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Original poster

To be pissed off about mortgages rates being so low and down to 1%

184 replies

feellikeahugefailure · 26/02/2016 12:01

All in the headlines today about the 1% mortgage to last 10 years.

Oh great so landlords and those lucky enough to own will be paying even less than the have nots that cant afford to buy.

I doubt my rent will be going down, but the tiny savings I have towards a deposit and emergencys will be earning less interest than inflation :(

OP posts:
OurBlanche · 26/02/2016 13:45

Well, just to burst that bubble for you, direct form the poeple whose job it is to know such stuff!

www.propertyreporter.co.uk/landlords/first-time-buyers-outnumber-btl-landlords-by-3-to-1.html

The Council of Mortgage Lenders say that lending to first-time buyers continues to outnumber buy-to-let purchases by three to one

Lending to buy-to-let investors in 2015 totalled £37.9 billion, however, in 2015 only 41% of buy-to-let mortgages were for house purchase, a total value of £15.6 billion.

Compared with first-time buyer activity, which is back to pre-crisis levels, loans for purchases totalled £46.7 billion – the highest level of activity since 2007.

WidowWadman · 26/02/2016 13:58

Only good for those getting a new mortgage or those on a tracker mortgage, we've got a fixed deal to protect us from potential increases, so no savings from current drop. Can't see that as a reason to begrudge those who can benefit.

KitKat1985 · 26/02/2016 14:08

The thing is though even though with mortgages are also taking the 'hit' on any savings they have by interest rates being low, so it's not like they are universally benefitting from the low interest rates. Similarly as much as you may be annoyed that the low interest rates mean your savings aren't earning much, it also means that you are more likely to get accepted for a mortgage once you have accumulated your deposit, as your monthly repayments will be lower. There are both positives and negatives to low interest rates.

KitKat1985 · 26/02/2016 14:09

^ That should say 'even those with mortgages' not 'even though with mortgages'.

WeAllHaveWings · 26/02/2016 14:20

25 years ago I managed to save a £5K/15% deposit for my first wee flat while earning

caroldecker · 26/02/2016 14:20

The trouble is base rate is a blunt weapon as it covers mortgage debt for both homeowners and buy-to-let and business debt.
The BOE has made an important step of making BTL mortgage lenders hold higher reserves against these compared to other lending, which will increase BTL mortgage rates without impacting homeowner and businesses.

WeAllHaveWings · 26/02/2016 14:23

just to clarify it wasn't good for us having small inheritances (much loved grandparents) Blush, it was good for the mortgage............

nauticant · 26/02/2016 14:26

The interest rate is what it is. However, I think the OP has a point about the effect of interest rates.

Roughly lower interest rates mean higher house prices. Prices are largely based on affordability and that's based on the interest payment due. So if someone can afford to pay £500 per month, if the interest rate is 10% they can "afford" to buy a house at £60,000 and if the interest rate is 1% they can "afford" to buy a house at £600,000. This goes a long way to govern house prices in the market.

The difference between these two house prices is that if a 10% deposit is required then in one case it's £6,000 and in the other it's £60,000.

The latter will favour people whose circumstances have enabled them to save a larger deposit or those who can receive a contribution from somewhere, like their parents.

Higher interest rates tend to go along with higher inflation. Once the house is bought if inflation is high the cost of paying the interest on a mortgage will become less of a burden relatively quickly.

For house buying, lower interest rates do benefit the better off, whether that's in terms of higher income, rising income, or access to lump sum amounts.

Murphyslaw21 · 26/02/2016 14:35

Nautica

Roughly lower interest rates mean higher house prices. Prices are largely based on affordability and that's based on the interest payment due. So if someone can afford to pay £500 per month, if the interest rate is 10% they can "afford" to buy a house at £60,000 and if the interest rate is 1% they can "afford" to buy a house at £600,000. This goes a long way to govern house prices in the market.

The difference between these two house prices is that if a 10% deposit is required then in one case it's £6,000 and in the other it's £60,000.

Are you making figures up .... I had a £130k deposit. I could only borrow £100k Max. It has nothing to do with that. It's your earnings. Mortgages are so restrictive. 6x salary now.

nauticant · 26/02/2016 14:38

It was an illustration to show how the numbers work. It wasn't supposed to be a model of your particular circumstances.

Murphyslaw21 · 26/02/2016 14:56

But those numbers don't work.

Mortgages are not calculated like that.

They are fine on earnings and outgoings. Yes a bigger deposit helps. But regardless you still need a salary 5x for mortgage.

Caboodle · 26/02/2016 15:15

I don't have a mortgage and my savings are earning very little. I'm not sure how interest rates can be made 'fair' though.

Onthedowns · 26/02/2016 15:18

In reality who actually gets these 1% rates? Majority of normal families are nearer 3-4% so when interest rates are so low whose the real winners?

redhat · 26/02/2016 17:57

I don't understand the references to 6x salary and 5 x salary. Are you saying that is what banks will lend? If so, that's high compared to what they used to lend.

OurBlanche · 26/02/2016 18:06

They can't use salary multiples any more

Rather than using a crude salary multiple, more lenders began to work out a borrower's incomings and outgoings and base how much they would lend on this.

In April 2014, City watchdog the Financial Conduct Authority officially enshrined affordability-based lending into its rules.

Now all banks and building societies must assess borrowers this way. The difficulty is that they all use slightly different methods. Many offer calculators on their websites that give some idea of what they would lend, a final verdict only comes after an interview with an adviser.

OurBlanche · 26/02/2016 18:07

Sorry, they can't solely rely on salary multiples any more

Murphyslaw21 · 26/02/2016 18:07

Before 2006 you could get 10x salary but now some banks lend 6x but most offer 5x.

I was looking and on salary of 21k I could borrow £126k that was last year .

Murphyslaw21 · 26/02/2016 18:10

Yep they do a breakdown of all outgoings including this like birthday presents. Everything is covered.

They look at salary do the multiples. Then look at monthly outgoings and decide if you can afford repayment.

You need the salary to get multiples but also to prove outgoings e.g car rental, bills, pension and literally Christmas and birthday present rough expenditure

BarbaraofSeville · 26/02/2016 18:18

Even 5 or 6 times salary sounds like an awful lot. Do you think you could repay a £126k mortgage and have a life, Murphys?

But counting discretionary expenditure like Christmas and birthday presents is a bit odd. Surely you would pay your mortgage and buy presents out of what's leftover?

SnuffleGruntSnorter · 26/02/2016 18:22

I agree there is a lot wrong with the housing situation in the UK, however:

Lucky enough to buy? We're in the SE and rents are crazy, house prices are crazy and we have worked bloody hard for a long time and are just trying to get our first step on the property ladder - by the way we are nowhere near being able to get a 1% rate. It really pisses me off when hard work gets called 'luck'.

If you win the lottery and buy a mansion that is luck.

Murphyslaw21 · 26/02/2016 18:27

No I was lucky (well unlucky) I got a large deposit. So I only need £70k but that's what I was offered.

And yes presents were included in providing outgoing forecast. Chat was with two uk big banks

redhat · 26/02/2016 18:31

10 times salary must have been right before the crash though and not for long/only with a few crazy lenders. That wasn't the norm. It was typically around 4 times salary or 3 times joint salary.

Murphyslaw21 · 26/02/2016 18:58

Redhat 10 times salary must have been right before the crash though and not for long/only with a few crazy lenders. That wasn't the norm

Seemed to be the norm to me and most friends and family that were buying. Hence when crash happened and rates went through the roof people couldn't afford repayment. And lots fell out of bed with their homes. Over a period of around 15 years nearly everyone I know that bought mortgaged for more than 4x single salary

Murphyslaw21 · 26/02/2016 19:03

Please don't mistake what I'm saying.... I know it's not right. But it happened

KristenBell · 26/02/2016 20:51

5x salary is the most you can borrow now. Saw a broker last week.

But to get the 5x you have to have excellent credit, no loans etc.

I am "lucky enough to buy" because my DGrandfather died and left me inheritance. Plus I slogged at school and uni and have ended up being paid fairly well. Still can't afford the South East though...