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

sidneyvic

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?

Yes lets be constructive, it is highly doubtful interest rates will shoot up now we have houses costing in excess of 10 x salary, sod inflation, let it run rampant. I mean it's not like we had rampant inflation in the late 70's early 80's and thats the reason for the 17% interest rates. It's not like interest rates are rising in nearly  every country in the world....
So lets be constructive and bury our heads in the sand...🙄

cheshirelabrador

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

But if you've been saving for a deposit at the time the base rate hit 17%, you would have seen your savings increase at a rapid rate.

lookstraightahead

cheshirelabrador 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

But if you've been saving for a deposit at the time the base rate hit 17%, you would have seen your savings increase at a rapid rate.

You didn't need a deposit. Might sound good but it truly wasn't. 

Lavendyr

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.

No, it wasn't shared ownership. It was in Buckinghamshire and was a new build. Same with my dad. 

Lavendyr

jonnydeppiwish! said:

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?

You're very lucky to have a final salary pension so your situation may be very different as most people do not have these. 

Lavendyr

sidneyvic 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?

Yes lets be constructive, it is highly doubtful interest rates will shoot up now we have houses costing in excess of 10 x salary, sod inflation, let it run rampant. I mean it's not like we had rampant inflation in the late 70's early 80's and thats the reason for the 17% interest rates. It's not like interest rates are rising in nearly  every country in the world....
So lets be constructive and bury our heads in the sand...🙄

If the government allow interest rates to hit 17% plus, then they will find themselves in a situation far worse than the US in 2007/2008. If interest rates hit 17% now, homeowners would default on their mortgages, homes would be repossessed, those people will need housing, would need to claim benefits, etc. Exactly because houses now cost so much relative to salaries. Interest rates will rise, I completely agree, but to compare the situation now to 1979 is not helpful because things are in a completely different position. 

That's what I mean by being constructive. Let's talk about the situation now, not how things were over 40 years ago. And in the "now", I agree that interest rates will rise to attempt to control inflation, but I suspect there will also be other mechanisms used by the government to control inflation. Because the alternative would cost the government far more in the long run.

As an aside, I entered this debate in a polite manner. The sarcasm isn't necessary. 

Thrugelmir

Lavendyr said:

sidneyvic 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?

Yes lets be constructive, it is highly doubtful interest rates will shoot up now we have houses costing in excess of 10 x salary, sod inflation, let it run rampant. I mean it's not like we had rampant inflation in the late 70's early 80's and thats the reason for the 17% interest rates. It's not like interest rates are rising in nearly  every country in the world....
So lets be constructive and bury our heads in the sand...🙄

That's what I mean by being constructive. Let's talk about the situation now, not how things were over 40 years ago. And in the "now", I agree that interest rates will rise to attempt to control inflation, but I suspect there will also be other mechanisms used by the government to control inflation. Because the alternative would cost the government far more in the long run.

Central Banks run out of ammunition once interest rates hit the floor. Money printing likewise has run it's course. Simply causing an increasing divide of wealth in society. Social unrest is the underlying concern if treatment isn't viewed as equitable. 

Lavendyr

Thrugelmir said:

Central Banks run out of ammunition once interest rates hit the floor. Money printing likewise has run it's course. Simply causing an increasing divide of wealth in society. Social unrest is the underlying concern if treatment isn't viewed as equitable. 

That's also very true and a real risk arising from where we are now.

Richiem1987

Looking at a 2 base point rise, bringing the base rate to 1.5%. Noises from the BoE suggest rate rises are going to need to rise sharply. It may well go 1.5%, then 2.75%, 4% followed by 6% going into next year. The problem will be reposession rates rising at a dramatic rate, affordability tests failing (due to direction of interest rates) leaving only cash buyers in the market is going to have an affect and could push many into mortgage jail with negative equity. Not saying there will be a crash, just a correction. Going to be a bumpy ride. 

Thrugelmir

Richiem1987 said:

Looking at a 2 base point rise, bringing the base rate to 1.5%. Noises from the BoE suggest rate rises are going to need to rise sharply. It may well go 1.5%, then 2.75%, 4% followed by 6% going into next year. The problem will be reposession rates rising at a dramatic rate, affordability tests failing (due to direction of interest rates) leaving only cash buyers in the market is going to have an affect and could push many into mortgage jail with negative equity. Not saying there will be a crash, just a correction. Going to be a bumpy ride. 

Market prices will fall until an equilbrium is reached. Property is a conveyor belt. With people falling off the top while others join at the bottom. Corrections can be progressive. While many people just sit on their hands and delay their plans.