Mortgage rates could reach 7% by christmas

Their website is still saying 6 months - I would go back and challenge them on this based on their website. If they stick to their guns then at least maybe they will update the info on their site for other people in a similar position. Screenshot from this page www.nationwide.co.uk/mortgages/existing-customer-switching/apply/

I've just put an application to Nationwide this morning for a new mortgage to start 1 January 2024. They are accepting applications up to six months out.

I've taken a 3 year fix at 5.59% over 22 years for £188,000. Added the £999 fee on top (for now - I will pay this off the balance in January), and that's £1245.86 pm (will be £1239 when I pay the £999 off). Can overpay by 10% of the original balance each year.

My current deal is 1.9% which is £895 a month so an increase of c£350. Im the sole earner so that's a bit of a jump. Affordable but tight.

I used London & County after seeing them recommended on MSE. However I'd heard of them before plus I work in financial services.

The broker said he will check monthly to see if there are any better deals between now and then, and if so, we will apply elsewhere. Nothing's concrete until December.

The problem with these discussions is the focus on “averages” when there is a vast diversity in pricing in different areas of the country.

The areas where prices have risen most will be affected most of course.

I was a homeowner when the rates shot up in the early 90s and that felt exactly like now - for us it was particularly bad, we were two nhs nurses with a 3.5x joint income mortgage for our starter home and the rate was fixed every 12 months for the following 12 months, so it got fixed at very high rates for a year at a time - it wasn’t short-lived for us. It cost more than one of our salaries to just pay the mortgage, the utilities took the remainder with practically nothing left for food or saving for furniture. Having a beer in the pub was impossible.

That house cost £30k which should tell you how low wages were (£7k salary with higher income tax than now - the low Income Tax rate was 30% and the personal allowance was £2k where it is now £12k).

So from a £7k salary the first £2k had no income tax, the remaining £5k was income taxed at 30%, meaning income tax of about £1.5k plus national insurance so take home was about £5k a year.

Needles to say we couldn’t afford that basic starter house and the worst happened.

My older brother (late 20s) was more sensible : he and his wife bought a 1 bed flat for £20k - that was the more normal first property.

That £30k house is now likely worth £130k, that flat is now likely worth £80k.
So basically where we lived property prices have risen 400%

That house was rented in 1990 for £550 a month, it now rents today for £750 a month. So renting is far cheaper now than then.

The nurse starting salary is now £28k i.e. increased 400%

So house price : salary ratio has not changed in this part of the country (north yorkshire) but taxation has changed - there is significantly lower income tax now than there used to be and people forget that.

Basically taxation has moved from direct income taxation to more indirect taxation - done on purpose as this means wealthier individuals have a lower tax burden.

Back when we bought our first home I remember exactly the picture of the house that was our dream future home, it was for sale priced at £150k which we thought a hilariously large sum. I suspect that house would now be marketed at £600k possibly more.

I also remember my boss buying a very posh new build in Milton Keynes around 2000 for £250k which I thought at the time expensive, it will be well over £1million now.

But back to the original point, this post is anecdotal, and averages are meaningless when some areas will be same as the 90s now, others like in the south are in a much worse situation.

Just to add, might be needless to say but back then neither of us drove so we had no car expenses - we walked 3 miles to work.

And no kids to pay for either. Still two nhs nurses couldn’t safely buy a so-called FTB “starter house”.

I considered doing that, but the broker he strongly advise that i dont. Just try not to wobble and try not to fix at 6% because it’s not gonna last. The general feeling is it will be about 4% by spring next year.

piglet879

I think you have shared identifying details you might need to report your post

The longer the fix, the lower the rate ? Where are you getting that from currently 5 year fixes are higher than 2 year

Unfortunately, it won’t make any difference until those defaults have dropped off in six years time. Realistically you’re gonna be looking at a subprime lender now

Sorry @piglet879 I reported your post because the photo had your name and address on it

Re the 6 months thing, Santander says 4 months on its website. This seems to be in contradiction to the list of things providers agreed with the Chancellor recently to mitigate impact of all of this on mortgage holders?

Nationwide is 4 months, they changed in 2021 i think most lenders a deal is live for 6 months

most 5 years are lower than 2- I just fixed. Every single 5 year deal was a lower rate than 2

That would suggest to me that Lenders are encouraging people to fix for 5 years. Which would be a reason to fix for 2.

I'm about to fix today for 5 years at 5.5%. We're all just playing a guessing game. Last year everyone thought the rates would drop by now and yet they're going up. I'd rather have some stability and I'll take the risk that they may come down a bit in the next few years but I can't see them falling past 4% and certainly not in the next two years. They will not drop as fast as they have risen!

Mortgage rates are based on swap rates. It’s no odds to the lender where you or I fix. The reason a 5 year is cheaper is basically built in that inflation (and thus BR) will come down.

I just checked online re the Nationwide who are my Lender.

Pretending to be a FTB with a healthy deposit they offered me 5.99% ( 2 year Fix) or 5.74 (3 year Fix) or 5.49% (5 year Fix).

They want to make as much money from people as they can so I think they do care where people choose to Fix. And if they are encouraging longer Fixes, that shows they expect interest rates to come down in the next couple of years

Mortgage fixes are based on gilts aren't they?

Yes they do but it’s not like they are trying to trap people into 5 year fixes to get them to pay a higher rate. They’ve made their money regardless

mortgage rates are tied to swap rates which is tied to government borrowing (guilts) and thus inflation

Ugh^ gilts

My fixed of 1.99% is due to end in 2024. When I took out the 5 year fixed, I did consider the 10 year but it was around 4% so I would have overpaid by 2% for those 5 years. If I can get a fixed for 6% or less next year, I will be paying 2% over for the next 5 years so it balances out. If the rates appear they will come down next year, I could probably do better if i fix for just 2 years in 2024. The 10 year fixed would only have been beneficial if fixed rates exceed 6% for the next five years.

Yes, you absolutely could get away with more 30 years ago. Ex h and I worked on the basis of the interest rate never going below 10% when we did our own affordability calculations. We also had several BTL mortgages stacked up (again, we knew we could afford them even in the worst case scenario). I would not get any kind of mortgage now, though!

News headlines, social media posts etc re rates are always going to make people feel twitchy - understandably. When things like this feel out of our control, it can help a bit to try to take a bit of control back. You can’t change the situation, but just try to feel as though you’re managing it as best you can. I’d suggest:

Most lenders will let you find a new deal 6 months in advance, so seta calendar reminder for 6 months before your current rate is due to expire.

On that date, go to your current lender’s website and input your relevant data. Select the best option and “book” that deal.

With most lenders, you can then keep an eye on rates and, if they drop, you can cancel your new deal and reapply for a better rate. Make sure you check their terms re timings for cancelling/reapplying (usually allow a good 10-15 days).

If, for any reason, you miss the 10-15 days and a better rate is available, don’t panic. You should still be able to book it. It would just mean that you’d spend one month on their SVR before your better fixed rate kicks in.

If you’re looking at the whole market for a new fix, rather than your current lender, make sure you look at the numbers closely. I’ve often found that I could shave off a fraction of a percentage by moving to another lender. But this would mean full financial checks, a new valuation, etc. So, in the long-run no real savings and more hassle.

If you’re hoping to make overpayments at any point, do check the terms. For example, Nationwide allows 10% annually of the ORIGINAL amount borrowed, some lenders only allow 10% of the current balance.

Brokers can be a help, but I find that unless you’re a FTB or navigating your first re-fix, then it’s often easier to do it yourself.

Also, pay attention to LTV bands. The lower your LTV, the more access you have to better rates. However, once you reach 60% or below LTV then you are already seeing the best rates available - anything below that does not earn you extra brownie points.

With regards to overpaying vs savings, definitely worth plugging numbers into online calculators - due to the way interest is applied for mortgages vs savings.

Anyone looking to get out of a deal early to secure a new fix now. Really look into the numbers. Usually, you can’t add an ERC onto your new deal - you need to pay it upfront. So look into whether the cost is worth it over the term of your new fix.

If you’ve got a couple of years to go until your current fix finishes, do some calculations as to what you’d be paying today with your current lender. With the additional monthly cost, look into putting that amount (or even half of that) into a savings account - that way, you get used to budgeting for it slightly and you build up a buffer of savings in advance of your renewal date.

My last observation is that I’d probably be avoiding some of the less well-known lenders if I was due to renew soon. That’s probably me being over cautious, but the collapse of energy companies has probably altered my view!