real mortgage rates are not going down...

izzybusy23

Sapphire wrote: »

Are you really 87? :T

I think this is a fellow HPC'er ...

Generali

MissMoneypenny wrote: »

It's not so good if they lend on a cc and the customer can't pay that back either. I wonder if any other cc lenders are also going to be trimming the fat.

The thing is, banks charge very high rates on credit cards for a reason - the lending is unsecured and so risky. They factor in a certain proportion of defaults. There isn't necessarily a problem if even a third of your clients default so long as you set the interest rate at a high enough level. A mate of mine worked for a shop that would sell on tick to pretty much anyone. The default rate was horrific but the APR was 50 or 60% so they didn't care. It was a pretty nasty business to be in but they lent plenty of money to the poor of Elephant and Castle and provided a service of sorts.

Mortgage rates are much lower as the banks believe that they'll get their money back regardless of whether you pay or not; they'll just take your house off you and sell it.

Sapphire

MissMoneypenny wrote: »

For some it might have been fear, not greed. Fear that they might never own their own house, as they thought prices only go up.

Or perhaps wanting to keep up with the Joneses? Seems to me that expectations of the type of property people 'have a right to' or 'need' are far higher now than they have ever been. And, of course, once you have a property, there is no question of making do with what you have in it until you have saved up enough money to replace it (if, indeed, you actually need to replace it). You must have it all now, in the latest 'style' propagated by the likes of IKEA and B&Q, and pseudo modernist designers.

There have been enough warnings by various experts and on Internet forums, etc, about the unsustainability of the rises in house prices. Anyone with half a brain should realize that you don't borrow enormous sums of money without taking into consideration what could happen in the future.

Gorgeous_George

Life doesn't wait for the property cycle.

If you want/need to start building a nest when propeerties are at the peak of the cycle, you are stuffed. There are few rental properties around other than those from private LLs with rents similar to a mortgage repayment. Buying a house at any price seems the wisest choice. It is much easier to breed if you are unemployed or on incapacity benefits. More kids = more income whereas for the employed, more kids = less income.

If you are luckier, you nest-building urge coincides with a lull in house prices. It is at these times when the average worker can truly afford to buy a home of their own.

Back on topic, real mortgage interest rates will fall but the banks need to factor in the risks to their business. This will lead to less attractive rates, larger upfront fees and lower lending multiples.

GG

Generali

Gorgeous_George wrote: »

Life doesn't wait for the property cycle.

If you want/need to start building a nest when propeerties are at the peak of the cycle, you are stuffed. There are few rental properties around other than those from private LLs with rents similar to a mortgage repayment. Buying a house at any price seems the wisest choice. It is much easier to breed if you are unemployed or on incapacity benefits. More kids = more income whereas for the employed, more kids = less income.

If you are luckier, you nest-building urge coincides with a lull in house prices. It is at these times when the average worker can truly afford to buy a home of their own.

Back on topic, real mortgage interest rates will fall but the banks need to factor in the risks to their business. This will lead to less attractive rates, larger upfront fees and lower lending multiples.

GG

One of the big problems with houses being so eye-wateringly expensive right now is that, contrary to popular opinion, people used to buy a home for their family a couple of years after they married and would perhaps move once to a bigger place once the kids got older. That reduces your risks dramatically as you're never really looking to sell. If you buy when prices are up a bit then you'll pay substantially more over the life of the mortgage but nothing that an hour or 2 of overtime each week can't take care of.

If you're having to buy lots of places over the course of your life then firstly you get crippled with the costs of buying and selling and secondly you are taking a lot more risk on - the time when you need to sell may be great or lousy but the timing is likely to be forced on you. If you're a 32 year old woman wanting kids, it's no use waiting 5 years for a better time to buy a family home.

neverdespairgirl

geoffky wrote: »

when will people realise this.....interest rates where 15% then. but houses and mortagages were only £50.000 to £100.000 but now we have 5% and £250.000 to £300.000. so we are in the same position...so 15% isnt too bad then..

My parents bought their London house for £480,000 in 1993. They were paying 11% fixed rate on it, , and had a £200,000 deposit, so the interest part of their mortgage was £30,800 a year or £2,567 a month.

The house a few doors down sold a year ago for £2.5 million. At the time, my parents were on a 5% fixed rate, so if they'd bought the same house with a £200,000 deposit a year ago, they'd have been paying £112,500 a year or £9,375 a month.

According to measuring worth, the following values apply:

In 2006, £2,567.00 from 1993 was worth:

£3,614.28 using the retail price index£3,538.08 using the GDP deflator£4,318.16 using average earnings£4,927.60 using per capita GDP£5,168.29 using the GDP

So by any way of looking at it, property was a great deal cheaper in 1993, even taking into account high interest rates on mortgages.

Mozette

happinessfactory wrote: »

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.

Well... did she not realise it would go up then?

Gorgeous_George

neverdespairgirl wrote: »

My parents bought their London house for £480,000 in 1993...

...The house a few doors down sold a year ago for £2.5 million.

Are you an only child? Are you married?

:rotfl:

GG

[Deleted User]

yes yes, october isn't a year

I've checked - it's still cheaper to have my IO mortgage than rent at the moment (700 mortgage payments Vs 1000 rent)

neverdespairgirl

Gorgeous_George wrote: »

Are you an only child? Are you married?

:rotfl:

GG

I have 3 younger siblings, a 10 year partner, a 2 year old son, and parents in their late 50s in stunning health. So I'd look elsewhere if I were you LOL!