Mortgage rates rise for second time in days

meanmachine_2

LillyJ wrote: »

I was making the point that people who bought at the peak last time are laughing now.

That's a rubbish point to make.

I'd rather by the person "laughing" (lame) in 1995 who bought in the trough than the muppet who bought at the peak and suffered 5 years of possible NE.

As I say, as a "point" that's weaker than a weak old lady spending a week in Weakly-on-sea.

Kez100

LillyJ wrote: »

Nope I think you'll find they were 200 grand houses at the PEAK of the last crash. I was making the point that people who bought at the peak last time are laughing now.

If they didn't get repossessed.

borntobefree

!!!!!!? wrote: »

Better to borrow a 'small' amount and pay a large amount of interest than borrow a whopping amount and pay low interest rates.

Why Is this because you'd rather the banks had your money than regular folk?

borntobefree

!!!!!!? wrote: »

They weren't 'laughing' for about a decade as that's how long it took on average for prices to return to the same levels. I don't imagine that years of negative equity and struggling to meet high repayments for an overblown loan were much fun in the meantime. :rolleyes:

I certainly wouldn't wish that on anyone which is why I've been blowing the trumpet for not buying at the present time, for some time now.

Hi

As someone who was living through the 80's and early 90's it really didn't make any difference what the value of property was. We just got on with our lives as normal. We didn't spend our lives angsting about property prices. I sold my first flat (as I've said previously) for what I'd paid for it - we lived in it for 6 years. I bought my next house cheap relative to what it had been worth at the early 90's peak. What a property was worth was irrelevant - it was just a question of whether we could afford the mortgage.;)

m00m00

throughout the early 80s and 90s people weren't remortgaging every couple of years on short term fixes. That's a huge 'difference this time'

IveSeenTheLight

m00m00 wrote: »

throughout the early 80s and 90s people weren't remortgaging every couple of years on short term fixes. That's a huge 'difference this time'

Very true, however the amount of lenders competing for your mortgage was also not the same.
When you work out the figures, it can make sense re-mortgaging to have a better rate, this was why there was an increase in the amount of re-mortgages

WTF?_2

borntobefree wrote: »

Why Is this because you'd rather the banks had your money than regular folk?

No, it's because I'd rather I had the money (or at least didn't have to borrow so much of it from the bank and go more into debt).

Why would I prefer a situation where I'd have to borrow 100k to buy a house to one where I'd have to borrow 40k for the same house, even if the 100k could be borrowed at lower interest rates than the 40k???

Debt is still debt, irrespective of what the interest rate is.

Plus, unless you can get a fix for the whole term of your mortgage, interest rates can change quite significantly over the course of the repayment term and that 'affordable' 100k debt at 4% becomes a lot less affordable at 7.5%.


I think people really have lost sight of the concept of being in debt (vs balancing your finances and having savings) and how that's not a good situation to be in. It's almost accepted these days that you'll be owing large amounts of money no matter what. If not on a house then on a car loan, credit card, overdraft, personal loan etc.

Just because lenders have been unbelievably lax in who they will lend to, and the amount they will lend, and interest rates have been incredibly low doesn't get away from the fact that the individual is taking on large amounts of debt which will have to be repaid.

setmefree2

Hi !!!!!!?

Your example above is assuming a house price drop of 60% - I'm not sure that's likely to happen. Since a 1% increase in interest rates is equivalent to a (roughly) 9% drop in house prices on the total cost of a mortgage, prices will need to fall substantially for you to be better off because of the hike in rates. Indeed, if you factor in the incredibly high costs now of switching mortgage products (from one fix to another) this will also take out quite a big chunk of your "perceived" profit from buying cheapily, compared to someone who took out a BOE tracker (at a nominal fee) last summer. It's a delicate balance for sure.:money:

WTF?_2

setmefree2 wrote: »

Hi !!!!!!?

Your example above is assuming a house price drop of 60% - I'm not sure that's likely to happen. Since a 1% increase in interest rates is equivalent to a (roughly) 9% drop in house prices on the total cost of a mortgage, prices will need to fall substantially for you to be better off because of the hike in rates. Indeed, if you factor in the incredibly high costs now of switching mortgage products (from one fix to another) this will also take out quite a big chunk of your "perceived" profit from buying cheapily, compared to someone who took out a BOE tracker (at a nominal fee) last summer. It's a delicate balance for sure.:money:

The figures were just for the sake of illustration. And of course depending on your desposit/equity from previous house, you wouldn't need such a large drop in prices to make having to borrow 50-60k less a real possiblity


The point I'm getting across is that lower interest rates just make it possible for you to service the debt more easily. It's still more debt. It still has to eventually paid back with the interest added on.

(And interest rates can't be guaranteed to stay low over the period of the mortgage so you may not even be able to service the debt 2-5 years down the line.)

pickles110564

meanmachine wrote: »

I'd rather by the person "laughing" (lame) in 1995 who bought in the trough than the muppet who bought at the peak and suffered 5 years of possible NE.

Why?
If the person who bought at the peak and suffers 5 years of NE but has no intention of selling their home and can afford to service the debt, it does not matter.