real mortgage rates are not going down...

Rikki

My first mortgage was in the late 80's and the mortgage rate was 13%.

I wonder how many of us could cope if it went up to that again?

gingin_2

Rikki wrote: »

My first mortgage was in the late 80's and the mortgage rate was 13%.

I wonder how many of us could cope if it went up to that again?

Out of interest, how long were you paying at that rate?

BettiePage

gingin wrote: »

Out of interest, how long were you paying at that rate?

And how much was your mortgage and what % of your wage would it have been?

Raggie

Rikki wrote: »

My first mortgage was in the late 80's and the mortgage rate was 13%.

I wonder how many of us could cope if it went up to that again?

not quite that bad but our first in 1993 was fixed at 8.95%... and we thought we did well to get that...

:beer:

real1314

Hmm high interest rates are not always as bad as they seem, as they are accompanied by their friend "high inflation" in most cases.

So, although you might pay 13% on your mortgage, if your pay goes up by 12% per year, so long as you keep up with the payments in the early years, you find that your debt becomes smaller and smaller as the years pass by.

e.g £100k mortgage at 13% gives £13k in interest payments, or £1083 pcm
Assume salary is £40k.

1 year later salary is £44.8k, 2 yrs gives £50.2k, 3 yrs £56.2k, 4 yrs £62.9k, 5 yrs £70.49k

So after 5 years, your mortgage has gone from 2.5 x income to 1.4 x income and you've got £30.49k extra income. But your mortgage payments are the same as when you started.

Generali

real1314 wrote: »

Hmm high interest rates are not always as bad as they seem, as they are accompanied by their friend "high inflation" in most cases.

So, although you might pay 13% on your mortgage, if your pay goes up by 12% per year, so long as you keep up with the payments in the early years, you find that your debt becomes smaller and smaller as the years pass by.

e.g £100k mortgage at 13% gives £13k in interest payments, or £1083 pcm
Assume salary is £40k.

1 year later salary is £44.8k, 2 yrs gives £50.2k, 3 yrs £56.2k, 4 yrs £62.9k, 5 yrs £70.49k

So after 5 years, your mortgage has gone from 2.5 x income to 1.4 x income and you've got £30.49k extra income. But your mortgage payments are the same as when you started.

In any normal economic situation, it's real (ie inflation adjusted) interest rates that count. The higher inflation is, the higher real interest rates are likely to be so while inflation will erode the principle sum, you are likely to be paying a premium on your interest rate. Also, inflation is very bad for an economy and so you are likely to find it tougher to make money to service your mortgage.

mystic_trev

Anyone with a Sub-prime coming up for renewal are going to get great problems according to Ray Boulger, this morning. 'Many will only be offered the Lenders variable rate, and that could be as much as 11% !!!!!!!!'

Generali

mystic_trev wrote: »

Anyone with a Sub-prime coming up for renewal are going to get great problems according to Ray Boulger this morning. 'Many will only be offered the Lenders variable rate, and that could be as much as 11% !!!!!!!!'

From the Egg thing, it looks like lenders are starting to look at the profitability of their customers. The worst thing for a lender of a mortgage is for the customer to default leaving them owing more than the value of the security.

If you're trying to remortgage on a high LTV then you're likely to have more problems than in the recent past. High multiples of salary less so as long as you're offering up plenty of equity.

Gorgeous_George

Another effect of the credit squeeze may be:

If you have an attractive rate (fixed or tracker), miss a payment and the mortgage could be recalled quicker than if you had been on a less attractive rate.

So, if you have an attractive rate, don't miss a repayment - not even by a day.

GG

OLS

Im glad we never got a fixed rate. TBH when we got our first mortgage 3 years ago there were some pretty good FR's but as we both worked for building soc we got staff mortgage and took advantage of all the free b's (no HLC, free full Survey, £250 to cols fees, £250 cash back etc) and its a VR a certain percentage below the BOE rate - so were used to it going up - it went up GRADUALLY buy about £150 over all - but as it was bit by bit we could always ''find'' the extra £20 or £30 it had gone up one month - get used to that payment for a few months before it went up again etc....just had or mort statement and its gone back down again this month by £25 after the first cut so Im happy!