What is the actual future for mortgages and rates? As frankly every news article in hindsight...

RelievedSheff

housebuyer143 said:

weddingringman said:

Had mortgage rates remained around 4-5% these last 10 years then property would probably be 30-40% cheaper. 

Look what happened when the inept Bank of England slashed the base rate to 0.1% in 2020. Typical mortgage rates dipped to just 1-2% and prices rocketed. And no wonder when money is that cheap. It’s virtually interest free credit!!

When will people learn?

I can agree that I bought a much larger house than I needed because rates were so cheap, it was an actual conscious decision as repayments were cheap and money was better off increasing in value in property than it was in the bank earning no interest. 

As it happens I can afford my house at 10% so it's fine but how many people did this and can't... We are going to see some people in trouble in the coming few years.

Will people struggle? Or will they just move to a more affordable or smaller property?

For every person that is struggling and needing to downsize to a more affordable property there will be those that are not and can purchase a more expensive property.

housebuyer143

RelievedSheff said:

housebuyer143 said:

weddingringman said:

Had mortgage rates remained around 4-5% these last 10 years then property would probably be 30-40% cheaper. 

Look what happened when the inept Bank of England slashed the base rate to 0.1% in 2020. Typical mortgage rates dipped to just 1-2% and prices rocketed. And no wonder when money is that cheap. It’s virtually interest free credit!!

When will people learn?

I can agree that I bought a much larger house than I needed because rates were so cheap, it was an actual conscious decision as repayments were cheap and money was better off increasing in value in property than it was in the bank earning no interest. 

As it happens I can afford my house at 10% so it's fine but how many people did this and can't... We are going to see some people in trouble in the coming few years.

Will people struggle? Or will they just move to a more affordable or smaller property?

For every person that is struggling and needing to downsize to a more affordable property there will be those that are not and can purchase a more expensive property.

I suppose it depends, how much equity they have and how whether they can sell at the price they paid. 
I imagine many will downsize if push came to shove but some won't want to and maybe they won't be able to without losing money.

Strummer22

Imagine thinking being forced to sell up and move to a smaller or more affordable property doesn't count as "struggling"! It would be devastating for me and my family if we had to do that.

One thing people don't seem to be talking about... interest rates may be rising, and the BoE doesn't want anyone to get a pay rise so that inflation comes down because we're all poor and they can say they have at last got a handle on inflation*. However, inflation is also eroding the value of our debt, particularly if pay increases aren't too far behind inflation. Say you've got £250,000 mortgage debt, and for absolute ease of calcs assume you have an interest-only mortgage. After two years of 10% inflation, the inflation-adjusted debt is only £202,500. Inflation is not all bad news for debt-holders. 

*so, if we don't get pay rises and this helps cool inflation, we're poor because we didn't get pay rises. Or, if we get the pay rises but inflation continues to be high for longer as a result, we're poor because of inflation. Either way, we're poor! 

CSI_Yorkshire

weddingringman said:

Had mortgage rates remained around 4-5% these last 10 years then property would probably be 30-40% cheaper. 

That's a pretty bold statement.  Anything to back it up?

I can't see it.  We aren't isolated from money elsewhere, so domestic pressures aren't the only factor, and it's still a supply-constrained market.

RelievedSheff

Strummer22 said:

Imagine thinking being forced to sell up and move to a smaller or more affordable property doesn't count as "struggling"! It would be devastating for me and my family if we had to do that.

One thing people don't seem to be talking about... interest rates may be rising, and the BoE doesn't want anyone to get a pay rise so that inflation comes down because we're all poor and they can say they have at last got a handle on inflation*. However, inflation is also eroding the value of our debt, particularly if pay increases aren't too far behind inflation. Say you've got £250,000 mortgage debt, and for absolute ease of calcs assume you have an interest-only mortgage. After two years of 10% inflation, the inflation-adjusted debt is only £202,500. Inflation is not all bad news for debt-holders. 

*so, if we don't get pay rises and this helps cool inflation, we're poor because we didn't get pay rises. Or, if we get the pay rises but inflation continues to be high for longer as a result, we're poor because of inflation. Either way, we're poor! 

I should think it would be devastating for most people to have to sell up and move somewhere more affordable.

But given the option of falling into arrears or potentially losing your home completely, I should think most people in those circumstances would do the sensible thing and reduce their housing costs if there was no other way they could reduce their other ongoing costs enough to cover the additional cost of keeping their current home.

ItisHappening

IAMIAM said:

was wrong....

The BOE is now going to 5% as a minimum in my eyes, with rates set to continue into 6% over next 12 months. 

Surely this has got to stop eventually, how anyone can now afford a mortgage with stress rates at 8% is beyond me, especially if single, first time buyer or even upgrading homes. 

And I don't need to know that rates were artificially low for the last 15 years, or that mortgage payments were 50% of take home pay 15 years ago, or yada yada yada. Society has moved on from those days. Especially as I can remember when a Freddo was 10p and an iphone didn't exist. 

Most were saying last year that the BOE base rate will top out at about 3%, now at 4.5% with another hike looking like a dead cert in June. Who knows it might hit 8% next year if they can't control inflation.

michaels

RelievedSheff said:

housebuyer143 said:

weddingringman said:

Had mortgage rates remained around 4-5% these last 10 years then property would probably be 30-40% cheaper. 

Look what happened when the inept Bank of England slashed the base rate to 0.1% in 2020. Typical mortgage rates dipped to just 1-2% and prices rocketed. And no wonder when money is that cheap. It’s virtually interest free credit!!

When will people learn?

I can agree that I bought a much larger house than I needed because rates were so cheap, it was an actual conscious decision as repayments were cheap and money was better off increasing in value in property than it was in the bank earning no interest. 

As it happens I can afford my house at 10% so it's fine but how many people did this and can't... We are going to see some people in trouble in the coming few years.

Will people struggle? Or will they just move to a more affordable or smaller property?

For every person that is struggling and needing to downsize to a more affordable property there will be those that are not and can purchase a more expensive property.

Or will they just cut spending elsewhere, holidays, meals out, iphones, new cars and kitchens etc and this will reduce demand in the economy enough to make the jobs market cool off and employers no longer needing to raise salaries to recruit/retain staff and that along with moderating commodity prices will eventually see inflation fall.

You know - monetary policy in action

Ksw3

I expect in some areas instead of sellers having 14 offers they will have 3. Might take the heat out of the offers over craze but won't expect prices to fall too much. 

weddingringman

CSI_Yorkshire said:

weddingringman said:

Had mortgage rates remained around 4-5% these last 10 years then property would probably be 30-40% cheaper. 

That's a pretty bold statement.  Anything to back it up?

I can't see it.  We aren't isolated from money elsewhere, so domestic pressures aren't the only factor, and it's still a supply-constrained market.

It’s entirely rational and there’s no credible argument to the contrary. 

You only have to look at one of the responses in this thread - “I bought a bigger house than I needed because rates were low”. Fair play - but that’s why prices are so high. How many thousands of people did the same? 

In 2021 when rates were at their lowest, you could borrow 300k with a 60-75% LTV and get a rate of around 1.44%, fixed for 2 years. That equated to about £1190 per month (25 year term). Today, it’s costing you £1700…

(I’m using my lender, first direct, no product fees).

That’s £6000 per annum extra in interest. You can’t tell me house prices wouldn’t be significantly lower had rates remained around 3-5% over the last 10 years instead of dipping below 2% across most LTV bandings. 

ItisHappening

weddingringman said:

CSI_Yorkshire said:

weddingringman said:

Had mortgage rates remained around 4-5% these last 10 years then property would probably be 30-40% cheaper. 

That's a pretty bold statement.  Anything to back it up?

I can't see it.  We aren't isolated from money elsewhere, so domestic pressures aren't the only factor, and it's still a supply-constrained market.

It’s entirely rational and there’s no credible argument to the contrary. 

You only have to look at one of the responses in this thread - “I bought a bigger house than I needed because rates were low”. Fair play - but that’s why prices are so high. How many thousands of people did the same? 

In 2021 when rates were at their lowest, you could borrow 300k with a 60-75% LTV and get a rate of around 1.44%, fixed for 2 years. That equated to about £1190 per month (25 year term). Today, it’s costing you £1700…

(I’m using my lender, first direct, no product fees).

That’s £6000 per annum extra in interest. You can’t tell me house prices wouldn’t be significantly lower had rates remained around 3-5% over the last 10 years instead of dipping below 2% across most LTV bandings. 

Phew that is some big price hike on mortgage payments and it is beautifully explained.