole different bank for that.  Even the 1.5% chase account could earn us £100 a year but so far, I have not bothered to move the savings to them.

Been doing the same as you but putting a little more £1200 a year away for any potential children I have. Difference being I have been paying it into a Moneybox ISA and have made nearly a grand in 'profit' over the past three years - invested £3600 ish and current balance sitting at £4400 or thereabouts. Might be worth considering rather than putting the money into a savings account paying you a fiver a year interest? Yes investments can fall in value of course, but if you are looking at an 18 - 21 year timescale I would reason that any falls / crashes even in the stock market will right themselves in time for when you need the money out. Just a thought.