real mortgage rates are not going down...

happinessfactory

You know how we keep hearing about this 'fixed rate timebomb' due to go off?

My sister's has exploded today.

She had a letter through from the building society this morning telling her her mortgage payments are going up from £801 to £1332 when she comes off the fixed rate in April.

Luckily she found and has been accepted for a more competitive rate elsewhere, but the best she was offered (and she's a doctor, so unlikely to find herself redundant any time soon) is still £211 more than she was paying before. On a typical London X4 mortgage where the salary is already very stretched, that's going to hurt.

How are people are going to manage? £211 extra a month is a lot for someone on a good salary to manage, never mind people on bigger multiples or with kids.

Ms_Piggy_2

What are the APRs involved?

BettiePage

Local radio this lunchtime said that only First Direct are passing on the cut, the others are waiting until 'spring'.

happinessfactory

Ms_Piggy wrote: »

What are the APRs involved?

Not sure, she didn't say, but the one she was going up to was 7.5%, and so I'm guessing the original was something around 5%??

mountainchrisriver

BettiePage wrote: »

Local radio this lunchtime said that only First Direct are passing on the cut, the others are waiting until 'spring'.

Anyone with any bank/building society on a base rate tracker will benefit...

UK007BullDog

Happiness,

Which lender is this?

happinessfactory

The original lender was Cheltenham & Gloucester, I think the new one is going to be HSBC but she was still shopping around.

Yes, trackers are great for some people but most people I know who borrow 4 times a salary (the norm in London SFAIK), you're scared out of your wits if rates go up so you opt for the security of a fixed rate.

roxy84

Our fixed rate ended in December 07, we were paying £948 a month repayment and that shot up to £1302. We have had to change the mortgage to Interest Only and now with the cut our payments are £936 a month. We cannot change the mortgage company because we have bad credit, remortgage because there isnt enough equity.
Our net take home pay is only £1800, so we are strugeling to keep up

going2die_rich

Real mortgage rates aren't going to go down because banks are facing the credit crunch. The longer they leave the rate up the more money they make. Cutting rates while finding it more expensive to borrow more themselves doesn't make good business sense to them if they want to protect their profits.

Rate cuts are hardly passed straight away at the best of times, let alone when it's tough for banks to borrow money.

This is the period those that overstretched will feel the error of their ways. But no doubt they will blame the banks instead of themselves. They are actually lucky in that the bank of england is cutting it's rates and will continue to do so over the year, else they would really feel the brunt of overstretching if the global economy wasn't slowing down.

[Deleted User]

October is going to be hard year for me. Currently on a 4.49% fixed rate, IO mortgage.. was planning to move to repayments this year (300 quid step up) but the IO mortgage will probably cost that much when we come to remortgage.

Damn it, i've had 280 pound a month's worth of payrises since we bought this house 18 months ago.. now it's all going to be eaten up in extra mortgage payments. No more fun for Ringo

We'll get by, but i was looking forward to enjoying having disposable income for a while. Dunno how this will effect planning for starting a family.

Fergie73

Ringo, have you checked whether it would be cheaper to rent a place in the area where you live? It's just that IO mortgages are no better than renting, unless prices are shooting up, which they're unlikely to be doing over the next couple of years (although that's a guess, obviously, but how can they when everyone is already so stretched or priced out of buying?) If you find that renting would give a lot more disposable income for a similar place, why not just do that for a while instead?