Interest rates on property…. What in the world

[llamazoo2]

We couldn’t afford a mortgage on the house we rent! is anyone else feeling doom and gloom about interest rates? a quick input into the money supermarket repayments calculator says we’d be paying £500 more a month if we had a mortgage on the house we are renting, which is a small 2 bed home which we will outgrow in time anyway… not to mention a bigger one!

We have a deposit ready and AIP to the value of a modest 2/3 bed semi detached or terraced home but don’t feel we can action it as rates continue to climb. We want to try for a baby soon and had aimed to get on the property ladder before for obvious reasons, but I don’t see how it would be sensible when our life would become all work no play to cover the repayments!!! DH would have to do so much overtime for us to maintain any sort of standard of living

How are people managing who are reaching the end of their fixed term? Is anyone downsizing to solve the issue? Surely the government have got to step in soon…..

we are moving to a cheaper area, but getting a bigger house.

Could you increase the length of the mortgage? Most people seem to be taking as long as they can to get the lowest monthly payment, then overpaying when possible.

Even increasing it to 35 years seems to only take it down by £40 a month. We probably couldn’t do 40 years I don’t imagine as we only have a 5% deposit

Doesn’t it depend on the mortgage term?

Surely the government have got to step in soon

And do what? Force banks to lend you money at low interest rates?

The thing is, in five or ten years your mortgage payment wouldn't have gone up. Your rent would have increased though.

What are the actual figures involved? Assuming you started at 20 years, increasing to 35 years should have made a lot more than £40 per month difference. Are you sure you are calculating correctly?

a modest 2/3 bed semi detached or terraced home

You have to buy a smaller property then, or save up a bigger deposit, or move to a cheaper area.

Interest rates aren’t going to go back to the extremely low rates we had for years. And house prices won’t crash.

Surely the government have got to step in soon….

Rates have been artificially maintained at a very low level for a decade, and are simply returning to a level that's consistent with the historic average. The government isn't going to do anything to stop that, because if it does we will see increased inflation and devaluation of sterling.

Low rates aren't actually beneficial for normal people - the low rates we have seen have had the effect of hugely inflating property values, and that's not something you should wish to continue.

Why do they need to step in? Most of us can afford our mortgages, lots of others are mortgage free. We knew interest rates wouldn’t sty low forever so we didn’t take on more than we could afford, and have a plan to pay off most of it when our next fix ends anyway.

We have a deposit ready and AIP to the value of a modest 2/3 bed semi detached or terraced home but don’t feel we can action it as rates continue to climb.

Btw, whilst the Bank of England interest rates are continuing to climb at the moment, mortgage lenders had already priced this rate rise into their fixed rates, so it’s not necessarily pushing up mortgage rates. And I assume you’d fix your rate if you’re FTB. The money markets expect the interest rate rises to stop, stabilise and maybe decline a little next year. But mortgage rates will not go down lots.

So if it’s rates continuing to climb you can fix your mortgage rate to give you stability, and then hopefully in 2-3 years it will be either similar or a bit less.

5% deposit is low and you'll pay an interest rate premium because of that. If you can get to 10% the interest rate will be lower.

What value mortgage are you asking for?

Precisely. House buying and mortgages are a long-term thing.
As time moves on (interest rates aside) your mortgage will usually go down in real terms and your earnings increase. In time you can often afford overpayments and reduce the term of the mortgage. The end goal is to be mortgage free and own your own home that can't be taken away from you.
If you rent the cost will just keep going up and you will be paying until the day you die.

Contrary to what some people say it has always been hard to make that initial purchase to get on the ladder.
Most people start at the bottom and find it incredibly tight for the first couple of years but unless you spend the next 30-years buying bigger & better houses, the end will eventually be in sight.

I’m desperately trying to enter a new career, it’s the only way as I was at the top of my payscale in my old job and no prospect of earning more. I’m in training and I’ve got another 2.5 years left of my fix.

I agree, the current intrest rate raises were predicable.

In the same way as we are headed towards a recession that could easily last 7-10 years thanks to getting blue passports Brexit.
It obviously doesn't help, that the government didn't bother to put spending money into our pockets with their latest budget. Grim times indeed but all foreseeable.

Before the 1990s, this was the norm: rents were cheaper than mortgages, so you rented until you could afford to buy, saving your deposit on the way. It’s a very recent thing, with the artificially low rates of the last ten to fifteen years, that renting was more expensive, and saving for a deposit so difficult. We bought our first house about 20 years ago with a 5% ish deposit, and interest at over 5% on a fixed rate. When we moved to a house worth nearly twice as much about 10 years later, rates had fallen so low that our monthly payments were exactly the same as we’d previously been paying for a mortgage on almost half the amount.

It’s hard, but it’s a correction in the market. It should never have been cheaper to buy than to rent. We’re getting back onto a more normal and sustainable footing now.