Page 3 | Mortgage crisis

FaazoHuyzeoSix · 05/10/2022 09:31

Low interest rates are great for people who have to work for a living and need to borrow for a mortgage, but they are terrible for the wealthy people who have a large amount of capital and who have been brought up to expect to be able to just invest that capital and use the interest as their living income..

When I was learning these things in the late 90s/early 2000s I was confidently told regularly by numerous experts that as rule of thumb one should assume 10% is a reasonable rate to expect in the long term, though it's temporarily a bit lower just at the mo (rates were fluctuating betwen 4 and 6% at the time).

The Tories are now in charge of the economy and no longer have the restrictions of the EU to stop them from rebalancing the economy in the interests of the 1% wealthiest. We voted for this.

Africa2go · 05/10/2022 09:38

For everyone going on about stress testing borrowing, or higher interest rates in the past, I can absolutely see where the OP is coming from - its the speed of the change, and the level of the jump that is an issue. If rates had been increasing incrementally for many years, or they'd been volatile for years, you can understand people suggesting you look at stress testing when borrowing.

But that's not the case - rates have flatlined for a number of years and we've had a couple of decades with very low rates which have now jumped 4 or 5 points overnight.

OP, I do think a jump of £800 soounds huge (our mortgage is significantly more than yours, and our jump is about £600) so as others have suggested, look around, or even consider just paying your lender's variable rate for a little while to see how things pan out.

ArseInTheCoOpWindow · 05/10/2022 09:40

As a pp said, it’s market conditions created by world events not the government that are at the root of your current issues

Is that you Liz?

what a load of shit. This government has pushed interest rates higher than they needed to be. Yes, the BoE was going to raise them, and yes, interest rates are rising everywhere. But the U.K. is extra deep in shit because of our amazing government.

Faciadipasta · 05/10/2022 09:45

FaazoHuyzeoSix · Today 09:31

Low interest rates are great for people who have to work for a living and need to borrow for a mortgage, but they are terrible for the wealthy people who have a large amount of capital and who have been brought up to expect to be able to just invest that capital and use the interest as their living income.

This. Which is why I fail to worry about how terrible it has been for savers recently.

Summersdreaming · 05/10/2022 09:49

User84 · 05/10/2022 08:07

This simply isn’t true. This is interest rates at the end of each of the quoted years:

Bank rate at year end (%) (source Bank of England)
1979 17
1980 14
1981 14.375
1982 10
1983 9.0625
1984 9.5
1985 11.375
1986 10.875
1987 8.375
1988 12.875
1989 14.875
1990 13.875
1991 10.375
1992 6.875
1993 5.375
1994 6.125
1995 6.375
1996 5.9375
1997 7.25
1998 6.25
1999 5.5
2000 6
2001 4
2002 4
2003 3.75
2004 4.75
2005 4.5
2006 5
2007 5.5
2008 2
2009 0.5
2010 0.5
2011 0.5
2012 0.5
2013 0.5
2014 0.5
2015 0.5
2016 0.25
2017 0.5
2018 0.75
2020 0.25
2020 0.10
2021 0.25
2022 0.5
2022 0.75

Show quote history

I'm 30, I left school in 2008, so I've never seen interest rates that didn't start with a 0!

I bought my first house this year on a 2 year fix, and didn't give the interest rate much thought. Obviously I am now! But it was an abstract concept before now.

kirinm · 05/10/2022 10:09

Sestriere · 05/10/2022 06:53

Really good advice on here, and I’m also one of those that paid 15% interest, I still remember the fear at the time. We literally didn’t have a penny left. I got a bus pass. We didn’t have any niceties such as Sky TV or gym memberships or meals out. We food planned and did nothing and went nowhere for months. All mortgage rates were variable so each month it just went up and up. it NEVER came back down to the rate we started at. We probably paid around 6-7% for most of our entire mortgage term.

I remember afterwards when we moved house saying I will never get a mortgage for an amount where I cannot pay it if it goes up to 15%, I cannot have another sleepless night.

Sadly, due to such tiny rates for so many years there is a whole generation of people who don’t know any different and assume these rates are for life.

I feel for you OP.

Out of interest, how much did you have to borrow to buy your first home? I'm going to guess it wasn't anything like people have to borrow now.

That people have to borrow x5 x7 x10 of their joint earnings makes it clear that interest rates of 15% in the 90s is not the same as interest rates at 6 / 7 / 8% now.

kirinm · 05/10/2022 10:24

At the beginning of the year I could fix at least than 2%. In less than 8 months, fixed rates are closer to 6%. That is a huge leap in such a short period of time and combine that with increased energy and food prices means it's no surprise people aren't in a position to meet the increased payments.

The smugness of those who had to pay high rates on much smaller sums is ducking boring.

Speak to a broker OP. I did last week and have fixed at 4.2%.

Ineedteepeeformybunghole · 05/10/2022 10:30

Nw22 · 05/10/2022 07:05

I am so sick of hearing about people who paid 15%. It has been shown that 15% then is the same as 6%, given the higher house prices and stagnant wages.

This

TightDiamondShoes · 05/10/2022 10:32

I hope it’s ALREADY been said, but people saying “switch to IO” are talking shite and should be ignored because they clearly have NFI because y’know… interest rates ffs.

OP I’m sorry you’re struggling and I hope a broker can help.

FreddyHG · 05/10/2022 10:34

FaazoHuyzeoSix · 05/10/2022 09:31

Low interest rates are great for people who have to work for a living and need to borrow for a mortgage, but they are terrible for the wealthy people who have a large amount of capital and who have been brought up to expect to be able to just invest that capital and use the interest as their living income..

When I was learning these things in the late 90s/early 2000s I was confidently told regularly by numerous experts that as rule of thumb one should assume 10% is a reasonable rate to expect in the long term, though it's temporarily a bit lower just at the mo (rates were fluctuating betwen 4 and 6% at the time).

The Tories are now in charge of the economy and no longer have the restrictions of the EU to stop them from rebalancing the economy in the interests of the 1% wealthiest. We voted for this.

This posts shows lack of economic knowledge. What has happened to equality during zero interest rates. www.google.com/amp/s/amp.theguardian.com/commentisfree/2022/sep/21/era-low-interest-rates-legacy-inequality-toxic-politics if you're not up to thinking about the answer.

FreddyHG · 05/10/2022 10:39

kirinm · 05/10/2022 10:09

Out of interest, how much did you have to borrow to buy your first home? I'm going to guess it wasn't anything like people have to borrow now.

That people have to borrow x5 x7 x10 of their joint earnings makes it clear that interest rates of 15% in the 90s is not the same as interest rates at 6 / 7 / 8% now.

Show quote history

Mortgage market review stopped people borrowing more than 4.5x joint income. So talk if many borrowing 7x to 10x is fanciful at best or rather downright misleading.

kirinm · 05/10/2022 10:53

@FreddyHG you're wrong. Certain professions and those earning over a certain amount can borrow more.

CoastalWave · 05/10/2022 10:54

There are always way to cut if you're the type of person who took out a mortgage costing £1200 a month! You just don't want to lose your lifestyle (understandably)

You overstretched yourself. Own it. It was never ever going to stay at 1% and if you think it was, you're to blame. Very naive.

Worse case scenario - sell up, release equity, downsize.

FrownedUpon · 05/10/2022 11:03

Sell & downsize or rent. My neighbour is doing this. People have basically borrowed more than they could afford. Interest rates were always going to rise.

Lifeisrelentless · 05/10/2022 11:10

Some of these replies are so smug and so unhelpful. Not everyone was stupid or overstretching themselves when they took out a mortgage. A) in some areas house prices are so high it was either that or rent which is usually even more expensive per month. Everyone needs somewhere to live so unless you have family to stay with they are literally the only options. B) circumstances change. When people took out a mortgage initially they might have had a different job, could of lost their job since, had children etc. honestly can’t stand people who seem to get off on others misery, it’s not a nice trait to have. A lot of people myself included just wanted a modest family home, I haven’t bought a big luxurious house, I’ve bought a semi detached small ish house that I actually don’t even like but needed somewhere for my family. Had a large deposit but still ended up being quite a big mortgage due to house prices and yes I’m terrified.

Zilla1 · 05/10/2022 11:22

Low interest rates are great for people who have to work for a living and need to borrow for a mortgage, but they are terrible for the wealthy people who have a large amount of capital and who have been brought up to expect to be able to just invest that capital and use the interest as their living income..

Perhaps those wealthy people should consider the aggregate of higher interest rates on their investments and pension funds before being so certain higher interest rates will have a benefit. The recent events seem to have relatively impoverished the wealthy people I know who have the capability to understand their overall position.

FreddyHG · 05/10/2022 11:24

kirinm · 05/10/2022 10:53

@FreddyHG you're wrong. Certain professions and those earning over a certain amount can borrow more.

Lol @kirinm you are arguing about semantics the limit for MMR is 300k income or 3 million in assets hardly poor people needing to buy an average house and the exception profession is mortgage professionals. So stop with the misleading information.

Volterra · 05/10/2022 11:31

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TheStoop · 05/10/2022 11:32

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Volterra · 05/10/2022 11:37

I see my previous reply was hidden. I’ll repeat leaving out my swearing at some of the attitudes (not directed at one individual in particular) seen on this thread by some .

OP I am sorry you are in this situation. The advice to see a broker Is very sensible, you need to be proactive and continue to do so. There are charities such as Step Change who can advise with debt . Good luck 💐

Orangesare · 05/10/2022 11:39

Talk to your mortgage provider and a broker. A longer term and/or interest only. There will be a saving as you want be repaying the capital.

next increase your income. One of you can work weekends and the other evenings then you won’t need any extra child care. Yes you’ll be knackered it there’s not much option

user26189065 · 05/10/2022 11:43

Do people expect the government to help with all the household expenses nowadays and where is the OP anyway, people have been bothered to give advice on this thread

Volterra · 05/10/2022 11:48

FreddyHG · 05/10/2022 07:57

@Meltingsocks 2 incomes being required is a result of feminism. How many on here would long for the days where the females income wasn't taken into account on a mortgage application like the good old days? Banks over lending and people willing to borrow more than they can afford caused house prices to be so high and when credit becomes less available like it is now they will fall again.

@FreddyHG I don’t understand what you mind by your post on feminism, would you mind explaining further please? Thank you very much.

updownleftrightstart · 05/10/2022 11:55

FreddyHG · 05/10/2022 10:39

Mortgage market review stopped people borrowing more than 4.5x joint income. So talk if many borrowing 7x to 10x is fanciful at best or rather downright misleading.

Show quote history

When was this? Because we borrowed more than 4.5 x out joint income when we bought 7 years ago. We aren't high earners, don't have any other assets and aren't mortgage professionals.

It was nowhere near 7x admittedly, but we bought the cheapest house we could find and already live on the limits of where we can reasonably commute from. Downsizing isn't an option - there's nowhere cheaper we could move to.

Iamthewombat · 05/10/2022 12:01

I just don’t understand how on Earth the government think anyone can just magically pull out an extra £800 a month!

The government are not responsible for your borrowing choices. You chose to borrow so much that you can’t cope with an increase in your monthly living costs. Didn’t you do the maths?

Where do they think this money is going to magically sprout from?

I assume that ‘they’ are the lenders. You do get that you are responsible for your own borrowing choices, right?

This particular iceberg - interest rates returning to historic averages - has been on the horizon for years. Nobody wanted to think about it. Even during COVID and after QE, both of which involved printing extra money and made it obvious that inflation was going to rise, even before the Ukraine war and Brexit increased commodity and energy prices. Higher interest rates are the antidote to inflation.

On this site you’d regularly see people being advised to ‘stretch themselves’ to get their ‘dream home’. Sometimes you’d see advice about lying about income (“don’t tell them that you’re planning to go part time, you might lose your mortgage offer!”). Posters would tell us that it was right for them to give their children a stack of cash to ‘get on the ladder’ and ‘get ahead of the market’.

All of these things inflate house prices. So do extended mortgage terms: 35 years is common now, for Christ’s sake. Loose lending and injections of capital inflate prices and make borrowers more vulnerable to increased rates. Anyone could have seen this coming, but no, everyone kept regurgitating the same mantra about getting on the ladder and house prices will increase forever etc etc. Despite the fact that we’ve had two economic shocks during which the exact opposite happened, in the last thirty years.

Some people will have to sell. That’s tough but it will at least deflate property prices. In the long term that’s a good thing for everyone: less money will be vacuumed up by housing and lenders will be incentivised to lend to businesses instead.