Average fixed-rate mortgages to go up again - highest in a decade

carolt

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/05/30/bcnmort130.xml

Mortgage payments will rise to their highest in more than a decade as a gloomy economic outlook squeezes the financial system even more tightly.

The average interest rate on a two-year fixed rate mortgage will soon rise above 7 per cent, according to moneyfacts.co.uk, a financial product comparison service.

clobber_2

Call me one of Thatcher's children, but 7.25% doesn't seem that high to me.

I guess however it might be a nasty shock to some of those on fixed rates atm.

poppysarah

I've just posted in another thread about the bbc mortgage calculator - it's got a message on it:
http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml

[SIZE=-1]But be careful, at 12% it will be:[/SIZE]

WTF?_2

clobber wrote: »

Call me one of Thatcher's children, but 7.25% doesn't seem that high to me.

I guess however it might be a nasty shock to some of those on fixed rates atm.

The more I see this thing playing out, the more I'm convinced that the population at large is in for an absolutely massive 'culture shock' as well as the shock to their finances.

Cheap and easy borrowing is now so deeply ingrained into the culture of anyone below about 35 that when it goes it really is going to leave them struggling to cope with the realities of living within your means.

So many people out there seem to have personal debt that would take 2 years or more to pay off ... and that's even IF they maintain their current income and the cost of living doesn't rise and the cost of debt doesn't go up and their lender doesn't get nasty and start putting the pressure on.

What will they do when they literally have no further spending power due to credit drying up and they need to pay the rent/mortgage and do the weekly food shop?

carolt

clobber wrote: »

Call me one of Thatcher's children, but 7.25% doesn't seem that high to me.

I guess however it might be a nasty shock to some of those on fixed rates atm.

Yes, a very nasty shock according to the article:

"Two years ago, the average rate on a fixed mortgage was 4.34 per cent.

There are around 5.9 UK million households on fixed-rate mortgages. Some 1.4 million of them will see their fixed-rate terms end this year, leaving them with a choice of seeking a new fixed loan or paying sharply higher costs for standard variable rate loans."

That's a big jump - interest payments up over 50%.

meanmachine_2

Carolt, was just about to post something very similar.

As you can see, swap rates are hitting new highs, which means fixed rates are going to go higher still

http://www.swap-rates.com/UKSwap.html

puddy

clobber wrote: »

Call me one of Thatcher's children, but 7.25% doesn't seem that high to me.

I guess however it might be a nasty shock to some of those on fixed rates atm.

me too, when i bought this flat (my first) the mortgage rate was 7.48, i thought that was normal

meanmachine_2

Last year I was watching a British film made in, I think, the late 90s, and one scene was in a bank - posters were trumpeting mortgages at 6.5%, and I remember thinking, cor, that was expensive.

Shows how brainwashed we've all become.

I also recall, last year, telling people they were crazy taking out sub prime mortgages with rates above 6 per cent.

God knows what those same people are being charged today - 9, 10%?!!

JonnyBravo

carolt wrote: »

Yes, a very nasty shock according to the article:

"Two years ago, the average rate on a fixed mortgage was 4.34 per cent.

There are around 5.9 UK million households on fixed-rate mortgages. Some 1.4 million of them will see their fixed-rate terms end this year, leaving them with a choice of seeking a new fixed loan or paying sharply higher costs for standard variable rate loans."

That's a big jump - interest payments up over 50%.

Of course the well organised (polishes own halo) will already have reserved their rate.
Those people of course aren't the ones who are likely to struggle though. It's the last minute brigade, who IMHO are also likely the ones close to struggling already, who need to worry. They will wait til Sept til they think about looking round despite their rate finishing in Oct who will really struggle.

meanmachine_2

carolt wrote: »

Yes, a very nasty shock according to the article:

"Two years ago, the average rate on a fixed mortgage was 4.34 per cent.

There are around 5.9 UK million households on fixed-rate mortgages. Some 1.4 million of them will see their fixed-rate terms end this year, leaving them with a choice of seeking a new fixed loan or paying sharply higher costs for standard variable rate loans."

That's a big jump - interest payments up over 50%.

Two years ago you could get a mortgage from Northern Rock (whatever happened to them??) for 3.99% with a reasonable product fee.

Or, a two year fix from A&L for 4.14% (95% ltv, low fee).

Today the equivalent is 6.99%, and that's with a 90% ltv!!!

Zammo

The average interest rate on a two-year fixed rate mortgage will soon rise above 7 per cent, according to moneyfacts.co.uk, a financial product comparison service.
A rate of 7.25 per cent would make the monthly payment on a £150,000 two-year fixed rate mortgage to £1,084.
Monthly payments on a similar mortgage fixed at 5.25 per cent would be £898.
"We should see fixed rates of well over 7 per cent in a couple weeks as lenders pass on the higher costs of their own financing," said Darren Cook, a spokesman for moneyfacts.co.uk.

Perhaps Gordon Brown can put pressure on mortgage lenders to reduce their rates. After all, with his recent strong arm tactics with Opec he has single handedly saved the planet from high oil prices.