Are we expecting BOE to remain at 4.75% on 8th February 2025?

michaels

TerryDuckworth said:

BikingBud said:

annabanana82 said:

It's been interesting talking to colleagues about this.

Colleague 1 - mid to late 50's late divorcee, had to take a long term mortgage to retirement age. About to come off a fixed rate mortgage of 2%, looking at 6% come October as they hadn't realised they could lock in a deal early. Electric also cqme off a fix so energy bill has doubled. Food bill has also increased significantly, despite this they will be able to manage, but not without a small change to current lifestyle - already lives quite cheaply.

Colleague 2 part of young couple, mortgage rate is under 2% also expires end of the year. They think low interest rates are normal and likely fall by the end of the year. They've bought a fitted kitchen on credit, had a fancy garden office on credit, have alluded to further debt. Their heads are seemingly buried in the sand, as they booked a £2k holiday on impulse and on the credit card. Their mortgage was taken out over 40 years, so limited to extend the term. Despite them both earning fully throughout covid they still took the mortgage holiday. 

40 year mortgage surely means house not affordable!

But their further behaviour is symptomatic of the wider UK issues, we, form the Government down are credit junkies.

It's easy money! 

House prices always go up, so we'll always have equity...........won't we?

Debt will always inflate away............won't it?

You're stupid not to!!

I think you are onto something here BikingBud.

I have just been playing around with some figures on a mortgage calculator and comparing the rates that we had over 2 years ago at around 2.5% interest rate on a 300k mortgage over 25 years with a 10% deposit. I have also entered the same mortgage on a 6% interest rate over 40 years.

As you can see the monthly payments on a 40 year mortgage are £274 more. But what is really scary is the total payment over the full term of the mortgage. Over 25 years it is £363,379 and over 40 years it is £713,379 which is nearly double. So a £300,000 property now would cost you twice as much when you factor in all of the extra interest you would have to pay.

             

Thing is all these figures are in 'today's money; terms.  Probably the 2% example you should assume average inflation of 1.5% and the 6% scenario, inflation of 5%.  Discount all the future cashflows accordingly and the picture changes.

michaels

MattMattMattUK said:

TerryDuckworth said:

I was talking with a work colleague the other week and their 2-year fixed rate is up for renewal soon and they were saying that their payments could shoot up from £1,500 to £2,500 per month. The only way they could bring this payment down is to take a longer term mortgage or go interest only.

I expect that they are either exaggerating, or misunderstanding. To generate those kind of changes they would need to have a large mortgage on an short term, going from a significantly below market average fix to a well above market average fix, ie going from somewhere like 0.75% to 9%. 

TerryD

Our monthly is going from 490pm on our old sub 2% fix to 1125pm on our new 4.5% fix starting October that we were lucky to lock in at the end of May, so proportionately a much larger increase.

MattMattMattUK

RyanHello said:

MattMattMattUK said:

RyanHello said:

It will be a good thing for interest rates going back to 5% - 6%. Rates have been low for far too long. 

What makes you think it will be good?

Historically that is the average rate.

Historically people died of what are relatively minor infections by modern standards, had no teeth by 40 and a broken limb would results in permanent disability or death, "historically" is not a measure of what is good nor where things should be today.

RyanHello said:
Since 2008 - the zero rates have made people borrow too much. That's why house prices are so high.

Have not made people borrow too much, they have allowed people to borrow more than in the past, they are not causative and "too much" is highly subjective. House prices are "so high" because of a huge imbalance between supply and demand, we either need to reduce net immigration, build a lot more homes, or a combination of both, interest rate rises will at most do nothing more than create a minor blip in house price rises.

RyanHello said:
A lot people / families have just looked at the monthly cost on everything. 

And a lot have not, their choice was, I need somewhere to live, I have to do what I can afford with certain lifestyle expectations, they will now need to reduce their lifestyle expectations. The result of that is in theory lowering inflation, but also more significantly either reducing growth in the economy, or reducing the size of the economy overall, depending on the size of that rate rise when it works it's way through the economy. 

MattMattMattUK

michaels said:

MattMattMattUK said:

TerryDuckworth said:

I was talking with a work colleague the other week and their 2-year fixed rate is up for renewal soon and they were saying that their payments could shoot up from £1,500 to £2,500 per month. The only way they could bring this payment down is to take a longer term mortgage or go interest only.

I expect that they are either exaggerating, or misunderstanding. To generate those kind of changes they would need to have a large mortgage on an short term, going from a significantly below market average fix to a well above market average fix, ie going from somewhere like 0.75% to 9%. 

TerryD

Our monthly is going from 490pm on our old sub 2% fix to 1125pm on our new 4.5% fix starting October that we were lucky to lock in at the end of May, so proportionately a much larger increase.

Out of interest how much is the borrowing and what is the remaining term, because I cannot get that increase to match that interest rate rise outside of some very weird calculations (eg. £260-300k on a 45+ year mortgage).

RelievedSheff

michaels said:

MattMattMattUK said:

TerryDuckworth said:

I was talking with a work colleague the other week and their 2-year fixed rate is up for renewal soon and they were saying that their payments could shoot up from £1,500 to £2,500 per month. The only way they could bring this payment down is to take a longer term mortgage or go interest only.

I expect that they are either exaggerating, or misunderstanding. To generate those kind of changes they would need to have a large mortgage on an short term, going from a significantly below market average fix to a well above market average fix, ie going from somewhere like 0.75% to 9%. 

TerryD

Our monthly is going from 490pm on our old sub 2% fix to 1125pm on our new 4.5% fix starting October that we were lucky to lock in at the end of May, so proportionately a much larger increase.

We are fairly lucky that we still have 3 years to run on a 5 years fixed deal at 2.3%. Kicking ourselves that we didn't take the 10 year fix that was only 2.35% at the time!

Our current contractual repayment is £1194 per month but we overpay and round that up to £1300 with plans to increase the overpayment further in the near future.

Just running a few numbers on our current lenders (Halifax) website gives us the following options:

• 2 year fix = 5.51% - £1357pcm
• 5 years fix = 5.12% - £1333pcm
• 10 years fix = 4.89% - £1319pcm

(All based on 10 year term £125k remaining balance)

All current options would not be massively over what we are already repaying. Increasing the rate to 6% only increases the repayment to £1388pcm which will still likely be less than what we are repaying with overpayments included by then.

We had initially said that if at the end of this fixed rate term we could secure a 10 year fix sub 4% then we would fix for the remaining term and overpay to get it cleared as soon as possible. However securing a sub 4% rate by then may not now be an option. We shall have to wait and see.

[Deleted User]

50 year mortgages are available in Japan, but they aren't very helpful in the UK because so many people only manage to save up a deposit by the time they are in their 30s or 40s.

RelievedSheff

[Deleted User] said:

50 year mortgages are available in Japan, but they aren't very helpful in the UK because so many people only manage to save up a deposit by the time they are in their 30s or 40s.

Several people where I work have opted for longer term 35 year and 40 year mortgages.

Quite scarily none of them understand just how much more interest that means they will pay and how little they will have paid off against the balance in the first 2 to 5 years when they are most likely going to be looking to remortgage!

greenwood132

michaels said:

TerryDuckworth said:

BikingBud said:

annabanana82 said:

It's been interesting talking to colleagues about this.

Colleague 1 - mid to late 50's late divorcee, had to take a long term mortgage to retirement age. About to come off a fixed rate mortgage of 2%, looking at 6% come October as they hadn't realised they could lock in a deal early. Electric also cqme off a fix so energy bill has doubled. Food bill has also increased significantly, despite this they will be able to manage, but not without a small change to current lifestyle - already lives quite cheaply.

Colleague 2 part of young couple, mortgage rate is under 2% also expires end of the year. They think low interest rates are normal and likely fall by the end of the year. They've bought a fitted kitchen on credit, had a fancy garden office on credit, have alluded to further debt. Their heads are seemingly buried in the sand, as they booked a £2k holiday on impulse and on the credit card. Their mortgage was taken out over 40 years, so limited to extend the term. Despite them both earning fully throughout covid they still took the mortgage holiday. 

40 year mortgage surely means house not affordable!

But their further behaviour is symptomatic of the wider UK issues, we, form the Government down are credit junkies.

It's easy money! 

House prices always go up, so we'll always have equity...........won't we?

Debt will always inflate away............won't it?

You're stupid not to!!

I think you are onto something here BikingBud.

I have just been playing around with some figures on a mortgage calculator and comparing the rates that we had over 2 years ago at around 2.5% interest rate on a 300k mortgage over 25 years with a 10% deposit. I have also entered the same mortgage on a 6% interest rate over 40 years.

As you can see the monthly payments on a 40 year mortgage are £274 more. But what is really scary is the total payment over the full term of the mortgage. Over 25 years it is £363,379 and over 40 years it is £713,379 which is nearly double. So a £300,000 property now would cost you twice as much when you factor in all of the extra interest you would have to pay.

             

Thing is all these figures are in 'today's money; terms.  Probably the 2% example you should assume average inflation of 1.5% and the 6% scenario, inflation of 5%.  Discount all the future cashflows accordingly and the picture changes.

If a £300k house goes up by 2% a year over 40 years it is worth £667217 at the end so not far off the total value of the 40yr mortgage at 6%

Strummer22

greenwood132 said:

michaels said:

TerryDuckworth said:

BikingBud said:

annabanana82 said:

It's been interesting talking to colleagues about this.

Colleague 1 - mid to late 50's late divorcee, had to take a long term mortgage to retirement age. About to come off a fixed rate mortgage of 2%, looking at 6% come October as they hadn't realised they could lock in a deal early. Electric also cqme off a fix so energy bill has doubled. Food bill has also increased significantly, despite this they will be able to manage, but not without a small change to current lifestyle - already lives quite cheaply.

Colleague 2 part of young couple, mortgage rate is under 2% also expires end of the year. They think low interest rates are normal and likely fall by the end of the year. They've bought a fitted kitchen on credit, had a fancy garden office on credit, have alluded to further debt. Their heads are seemingly buried in the sand, as they booked a £2k holiday on impulse and on the credit card. Their mortgage was taken out over 40 years, so limited to extend the term. Despite them both earning fully throughout covid they still took the mortgage holiday. 

40 year mortgage surely means house not affordable!

But their further behaviour is symptomatic of the wider UK issues, we, form the Government down are credit junkies.

It's easy money! 

House prices always go up, so we'll always have equity...........won't we?

Debt will always inflate away............won't it?

You're stupid not to!!

I think you are onto something here BikingBud.

I have just been playing around with some figures on a mortgage calculator and comparing the rates that we had over 2 years ago at around 2.5% interest rate on a 300k mortgage over 25 years with a 10% deposit. I have also entered the same mortgage on a 6% interest rate over 40 years.

As you can see the monthly payments on a 40 year mortgage are £274 more. But what is really scary is the total payment over the full term of the mortgage. Over 25 years it is £363,379 and over 40 years it is £713,379 which is nearly double. So a £300,000 property now would cost you twice as much when you factor in all of the extra interest you would have to pay.

             

Thing is all these figures are in 'today's money; terms.  Probably the 2% example you should assume average inflation of 1.5% and the 6% scenario, inflation of 5%.  Discount all the future cashflows accordingly and the picture changes.

If a £300k house goes up by 2% a year over 40 years it is worth £667217 at the end so not far off the total value of the 40yr mortgage at 6%

I also take the view that even in 10 years (and I've got 29 years left on my mortgage) the monthly payment will be quite a lot less in real terms, becoming more and more so towards the end of the mortgage. If I don't move (not going to) and don't borrow more (who knows, might need to for some reason), the next few years will probably be the least affordable, slowly getting more affordable as the repayment becomes cheaper in real terms. 

michaels

MattMattMattUK said:

michaels said:

MattMattMattUK said:

TerryDuckworth said:

I was talking with a work colleague the other week and their 2-year fixed rate is up for renewal soon and they were saying that their payments could shoot up from £1,500 to £2,500 per month. The only way they could bring this payment down is to take a longer term mortgage or go interest only.

I expect that they are either exaggerating, or misunderstanding. To generate those kind of changes they would need to have a large mortgage on an short term, going from a significantly below market average fix to a well above market average fix, ie going from somewhere like 0.75% to 9%. 

TerryD

Our monthly is going from 490pm on our old sub 2% fix to 1125pm on our new 4.5% fix starting October that we were lucky to lock in at the end of May, so proportionately a much larger increase.

Out of interest how much is the borrowing and what is the remaining term, because I cannot get that increase to match that interest rate rise outside of some very weird calculations (eg. £260-300k on a 45+ year mortgage).

IO

but fear not, I have saved enough to pay it off but like to keep the credit line available and am currently making a nice 'stooze' profit on the turn - currently maybe 700 a month, come October and the rate increase this will likely fall to £200pm - thems the breaks....