Mortgage fix

Pross

shirley_basso said:

only £300?

It was basically a 25% increase in one single increase.

Pross

Jezyboy said:

morstar said:

I definitely think Covid opened the floodgates to people expecting a safety net for every circumstance.

However, wages have been massively eroded to where people were already using foodbanks. Something was already very much broken and it just got a lot worse.

Conversely, like others have said, I’d be resentful of bailing out people who have over leveraged. I haven’t. I’ve been lucky to have significant wage growth in recent years. Despite this, every time we’ve looked into moving, I’ve just looked at the numbers and said no thanks.

I’d love to have moved but I’d rather be comfortable and not panicking every time the rates move. Don’t see why I should now subsidise somebody who had the same numbers and said f*** it, let’s do it.

I’ve frequently laughed at how much the lenders would lend me. Crazy numbers. Fine if I only had the mortgage to pay and nothing else.

Meh, tbf I'm not sure how the policies designed to limit the spread of COVID could have happened without the financial safety nets. As much as it's galling when distant friends reminisce about their lovely furlough holidays when you had to work at home the whole way through, that's just the way it is.

The energy price cap thing...well overall as a policy its older than COVID, it was designed to paper over cracks in a market that didn't seem to be working well for consumers, and it turns out that papering over cracks doesn't work as a long term strategy to fix things.

Yes, they were justifiable (and required) during Covid but I think there are now an element who expect the Government to step in and help and everything that affects their cost of living due to them doing so on that occasion rather than seeing that as a once in a generation or rarer event.

morstar

Pross said:

Jezyboy said:

morstar said:

I definitely think Covid opened the floodgates to people expecting a safety net for every circumstance.

However, wages have been massively eroded to where people were already using foodbanks. Something was already very much broken and it just got a lot worse.

Conversely, like others have said, I’d be resentful of bailing out people who have over leveraged. I haven’t. I’ve been lucky to have significant wage growth in recent years. Despite this, every time we’ve looked into moving, I’ve just looked at the numbers and said no thanks.

I’d love to have moved but I’d rather be comfortable and not panicking every time the rates move. Don’t see why I should now subsidise somebody who had the same numbers and said f*** it, let’s do it.

I’ve frequently laughed at how much the lenders would lend me. Crazy numbers. Fine if I only had the mortgage to pay and nothing else.

Meh, tbf I'm not sure how the policies designed to limit the spread of COVID could have happened without the financial safety nets. As much as it's galling when distant friends reminisce about their lovely furlough holidays when you had to work at home the whole way through, that's just the way it is.

The energy price cap thing...well overall as a policy its older than COVID, it was designed to paper over cracks in a market that didn't seem to be working well for consumers, and it turns out that papering over cracks doesn't work as a long term strategy to fix things.

Yes, they were justifiable (and required) during Covid but I think there are now an element who expect the Government to step in and help and everything that affects their cost of living due to them doing so on that occasion rather than seeing that as a once in a generation or rarer event.

That’s what I was trying to get at.
Not that we shouldn’t have done stuff for Covid but we now seem to be in this post covid world where we’re discussing government help for everything negative.

rick_chasey

For those who are saying it's mad to max out your borrowing, for first-time buyers, that's often the only alternative to renting, and renting is really bad - you pay a lot more than the mortgage would cost (at low interest rates, anyway. A *lot* more in some instances) and at least that way you see some of your money back.

wallace_and_gromit

rick_chasey said:

For those who are saying it's mad to max out your borrowing, for first-time buyers, that's often the only alternative to renting, and renting is really bad - you pay a lot more than the mortgage would cost (at low interest rates, anyway. A *lot* more in some instances) and at least that way you see some of your money back.

IIRC, in my formative years, the optimum strategy was held to be to max out the mortgage (*) and inflation would make debt service a minor issue in the longer term, as you could rely on decent pay rises each year. And house prices only ever went up.

None of these factors played out for me in the early 90s - I bought a house for £42k in 1991, sold it in 1993 for £37 (just clearing the mortgage) then rented for a while before buying another house for £64k in 1995 (the first W&G Marital Palace) that had been sold for £72k in 1993. Imagine that - house price deflation for 4 years in a row! Pay rises generally came only via promotion.

To this day, I don't really know whether I lost out via the 1991-1993 period or gained via the 1993-1995 period.

(*) In those days, Building Societies saved you from yourself with very prudent lending multiples.

Pross

Just had a quick look at how much I could potentially borrow as a joint mortgage over 15 years and then what that would cost be at 6%. The numbers were scary (more than double what I'm currently paying out). I would hope the proper affordbility tests would stop me being offered anything close to that. I could get the sort of house I'd really like though when adding the equity in my current place!

wallace_and_gromit

Pross said:

Just had a quick look at how much I could potentially borrow as a joint mortgage over 15 years and then what that would cost be at 6%. The numbers were scary (more than double what I'm currently paying out). I would hope the proper affordbility tests would stop me being offered anything close to that. I could get the sort of house I'd really like though when adding the equity in my current place!

But you'd have no spare cash, and would soon hate your house as you'd be stuck in it binge-watching travel programmes when you couldn't afford to travel. Though you'd have plenty of time to clean the much bigger house, so it's not all bad!

Munsford0

Both our sons + partners went through exactly that. Undersupply of affordable houses coupled with stupidly low interest rates fuelled equally stupid asking prices and a buying frenzy during the stamp duty holiday. Both couples ended up paying more than we thought they should, but they felt the alternative was failing to secure the purchase. They'd been outbid several times before.

Munsford0

And guess what? 2 years on when their fixed rates are up, potential new lenders aren't valuing the properties anywhere near what they actually paid, so their LTV assumptions are down the shitter.

surrey_commuter

rick_chasey said:

For those who are saying it's mad to max out your borrowing, for first-time buyers, that's often the only alternative to renting, and renting is really bad - you pay a lot more than the mortgage would cost (at low interest rates, anyway. A *lot* more in some instances) and at least that way you see some of your money back.

I think the disconnect on here is with those of us who have painful experience of negative equity.

Property is seen as a one way bet when it really isn't. The people in your example could find themselves several tens of thousands of pounds under water and unable to sell for a decade

rick_chasey

wallace_and_gromit said:

(*) In those days, the market saved you from yourself with not having to require imprudent lending multiples in order to secure a house

FTFY

Pross

wallace_and_gromit said:

Pross said:

Just had a quick look at how much I could potentially borrow as a joint mortgage over 15 years and then what that would cost be at 6%. The numbers were scary (more than double what I'm currently paying out). I would hope the proper affordbility tests would stop me being offered anything close to that. I could get the sort of house I'd really like though when adding the equity in my current place!

But you'd have no spare cash, and would soon hate your house as you'd be stuck in it binge-watching travel programmes when you couldn't afford to travel. Though you'd have plenty of time to clean the much bigger house, so it's not all bad!

Exactly - not sure about spare cash, I think I'd be struggling with the essentials and yet that is apparently what the banks think I can reasonably afford.

Stevo_666

wallace_and_gromit said:

rick_chasey said:

For those who are saying it's mad to max out your borrowing, for first-time buyers, that's often the only alternative to renting, and renting is really bad - you pay a lot more than the mortgage would cost (at low interest rates, anyway. A *lot* more in some instances) and at least that way you see some of your money back.

IIRC, in my formative years, the optimum strategy was held to be to max out the mortgage (*) and inflation would make debt service a minor issue in the longer term, as you could rely on decent pay rises each year. And house prices only ever went up.

None of these factors played out for me in the early 90s - I bought a house for £42k in 1991, sold it in 1993 for £37 (just clearing the mortgage) then rented for a while before buying another house for £64k in 1995 (the first W&G Marital Palace) that had been sold for £72k in 1993. Imagine that - house price deflation for 4 years in a row! Pay rises generally came only via promotion.

To this day, I don't really know whether I lost out via the 1991-1993 period or gained via the 1993-1995 period.

(*) In those days, Building Societies saved you from yourself with very prudent lending multiples.

Similar experience here.

Although the amount that the BS was prepared to lend me when we bought our current place in 2021 was pretty eye opening. Luckily I didn't need anywhere near that much.

Jezyboy

rick_chasey said:

wallace_and_gromit said:

(*) In those days, the market saved you from yourself with not having to require imprudent lending multiples in order to secure a house

FTFY

What comes first, a market requiring imprudent lending multiples, or lenders lending imprudent lending multiples?

rick_chasey

Jezyboy said:

rick_chasey said:

wallace_and_gromit said:

(*) In those days, the market saved you from yourself with not having to require imprudent lending multiples in order to secure a house

FTFY

What comes first, a market requiring imprudent lending multiples, or lenders lending imprudent lending multiples?

Market. Think about it. If lenders won't lend at what people will sell/buy the house for, they will just lose business.

wallace_and_gromit

rick_chasey said:

Jezyboy said:

rick_chasey said:

wallace_and_gromit said:

(*) In those days, the market saved you from yourself with not having to require imprudent lending multiples in order to secure a house

FTFY

What comes first, a market requiring imprudent lending multiples, or lenders lending imprudent lending multiples?

Market. Think about it. If lenders won't lend at what people will sell/buy the house for, they will just lose business.

I think we've had this discussion before. What the market giveth with low prices, it taketh via high interest rates. Borrowers being stuffed by sudden and adverse mortgage rate movements is not a new phenomenon. It's just not happened for years.

In the old days, Building Societies expected their borrowers to stay with them for years. Not out of arrogance. It's just what people did. Just like many folk of your generation expected interest rates to stay low forever, which always felt rather optimistic to this old stager.

Short term fixing and regular lender changes weren't common. So Building Societies had a vested interest in not promoting financial difficulties amongst their borrower base. It's no great surprise that many ex-Building Societies are simply just "ex" now. The lending model was simpler in the Old Days, and more prudent.

pblakeney

Jezyboy said:

rick_chasey said:

wallace_and_gromit said:

(*) In those days, the market saved you from yourself with not having to require imprudent lending multiples in order to secure a house

FTFY

What comes first, a market requiring imprudent lending multiples, or lenders lending imprudent lending multiples?

I was thinking the same. The market will charge what it can. More affordable mortgages and house prices go up. If nobody could afford the asking prices then the prices would fall.

briantrumpet

Seems sensible:

Key mortgage measures announced by Chancellor
Here are the key measures announced by Jeremy Hunt to support mortgage holders as interest rates increase:

Customers will be able to speak to their bank about mortgage support without it impacting their credit score

Households will be able to change to an interest only mortgage or extend the term and then go back to their original deal within six months

There will be a minimum term of 12 months before a house can be repossessed without consent.

https://www.telegraph.co.uk/business/2023/06/23/ftse-100-markets-live-interest-rates-consumer-confidence/

joeyhalloran

Though stupid as it sounds, people also need to understand that interest only or extending the mortgage period increases the total amount payable (in the same way overpaying brings it down). I remember a thread on another forum a while ago where people didn't understand this and a lot of the replies were similar.

Maybe Sunak is correct when he says everyone should do maths until 18.

kingstongraham

These sound like decent temporary solutions for people who are in serious difficulty when they get an increase due to coming off a fixed rate.

If they are just generally available - as sounds likely from Hunt's "no questions asked" - won't they hamper the rate increase having the intended effect on inflation?

rick_chasey

I would like to know how they plan to enforce the 'won't affect your credit score' rule

wallace_and_gromit

It does seem a bit cockeyed to try and reduce aggregate demand via higher interest rates and then introduce measures to reduce the demand-reduction impact of the interest rate rise.

focuszing723

A homes to live in crash and negative equity isn’t great for the economy. People need to know debt ain't cheap now! Not that it's their fault, they've been sold this ZIRP myth.

kingstongraham

rick_chasey said:

I would like to know how they plan to enforce the 'won't affect your credit score' rule

I can understand how just talking to your bank maybe doesn't get recorded in a way that impacts your credit rating, but if you take up the support, that just becomes part of your borrowing history, surely.

rick_chasey

kingstongraham said:

rick_chasey said:

I would like to know how they plan to enforce the 'won't affect your credit score' rule

I can understand how just talking to your bank maybe doesn't get recorded in a way that impacts your credit rating, but if you take up the support, that just becomes part of your borrowing history, surely.

We all want to believe their CRM system doesn't automatically track everything? It won't affect your credit score, until you try to do anything else with said bank, right?

focuszing723

https://www.youtube.com/watch?v=d0nERTFo-Sk

Jezyboy

kingstongraham said:

These sound like decent temporary solutions for people who are in serious difficulty when they get an increase due to coming off a fixed rate.

If they are just generally available - as sounds likely from Hunt's "no questions asked" - won't they hamper the rate increase having the intended effect on inflation?

I don't think extending your mortgage term or going on to interest only are particularly attractive options (unless the only other option is moving). So I wouldn't necessarily worry about lots of people swapping onto them just in order to continue spending.

Certainly our plan when remortgaging will just be to spend less on fun things.

focuszing723

Turkey has hiked its main interest rate from 8.5% to 15%, reversing one of President Recep Tayyip Erdogan's unorthodox economic policies.

The 6.5-point rise was far lower than economists were expecting, but it marked a major shift in policy by his new economic team brought in to tackle rampant inflation.

Turkey's leader has until now insisted on keeping interest rates down.

Inflation is almost 40% and Turks are in the grip of a cost-of-living crisis.

The head of Turkey's central bank, Hafize Gaye Erkan, 44, was only recruited from the US this month in the wake of Mr Erdogan's re-election as president.

Her decision marks the first rise in interest rates since December 2020, after a turbulent period in which three central bank governors were fired in less than two years, as they sought to stick to orthodox economics.

Although the increase almost doubles Turkey's policy rate to 15%, it is far less than many economists had forecast. US-based investment bank Morgan Stanley had suggested it would go up to 20%, while Goldman Sachs said it could hit 40%.

https://www.bbc.co.uk/news/world-europe-65971791

Nobody wants spiralling inflation!

morstar

Mortgage chatter all over the shop but thought I’d revert to here.

Good morning this morning. Talking mortgage rates and callers tales of woe.

One caller claimed their monthly payment has gone from £300 and something to over £900.

I can’t see how that is possible with todays rates without that being a result of defaulting leading to a punitive rate.

They were either having negative interest before or have now gone way above market rates.

Pross

Sounds like bollox to me unless, as you say, they’ve had some kind of financial default. Also, even with the previous low rates, how small a mortgage would you have for £300 per month?