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

newsgroupmonkey_

lookstraightahead said:

Lavendyr said:

lookstraightahead said:

Lavendyr 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

Artful, seriously, I usually think you are awfully sensible especially on the renting threads but this is a bit of a surprise. Interest rates then were horrific but house prices were far, far less so in terms of income ratio. My sister purchased her first (2 bed) house in 1995 at 2x her salary - and that was with her partner. My dad purchased his 3 bed house after divorce in 1997 at just over 1x his salary. Both in decent areas in the "home counties".

Let's try and be constructive rather than condescending, shall we?

I bought my first flat at 5 x income in 1991 and I really dont remember it being as you describe  with any subsequent purchase I made through the nineties. This was in London and then the Home Counties. I was a first time buyer then, maybe your family were in a different financial position having bought previously to that? For your sister to have bought for 2 x her salary she must have been on a really good income or have a large deposit. 1 x salary? What type of house did your dad buy and what deposit and what type of job? 

My sister was a newly qualified teacher and her husband was a junior in a credit control department. The\ty did not have a large deposit or a really good income. I believe their house cost around £28k. 

My dad bought a house for £57k. He was a professor at a local university.

Wow well I bought a one bedroom flat in the Home Counties in 1991 and it was £55000. The next property I bought was also in the Home Counties and it was a two bed terrace in 1996 and it was £77000. Neither of these properties were anything special. 

Was your sister's shared ownership? 

Before we bought,  still in 1991, we rented a bed sit on a main road which was £400 a month.

in 1993 we rented our flat out and rented ourselves in zone three and all we could afford for £800 a month was a basement flat next to the tube line. 

I don't recognise the amounts you are stating, but maybe they both got lucky with their purchases.

Hey, I'll jump in here

I bought a 3 bed semi on the border of Burnham, Bucks and Slough. Say what you like about the area, but cheap it isn't (and the road was lovely - never had any trouble).

Bought in 1997 for £59,500. Sold last year for £380k.

At the time, we were living in a flat in Langley and great friends with our landlord. When we left, he sold the flat for £30,000.

Just to put into context. Home Counties is a big area.

I can add loads more - my parents bought quite a few properties in the Hatfield / Welwyn Garden City area and sold around 2012. Similar kinds of prices - around £60k for a 3 bed , £30k for a 1-2 bed flat. Just checked one of them at it looks like my folks paid £54,500 in late 1996.

Sarah1Mitty2

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

lookstraightahead said:

This should be of no surprise to anyone. No one should get into any type of trouble as the banks 'stringent affordability checks' are watertight (😏🙄). 

Onus is placed on the banks to factor in affordability by the regulator. How people choose to spend their disposable income is up to them. When the squeeze hits won't be the mortgage lenders that suffer a downturn in trade. 

People have been saying that the squeeze is coming for years, but I thought lending tended to drop during recessions, or is that incorrect?

Lending is already tailing away. Doesn't require a recession for consumers to sit on their hands. Inflation is the real problem currently. 

If it is doesn`t that mean that mortgage lenders won`t do so well, I would have thought that they did better in the good times and any squeeze would affect them?

Lenders have the ability to widen their margins. With more business now driven through mortgage brokers. Lenders have changed their business models and reduced their fixed cost base. 

Cutting staff you mean?

No need to cut staff. The business model evolved some years ago with the introduction of the Mortgage Market Review regulations. 

What happened with that?

[Deleted User]

aoleks said:

lookstraightahead said:

This should be of no surprise to anyone. No one should get into any type of trouble as the banks 'stringent affordability checks' are watertight (😏🙄). 

they kind of are. I'm imagining if people were to get in trouble, they'd have quite a few buffers...

phone contract, nespresso subscription, amazon prime, netflix, crypto, waitrose etc.

plenty of stuff that can be cut before people decide not to pay their mortgage. and what's the alternative, anyway? living in a shared house that costs more than your mortgage? the street? get real.

You sound like a Tory MP.

Thrugelmir

Sarah1Mitty2 said:

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

lookstraightahead said:

This should be of no surprise to anyone. No one should get into any type of trouble as the banks 'stringent affordability checks' are watertight (😏🙄). 

Onus is placed on the banks to factor in affordability by the regulator. How people choose to spend their disposable income is up to them. When the squeeze hits won't be the mortgage lenders that suffer a downturn in trade. 

People have been saying that the squeeze is coming for years, but I thought lending tended to drop during recessions, or is that incorrect?

Lending is already tailing away. Doesn't require a recession for consumers to sit on their hands. Inflation is the real problem currently. 

If it is doesn`t that mean that mortgage lenders won`t do so well, I would have thought that they did better in the good times and any squeeze would affect them?

Lenders have the ability to widen their margins. With more business now driven through mortgage brokers. Lenders have changed their business models and reduced their fixed cost base. 

Cutting staff you mean?

No need to cut staff. The business model evolved some years ago with the introduction of the Mortgage Market Review regulations. 

What happened with that?

It was implemented. To avoid a repeat of the poor lending practices that some lenders adopted (i.e. Northern Rock, Halifax) in the run up to the GFC. 

Sarah1Mitty2

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

lookstraightahead said:

This should be of no surprise to anyone. No one should get into any type of trouble as the banks 'stringent affordability checks' are watertight (😏🙄). 

Onus is placed on the banks to factor in affordability by the regulator. How people choose to spend their disposable income is up to them. When the squeeze hits won't be the mortgage lenders that suffer a downturn in trade. 

People have been saying that the squeeze is coming for years, but I thought lending tended to drop during recessions, or is that incorrect?

Lending is already tailing away. Doesn't require a recession for consumers to sit on their hands. Inflation is the real problem currently. 

If it is doesn`t that mean that mortgage lenders won`t do so well, I would have thought that they did better in the good times and any squeeze would affect them?

Lenders have the ability to widen their margins. With more business now driven through mortgage brokers. Lenders have changed their business models and reduced their fixed cost base. 

Cutting staff you mean?

No need to cut staff. The business model evolved some years ago with the introduction of the Mortgage Market Review regulations. 

What happened with that?

It was implemented. To avoid a repeat of the poor lending practices that some lenders adopted (i.e. Northern Rock, Halifax) in the run up to the GFC. 

So lending only to those with the best credit ratings you mean, wouldn`t that make it even more difficult for lenders to make money in a downturn?

jonnydeppiwish!

Lavendyr said:

nicknameless said:

Lavendyr said:

nicknameless said:

Lavendyr said:

And actually @Thrugelmir is right in that cash is king. You can invest in stocks but until it crystallises you don't have anything and it can move anywhere. The point isn't keeping cash under your mattress. The point is that you don't count your chickens before they're hatched, so to speak. 

And @Sarah1Mitty2 - you are right that if your mortgage rate is lower than your savings rate, you are better off placing any overpayment amounts in savings as you will earn a better return than you would save paying off your mortgage. 

So where are you keeping that cash atm then that's productive and weathering inflation over the long term?

The original point wasn't just about where you 'invest' spare cash, it was about not blindly chucking it at the mortgage when there are other probably more fruitful financial uses, caveated by individual circumstance of course.

As a higher rate tax payer would you advise me to overpay my 1.5% mortgage every month if I can't obtain a better 'savings' rate in a cash account?

I once went on the mortgage free wannabee board - can't bring myself to do that again.  Only jesting.

As a higher rate tax payer I would absolutely overpay on my mortgage if I couldn't obtain a better interest rate (though allowing for a "rainy day" savings amount in case of need), but I have minimal risk appetite given my family situation and so am uninterested in investing. 

You wouldn't stick it in a pension for an immediate 40% plus boost?

Understand what you are saying - just pointing out there are often much more lucrative options.

I'm already putting away a good chunk into my pension and I'd always recommend doing that. 

For everyone? I have a final salary pension already paying at 44, another public sector pension that will pay out in 20 years so do I need to put more away?

Sarah1Mitty2

Why not put it into an ISA so you can access it any time?

TonyTeacake

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.

I agree interest rates are only heading one way. Not sure how high they will go but when we look how high real inflation is rates are really really negative. If we measure inflation using the old metrics we are over 15%, they say it is 9% so the BOE base rate is 1% so we are 8% negative. 

We will have to see how they manage this inflation monster but if they don't manage to bring it down they may have to resolve this by raising interest rates dramatically.

Sarah1Mitty2

TonyTeacake 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.

I agree interest rates are only heading one way. Not sure how high they will go but when we look how high real inflation is rates are really really negative. If we measure inflation using the old metrics we are over 15%, they say it is 9% so the BOE base rate is 1% so we are 8% negative. 

We will have to see how they manage this inflation monster but if they don't manage to bring it down they may have to resolve this by raising interest rates dramatically.

What do you mean by the old metrics?

Thrugelmir

Sarah1Mitty2 said:

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

Sarah1Mitty2 said:

Thrugelmir said:

lookstraightahead said:

This should be of no surprise to anyone. No one should get into any type of trouble as the banks 'stringent affordability checks' are watertight (😏🙄). 

Onus is placed on the banks to factor in affordability by the regulator. How people choose to spend their disposable income is up to them. When the squeeze hits won't be the mortgage lenders that suffer a downturn in trade. 

People have been saying that the squeeze is coming for years, but I thought lending tended to drop during recessions, or is that incorrect?

Lending is already tailing away. Doesn't require a recession for consumers to sit on their hands. Inflation is the real problem currently. 

If it is doesn`t that mean that mortgage lenders won`t do so well, I would have thought that they did better in the good times and any squeeze would affect them?

Lenders have the ability to widen their margins. With more business now driven through mortgage brokers. Lenders have changed their business models and reduced their fixed cost base. 

Cutting staff you mean?

No need to cut staff. The business model evolved some years ago with the introduction of the Mortgage Market Review regulations. 

What happened with that?

It was implemented. To avoid a repeat of the poor lending practices that some lenders adopted (i.e. Northern Rock, Halifax) in the run up to the GFC. 

So lending only to those with the best credit ratings you mean, wouldn`t that make it even more difficult for lenders to make money in a downturn?

Not at all. I'm reminded of this. 

The Worst Bank in the World? HBOS’s Calamitous Seven Year Life

http://www.ianfraser.org/the-worst-bank-in-the-world-hboss-calamitous-seven-year-life/