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  • oddlyuk
    • #2
    • 4th Nov 10, 4:24 PM
    Lucky or not?
    • #2
    • 4th Nov 10, 4:24 PM
    I have been mourning my lost s having been on a fixed rate of 4.9 for the last 3 years. I have 2 years left to go and after this blog perhaps I should think myself "lucky" that any rise won't come as such a shock
  • Frugal_Moose
    • #3
    • 4th Nov 10, 4:27 PM
    • #3
    • 4th Nov 10, 4:27 PM
    I'm on a tracker, base + 0.89, so have been piling cash into overpayments. I think that by the time interest rates go back up my amount owing will have shrunk by about 12k and hopefully that will make it substantially less painful.
    • riazmb
    • By riazmb 4th Nov 10, 4:57 PM
    • 20 Posts
    • 103 Thanks
    riazmb
    • #4
    • 4th Nov 10, 4:57 PM
    • #4
    • 4th Nov 10, 4:57 PM
    Wise words indeed Martin. Low interest rates are currently saving this country from economic meltdown, this must weigh heavily on the minds of the 'independent' BoE MPC each month, no political pressure whatsoever
  • sajonana
    • #5
    • 4th Nov 10, 5:11 PM
    • #5
    • 4th Nov 10, 5:11 PM
    I took out my first mortgage at the end of 1988 - I don't need reminding how high mortgage rates can go!! But a useful document, thanks.
  • Sybersal
    • #6
    • 4th Nov 10, 5:21 PM
    • #6
    • 4th Nov 10, 5:21 PM
    We are terrified interest rates will go up. Hubbie lost his job and could n't get one near his old salary so we are 10k down. We have a 250k mortgage on a 350k house and currently paying about 1k a month - if interest rates go up it will cripple us.
    (Hubbie earns just over 44k so we will also lose child benefit) I don't have much earning capacity (maternity support worker before children on 6ph but no flexiabilty at all in shifts for working mums). My son has special needs so I do need to be around - but we don't qualify for carers allowance - but I don't want more benefits!
    We ticking over at the moment - but no savings, no pension, no extra to put away and no we don't go on holiday or eat out!
    So if the interest rate creeps up we will be up the proverbial - with I imagine thousands of others!
    • MacMickster
    • By MacMickster 4th Nov 10, 5:44 PM
    • 2,806 Posts
    • 8,963 Thanks
    MacMickster
    • #7
    • 4th Nov 10, 5:44 PM
    • #7
    • 4th Nov 10, 5:44 PM
    Interest rates are low at the moment to save the banks from another meltdown. Many borrowers are in a negative equity situation having previously been offered ridiculous income multiples by lenders. If interest rates are increased significantly in the next couple of years then this will cause a downward spiral with an unprecedented level of defaults, house prices being driven down further, even more negative equity and then credit crunch 2 as the banks would be unable to recover amounts owing to them by repossessing the mortgaged properties.

    Higher interest rates were affordable historically as people were only allowed to borrow lower income multiples. It was the relaxation of income multiples combined with a shortage of housing which brought about the house price bubble. Banks then actively encouraged people to borrow even more of the new equity (magic money that their house made for them) to fund luxuries and people began to live lifestyles which were way beyond their means.

    If interest rates are raised significantly, then the new credit crunch will stifle the ability of businesses to start up or expand, providing the promised growth to compensate for the reduction in the public sector. For this reason I think that it is unlikely that we will see even 5% interest rates for some years to come.
    • michaels
    • By michaels 4th Nov 10, 5:45 PM
    • 21,896 Posts
    • 101,679 Thanks
    michaels
    • #8
    • 4th Nov 10, 5:45 PM
    • #8
    • 4th Nov 10, 5:45 PM
    WE were discussing on the economy board how sensitive borrowers were to rising rates and the replies thus far illustrate the range - some on fixed for who it is likely to make little difference, others on trackers who are likely to see big increases of who some like me could afford rates up to abut 11% and others who would be hit by any rise.

    I wonder what info the BoE have on this IR sensitivity when deliberating.
    Cool heads and compromise
    • michaels
    • By michaels 4th Nov 10, 5:47 PM
    • 21,896 Posts
    • 101,679 Thanks
    michaels
    • #9
    • 4th Nov 10, 5:47 PM
    • #9
    • 4th Nov 10, 5:47 PM
    I'm not disagreeing with your analysis but there is not necessarily any link between income multiples and negative equity.

    Many borrowers are in a negative equity situation having previously been offered ridiculous income multiples by lenders.
    Originally posted by MacMickster
    Cool heads and compromise
    • MacMickster
    • By MacMickster 4th Nov 10, 5:55 PM
    • 2,806 Posts
    • 8,963 Thanks
    MacMickster
    I'm not disagreeing with your analysis but there is not necessarily any link between income multiples and negative equity.
    Originally posted by michaels
    The income multiples allowed the house price bubble to occur. Without these increased multiples prices could not have increased in the way that they did, as nobody would have been able to obtain the necessary funds. The increased multiples also allowed the previously prudent to borrow from the equity in their properties

    This house price bubble was always going to burst leading to borrowers owing more than their property was now worth.
    Last edited by MacMickster; 04-11-2010 at 5:57 PM.
    • pongyvonny
    • By pongyvonny 4th Nov 10, 6:15 PM
    • 2 Posts
    • 0 Thanks
    pongyvonny
    We're stuck in a 5.99% mortgage until 2012. Looked to see if it's worth coming out of the fixed rate but it would cost us 9000. We've reduced to interest only repayments as husband lost his job and took a new one on half the salary (went from 80k to 40k/annum). Will look again to see if there's any way we can nab a lower rate mortgage before they disappear! Was SO hoping to reduce our interest in 2012 so we could carry on with repayment mortgage again
    • Coveredinbees!!!!
    • By Coveredinbees!!!! 4th Nov 10, 6:26 PM
    • 3,174 Posts
    • 1,961 Thanks
    Coveredinbees!!!!
    Like a previous poster I have been over paying while the going is good, I was talking to a mate about what he was doing and he said it was great he had load of spare cash at the moment and has 25 years to pay his mortgage. Fine until the rate hit 10% again.

    • MSE Martin
    • By MSE Martin 4th Nov 10, 6:29 PM
    • 8,115 Posts
    • 42,276 Thanks
    MSE Martin
    WE were discussing on the economy board how sensitive borrowers were to rising rates and the replies thus far illustrate the range - some on fixed for who it is likely to make little difference, others on trackers who are likely to see big increases of who some like me could afford rates up to abut 11% and others who would be hit by any rise.

    I wonder what info the BoE have on this IR sensitivity when deliberating.
    Originally posted by michaels

    I agree - what goes up is much more painful than what comes down. In the money diet I call it "fools gold" that we absorb our new income / disposable income quickly and find it hard to adjust downwards.

    I think I wrote about it in this too http://www.moneysavingexpert.com/news/mortgages/2009/11/the-mortgage-margin-scandal
    Martin Lewis, Money Saving Expert.
    Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.

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    • mdr86
    • By mdr86 4th Nov 10, 6:45 PM
    • 100 Posts
    • 50 Thanks
    mdr86
    I've made a graph here of the base rate changes over the last 2 centuries from the link Martin gave: http://www.madanra.com/base-rate-graph.pdf if anyone's interested...
  • ailuro2
    I paid interest all those years ago when it was up around the 14% mark and never forgot it... there were so many news reports of thousands of people just posting their house keys through the bank / building societies door and walking away because they couldn't pay the mortgage.

    Make the most of the low interest and pay the mortgage as if interest rates were still at 5%, that way you'll not get used to the extra money and will be well placed to cope when they return to normal.
    Member of the first Mortgage Free in 3 challenge, no.19
    Balance 19th April '07 = minus 27,640
    Balance 1st November '09 = mortgage paid off with 1903 left over. Title deeds are now ours.
  • Gemmzie
    I agree - what goes up is much more painful than what comes down. In the money diet I call it "fools gold" that we absorb our new income / disposable income quickly and find it hard to adjust downwards.

    I think I wrote about it in this too http://www.moneysavingexpert.com/news/mortgages/2009/11/the-mortgage-margin-scandal
    Originally posted by MSE Martin
    Exactly, and that's one reason I never let a wage increase go into my general account - it goes to something specific but short term (debt payment, holiday, savings)

    Make the most of the low interest and pay the mortgage as if interest rates were still at 5%, that way you'll not get used to the extra money and will be well placed to cope when they return to normal.
    Originally posted by ailuro2
    My parents can cope with a return to 6% mortgage so a 4.5% base rate - roughly where it was three years ago - because we've always kept the "spare" for mortgage overpayments, debt overpayments and a little for spending.
    No longer using this account for new posts from 2013
    • sarahs999
    • By sarahs999 5th Nov 10, 7:42 AM
    • 3,827 Posts
    • 9,475 Thanks
    sarahs999
    It is a time bomb and I'm acutely aware of it too. Sadly I'm not in a position to make overpayments; I've been ploughing all my spare money into my credit cards to clear them with the aim of overpaying on my mortgage after that. I managed to secure a tracker at a very good deal just before everything went crazy so have really benefitted from this past couple of years of low rates, but I know it can't last much longer. As soon as they start to rise I will be going back to my usual, a fixed rate. Even though I know all this it still feels 'normal' now to have such low rates as they've been around for a couple of years... there will be a mass wave of reposessions when they do start to go up. Worrying times.
    Debt cleared! 13,128 0!!!
    Saving for maternity leave: 3,300/3500
    'Eat food. Not too much. Mostly plants.' Michael Pollan
    • 50Twuncle
    • By 50Twuncle 5th Nov 10, 8:05 AM
    • 8,897 Posts
    • 2,168 Thanks
    50Twuncle
    But with such low interest rates - savings rates are low.
    It depends on your circumstances - whether you want rates to rise.

    I feel that if the base rate rose to 3% - we would (all ?) be happy....

    ie) - Those of us with no mortgage and savings (that at present are stagnant) and those on mortgages - will have to grin and bear it - they obviously didn't have the forethought to budget for inevitable interest rate rises !!

    Any comments ?
    Last edited by 50Twuncle; 05-11-2010 at 8:08 AM.
    • Clowance
    • By Clowance 5th Nov 10, 8:18 AM
    • 1,655 Posts
    • 1,139 Thanks
    Clowance
    Back at the end of the 70's - early 80's I had a mortgage at 15.5 (yes Fifteen and a half) percent. I don't know if that was the highest its ever been, but it was tough to pay it. I think the flat cost 17000 (it was in a cheap area - Hastings - and the mortgage was about 15000 but my salary back then was about (I think) 7000 per annum. If I was doing the same job now I imagine I would be getting about 28000 but the same flat would be at least 100000 - 4 times salary compared to 2.5 times. I sold the flat for the same as I paid for it 4 years later, having only had it as an "investment" since I lived 50 miles away (had only used it for holidays). Property not always a good buy, looking back I should have rented it out.
    Don't forget quidco/topcashback - I do!
  • ilurvfree
    Historical trends are always good to look at, however nobody (especially our politicians) actually knows where the future rates will go. It's a total gamble like most things financial. Personally it looks to me like there is a lot tighter control over interest rates and inflation than there has ever been compared to 20 30 40 years ago and long may it continue.

    Mass property ownership hasn't really been going on in this country long enough for trends to be accurate. You just have to look at what the so called financial experts predict, they contradict one another constantly regarding future interest rates.

    In Germany the majority of the population rent, as we did 30 plus years ago, with a great deal of legislation that benefits mainly the tenant as opposed to the landlord.
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