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

carolt

jenner wrote: »

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

It is.

Problem is, some people bought their houses at abnormally low rates, but imagined rates would never revert to normality - new paradigm I think they call it. Hmmm.....

m00m00

the point being missed when comparing historical interest rates, is the actual purchase price of the properties back then.

the only figure that really makes sense in comparison, is ratio of earnings to property price

jimcoxell

im one of the people whos fixed rate is due to end this year. Ive secured a 3 year fixed deal at 7.19 % ( from the only bank that would take me :-). To be honest I still consider this a really good rate plus they will let me overpay 10% of the capital per uyear without getting any charges.

It was suggested to me that I should wait to see if the bank would drop their rates but its a risk i cant take. I know that I can afford the repayments at the rate Ive been offered . If they go up another 1% then theres just no way I could pay.

jimcoxell

poppysarah wrote: »

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]

that message has been there for about 3 years. I took note of it when I bought my place .

PasturesNew

That 12% warning has been there "forever".
It was reading that that has always put the fear of God into me when thinking about mortgages.

I used to do a lot of ad hoc mortgage calculations, just to see. And all I could EVER see was the 12% amount.... the amount it would be at "today's rate" I never saw.... that 12% figure was there on the screen, warning.

MiserlyMartin

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.

So if you are one of Thatchers children you might remember that in 1990 house prices were 2-3 times lower than now. 2x higher prices has the effect of twice as much interest, if applying the same logic 7.25%x2 = 14.5%

In the last crash you also had mortgage interest tax relief at source (MIRAS) which helped the actual rate to appear less. No such help this time.

PasturesNew

MiserlyMartin wrote: »

In the last crash you also had mortgage interest tax relief at source (MIRAS) which helped the actual rate to appear less. No such help this time.

Only for some people/some mortgages. And income tax had been 33-25%, so a lot higher.
Also, the cost of all other goods needed in a home was a lot more. e.g. I bet you could buy a TV today for £100 that would have cost £120 back then (or more)

MiserlyMartin

Oh yeah no doubt that electrical goods were much higher. I remember my Dad buying a video recorder in 1988 for about £500. That was a lot of money then accounting for inflation.

Income tax higher ok, but what about NI? What was it in 1990? They jacked that up recently so they could keep the headline income tax rate down. And rates were nothing like the levels of council tax we have now. Even the poll tax worked out much cheaper even for those who moaned about paying it back then. We also have to pay more into pensions thanks to Gordon Browns decision to tax pension fund dividends in 1997.

PasturesNew

If lenders had never lent more than 3x a single earner, or 2.5x first + 1x second, prices could never have risen so much.

So it's the fault of lenders and couples who borrowed first 3x joint earnings, then 4x, 5x, 6x. Add to that the BLT and liar loans.

The cost of a house is only ever as much as people can borrow to buy it. If people can't borrow along the chain, then it works all the way through to keep a lid on increases.

mr.broderick

carolt wrote: »

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.

So what are you saying if prices drop 20% and people rush to buy they will be no better off due to high interest rates?