To be terrified about mortgage

[melodypondisasuperhero]

We finally managed to get our first mortgage last year and now this is happening. Our rate is 3.09% which runs out in August, currently the follow-on rate is 5% but I imagine this will go up several times before the end of the fix. We could manage 6%, probably just about 8%, but any higher than that and I really don’t know.

AIBU to be terrified? Or am I missing something?

They find tenants that can

a landlord can give notice of two months after initial contract

is that right no but the market for rentals will be going strong if people are struggling to move

Struggling to buy

What is interesting is that Nationwide's 5 year fixed rate is lower than their 2 year fix. The 10 year fix is even lower. This suggests that they are expecting interest rates to peak at some point in the next year or so, and then fall back down

It suggests nothing of the sort. Banks do not price fixed rate mortgages based on their predictions.

They hedge risk through the use of interest rate swaps. ie they reserve a large swap of X £ value over Y term, then this us used against which to hedge a load of mortgages that are given to customers. After using that batch they then reserve another.

The rates offered to customers are based on the rate the banks get. There is no predictions at all from the bank.

That is false economics. Your hypothetical landlord is not sitting in some utopian vacuum. They are in the real world trying to replace tenant A with tenant B, both of whom are operating in the same economic environment.

You are drunk or 12, not sure which.

Exactly. Well explained.

I have always been told that its easier to upsize in a falling market. Of course we have to wait a bit until it actually hits the bottom.

I will wait at least a year or two but isn't it better than trying to upsize in a rising market and then getting outbid and overpaying.

I have just read that long term mortgages are 7.1% in the USA.

If I was Martin Lewis I’d be worried too - a comparison website that relies on commissions for promoting financial products like mortgages and suddenly the income stream gets restricted because banks withdraw mortgage products

It is a very worrying time. My fixed rate of 1.99% runs out next summer and I think its likely the mortgage interest rate will be running at 6% by then - maybe more for a longer term fixed rate. Martin Lewis said today that every 1% rise will cost £600 p.a. on each £100,000 borrowed.

Sadly I remember the housing crash in the late 1980's when mortgage interest rates rose to 15% and I knew people who simply handed back the keys to their properties or they were re-possessed because the houses were in negative equity. It was awful. Its not just that mortgages become unaffordable but that with a housing crash selling will no longer pay back the original loan.

I'm not saying that will happen now but interest rates have been so low for so long that we have forgotten what its like to pay real rates of interest.

I’m neither

I was a landlord in 2008 rents went up considerably the following few years when house prices dropped. My tenants choose to move out to a bigger flat I was able to rent the flat for an increased amount and once again when next tenants moved on

I was also a tenant at the time myself (still am) I am not expecting tents to go down and they have increased in the last few years

this may not be the same in other parts of the country but London rents in some areas have steadily increased and the demand is already very high. Less people buying is good for landlords

It's mad to take on a mortgage without factoring in big rises in interest rates. But I suppose I only know that because I remember when they went right up in the 80's.

It is worrying, but just take it one renewal at a time and get advice from a good independent broker (ours has always saved us more than she costs).

All economics are cyclical - there is some good news though - the Bank of England has another weapon in its arsenal - starting yesterday it is buying buying five billion of gilts a day and this will rapidly reduce inflation -
ONCE AGAIN … our beloved broadcast media have got viewers panicking over something that might never happen … THAT OLD SAYING comes to mind … “Worry is like paying interest on debt before it is due!” Ok so interest rates have gone up a bit - but with inflation being tackled directly by the BOE, (like fireman pouring water on a blaze) by the time Christmas comes and goes inflation will have stabilised and interest rates will fall back - REMEMBER … there’s an election coming - the money men need to decide? Do they want Conservatives or Labour running the show? Bankers bonuses etc which party is more likely to tax heavily and stigmatise bonus’s for bankers? Ha! Let the markets decide - but if bankers are enjoying the extra money from re-mortgage deals - the voters who have mortgages won’t be voting conservatives, if bankers and money lenders and debt collectors wanted a pre-Christmas clue … bankers need to decide which side of their bread they like buttered - the wrong decision and they’ll be toast - more horses running around with nice music in a TV commercial won’t save them!

He sold it for millions - he’s not doing this out of self interest.

About 6 months ago, after watching what was happening to the country's finances and interest rates, I started hunting for a really good fix. I found a 10 year fix with barclays at 2.65%. We had that approved the day before the rate jumped to 2.75% and I've watched it keep rising since and it's now at 3.65%. The 10 year fix is still available and it's not a terrible rate if you want that stability long term. We have 15 years left on our mortgage but we are hoping to overpay so we will be mortgage free in 10 years time. If not mortgage free, anything left will be minimal when the interest rates will likely be 4 times what it is now.

If you follow Martin Lewis on Twitter he has become quite the alarmist doom monger.

I normally like the man for at least popularising common sense economics, but if gone right off him at the moment.

But let's not forget... He's a journalist

He is more extreme because things are worsening.

It is a sign of insanity to respond to worsening situations with an unchanged demeanour.

If enough people are seen to be angry/worried,.it may push the government to do something to help them. What the government can do, I have no idea.

What the government can do, I have no idea.

Resign ?

Well yes preferably. But I meant prevent people from losing their homes. A la energy bill bail out scheme.

I remember the housing crash of the late 80s as well, and a feature on the nightly news every night of how many homes were repossessed today. I also remember the daily news feature of how many jobs lost today. Both under Tory governments. The Tories crashed the pound last time as well.
I think the great British voter reelected them even after all that.

Having listened to the local radio interviews Truss has just done this morning, I think the government could 'fuck off to Monaco and let Labour take over' to be honest, Truss sounded both utterly uncaring and like she didn't understand the situation.

I would rather have Sunak than this, he warned Truss would crash the economy and he was right. No wonder he was not in the chamber for the mini budget bomb statement.

They could reverse their 45p-->40p tax cut and they could make a statement saying they will not make any more unfunded tax cuts - so always made alongside an OBR review/forecast to demonstrate the budget balances - which would stabilise the situation and probably reduce the height to which interest rates will go.

But they will not do these things because they are pretending there is no problem and Truss does not care and/or understand.

Not really sure you've understood this properly. This government has fuck all intention of helping people. It never did and it never will. If that has come as a surprise or a shock to people, then maybe they should pull their heads out of their arses when they decide how to vote. Except a good proportion of 50% of voters never think about their vote at all. Like the well trained spaniels they are they religiously tick the box they have always ticked.