Page 13 | 5% mortgage rates

SaturdayGiraffe · 2023-05-25T17:10:15+00:00

Just read this article saying to expect 5%+ rates shortly. [[https://www.theguardian.com/business/2023/may/25/uk-homeowners-and-first-time-buyers-warned-to-brace-for-5-plus-mortgage-rates https://www.theguardian.com/business/2023/may/25/uk-homeowners-and-first-time-buyers-warned-to-brace-for-5-plus-mortgage-rates]] *UK homeowners and first-time buyers warned to brace for 5%-plus mortgage rates* I just don’t know how people are going to cope, and it could go even higher.

rainingsnoring · 27/05/2023 19:14

whereeverilaymycat · 27/05/2023 18:23

I think what is worrying as well is that although lots of people will cope, it's at the expense of being able to take that extra money (they're now paying in more interest) and use it in the wider economy.
As someone mentioned upthread, a lot of people make their living from the more enjoyable side of life, the treats and fun. These are often the first thing to go when belts have to be tightened. The odd person scaling back can be absorbed, but when it's thousands of people, it will cause people to lose their livelihoods.

You only have to spend some time on the cost of living board to see how much some people are already struggling.

Exactly. A household not going out for as many dinners/ stopping beauty treatments to save a few hundred a month could well be manageable but it won't be manageable for lots of businesses over the next few years if everyone does this at the same time. This, as I have said several times before is what will lead to much higher unemployment. It is worrying but I'm not sure much can be done at this stage though individuals could have/ can take some action.

KievLoverTwo · 27/05/2023 19:23

Xenia · 27/05/2023 18:57

"you must be rich and have a massive house". I have a large house which is in the SE so yes that's true. I am not sure I would say I am rich as I don't have savings, pension etc. Yes I house 2 children who ceased to be students last year which is not particularly unusual and yes it is not as if they are 4 and homeless if I die and have IHT to pay - they could probably find a room to rent etc. However the basic principle remains -there is a massive wealth tax on houses - in my case every penny of my equity has been taxed at at least 40% already and then the state takes 40% on my death i.e. in a sense the state confiscates almost all .... so you can see why people are not to keen on Labour's likely £20k a year tax (if that happens) on their houses on top of all that.

What is this labour 20k a year tax, please?

Twiglets1 · 27/05/2023 19:25

rainingsnoring · 27/05/2023 19:12

Sorry. It wasn't very clear. I tagged you because you mentioned no plans for MIRAS a few posts back. I did hear 'on the grapevine' that MIRAS has been discussed. Help to Buy being discussed was in the media a few weeks back, ie some help the market initiatives are being discussed.

Show quote history

Help to Buy may be being discussed but to my knowledge, not MIRAS ( unless you have a link to show otherwise?)

avocadotofu · 27/05/2023 19:50

Throwncrumbs · 25/05/2023 18:41

I remember when they were 15%, we coped, so will you!

The cost of housing in relation to wages was very different then which is why this was more doable.

ThankmelaterOkay · 27/05/2023 20:53

I just walked through the centre of Manchester. Yeah, I thought 6% BoE interest rates was irrational, and just plain right doom-mongery.

I’m less convinced. The youngest generation haven’t known a tough labour market (last 5 years). Unless businesses start cutting back, these individuals aren’t going to be cautious. They will keep spending, hopping jobs cos they can, increasing their salaries to combat inflation. They are saving for a rainy day as pessimism and not part of their mantra, fair play. Meanwhile, the 50+ will continue to cash out of the property Ponzi scheme, semi retire, and continue to cause a tight labour market.

This is a recipe for super sticky inflation. I’m full hawk, 5.5% by February.

ThankmelaterOkay · 27/05/2023 20:53

See saving*

teanntoastinbed · 27/05/2023 21:01

inews.co.uk/inews-lifestyle/money/mortgage-rates-when-go-down-how-long-uk-interest-keep-rising-experts-2332740

Xenia · 27/05/2023 22:04

At the last election labour proposed, I believe, some kind of land value tax which some inaccurately dubbed the garden tax. On houses of the value of mine I think it is likely to be about £20k a year on top of presumably higher income tax rates too. However Labour in 2023 is not prepared to say what taxes it will levy until it comes to power and can look at the books and presumably because it does not want to put voters off about its plans for much higher taxes on people's houses.

I think the were suggestions it was going to be 3% a year of the land value in part in place of business rates. https://www.hamhigh.co.uk/lifestyle/21361120.great-garden-tax-cocktail-misery-fairer-way-levy-land/

New taxes rarely come with abolition of other taxes as we jsujt get tax heaped on tax so presumably it would be plus stamp duty land tax, plus council tax, plus inheritance tax.

The great garden tax: a ‘cocktail of misery’ or a fairer way to levy land?

The Conservatives claim Labour’s proposed land value tax could hike up taxes in homes with gardens, so what would it mean for green and leafy…

https://www.hamhigh.co.uk/lifestyle/21361120.great-garden-tax-cocktail-misery-fairer-way-levy-land

MidnightMeltdown · 27/05/2023 23:14

whereeverilaymycat · 27/05/2023 18:23

I think what is worrying as well is that although lots of people will cope, it's at the expense of being able to take that extra money (they're now paying in more interest) and use it in the wider economy.
As someone mentioned upthread, a lot of people make their living from the more enjoyable side of life, the treats and fun. These are often the first thing to go when belts have to be tightened. The odd person scaling back can be absorbed, but when it's thousands of people, it will cause people to lose their livelihoods.

You only have to spend some time on the cost of living board to see how much some people are already struggling.

I've already noticed that cafés and restaurants have been a lot quieter near me lately. This time last year you'd struggle to get a table anywhere, now they're half empty

MidnightMeltdown · 27/05/2023 23:18

When I took out my mortgage with nationwide I remember the mortgage advisor saying that mortgages were stress tested to 7%, so most people should be able to cope with 5 or 6%

As a pp mentioned, I think it's more local businesses and the wider economy that will suffer as people are forced to cut back other spending to pay the mortgage

C4tastrophe · 28/05/2023 07:36

@Xenia ”I think the were suggestions it was going to be 3% a year of the land value in part in place of business rates.”

There is a lot of scaremongering about LVT. In the article you referenced it says ‘3% of 55%’ so effective 1.5%
Maybe to get the ball rolling it could be set to 0.25% and not remove any other taxes, then let it evolve.

Even if someone introduces an LVT, it’s not a garden tax. It is designed to make better use of land. If you own land, you need to pay tax on it. This should incentivize (commercial, not residential) land owners to develop the land, and as land doesn’t move, there is no escaping the tax. It will stop land hoarding.

In any case, taxes are only going one way now, same as interest rates.

rainingsnoring · 28/05/2023 09:29

@Twiglets1 nothing been published. I said above it was 'on the grapevine' via someone with contacts. I also said I thought it was unlikely but who knows what daft scheme the current bunch may try.

DrySherry · 28/05/2023 09:40

MidnightMeltdown · 27/05/2023 23:18

When I took out my mortgage with nationwide I remember the mortgage advisor saying that mortgages were stress tested to 7%, so most people should be able to cope with 5 or 6%

As a pp mentioned, I think it's more local businesses and the wider economy that will suffer as people are forced to cut back other spending to pay the mortgage

Absolutely true, BUT they weren't stress tested against the massive cost of living increases that we are seeing on top of those higher rates. The cost of living calculations were done on inflation of 2 to 3 percent. Not over 10% (and much higher on basics like food). It's going to be a massive problem for some to pay mortgage rates of between 6 and 7 %...

rainingsnoring · 28/05/2023 09:45

ThankmelaterOkay · 27/05/2023 20:53

I just walked through the centre of Manchester. Yeah, I thought 6% BoE interest rates was irrational, and just plain right doom-mongery.

I’m less convinced. The youngest generation haven’t known a tough labour market (last 5 years). Unless businesses start cutting back, these individuals aren’t going to be cautious. They will keep spending, hopping jobs cos they can, increasing their salaries to combat inflation. They are saving for a rainy day as pessimism and not part of their mantra, fair play. Meanwhile, the 50+ will continue to cash out of the property Ponzi scheme, semi retire, and continue to cause a tight labour market.

This is a recipe for super sticky inflation. I’m full hawk, 5.5% by February.

Yes, there has been a huge amount of spending that people cannot afford but that's been an increasing trend (all centrally encouraged) since the 90s. It's got worse and worse with BNPL, etc but it's not confined to the young.
However, there is a limit to how much unregulated (and regulated) lending can take place before the wave of defaults kicks in. There is a limit to job hoping when unemployment ticks up. I've always said that the BOE forecasts were rubbish and that inflation would be much stickier. I can't remember what the latest one was but they have become more realistic.
I wonder if Sunak will fail on all 5 of his promises.

@MidnightMeltdown mortgages have been stress tested but not with current levels of inflation and only with circumstances when the loans were taken out. I think there are lots of people who will find their bills increasingly hard to pay.

DanceMonster · 28/05/2023 09:50

My gas and electricity has more than doubled since I took out my mortgage, and that certainly wasn’t included in the stress test.

Twiglets1 · 28/05/2023 10:23

rainingsnoring · 28/05/2023 09:29

@Twiglets1 nothing been published. I said above it was 'on the grapevine' via someone with contacts. I also said I thought it was unlikely but who knows what daft scheme the current bunch may try.

I don’t really believe things people hear on the grapevine as could just be rumours with no substance. No offence.

whereeverilaymycat · 28/05/2023 11:31

Absolutely @DanceMonster over the last year or two we've watched our buffer shrink to such a point it's a stretch to call it a buffer at all. We are still earning the same, but it just doesn't go as far. The mortgage is fixed so at the moment isn't causing us an issue, it's everything else.
I have two years to get us in the best position possible for when the fixed deal runs out and the good times are over....

Xenia · 28/05/2023 12:47

Interest rates going higher cause people a lot of problems but remember most people are no a repayment mortgage and some of what they repay is capital repayment. That does not mean it is all very easy, but it does mean a 1% rise does not mean the monthly payment goes up 1%.

On Labour's possible land value tax I think my recollection was that if my house is worth £2m and the cost of the land (empty plot) is worth about £1m going on what plots might go for around here 3% of £1k is about £30k a year.
" ‘3% of 55%’ so effective 1.5% " I was taking 50% rather than 50% for simplicity If we went 1.5% of whole house price that is also about £30k a year. If we went for 0.25% of whole house price that is £5k a year. That is quite a lot given council tax is already crippling at about £4k as I am kind enough to house adult student age children so don't get the single person council tax discount. I also face ULEZ ( unless my lovely Tory London brough is able to win its case against Khan ) at £4500 a year later this year which is £9k out of income before tax. Tax tax tax and more tax and so many more people now going into the 40% bracket too compared to in the past., never mind massive 20% VAT rates and insurance premium tax.

We need a much smaller state and much lower taxes.

NerdyIsMyMiddleName · 28/05/2023 12:58

DanceMonster · 28/05/2023 09:50

My gas and electricity has more than doubled since I took out my mortgage, and that certainly wasn’t included in the stress test.

Yes, this ⬆with bells on! Mortgages were stress tested without the extra 20%+ on food, 300% on fuel, and everything else going up.

NerdyIsMyMiddleName · 28/05/2023 13:03

Interest rates going higher cause people a lot of problems but remember most people are no a repayment mortgage and some of what they repay is capital repayment. That does not mean it is all very easy, but it does mean a 1% rise does not mean the monthly payment goes up 1%.

No it means that you're charged an extra 1% on the entire amount outstanding every year. So we pay an extra 4.5K a year (ish) on the outstanding mortgage on our London flat for every 1%. That's a lot more than a 1% increase in our payment!

DanceMonster · 28/05/2023 13:10

Interest rates going higher cause people a lot of problems but remember most people are no a repayment mortgage and some of what they repay is capital repayment. That does not mean it is all very easy, but it does mean a 1% rise does not mean the monthly payment goes up 1%

No you’re right, it doesn’t. Mine has gone up by £312 a month which is far more than 1% of my monthly payments.

CottonSock · 28/05/2023 13:26

People have short memories. I got 5 percent on our first time but 13 years ago and was very happy with it

Lightsgoingout · 28/05/2023 13:26

socialmedia23 · 26/05/2023 16:56

is anyone with a year left to go on current mortgage deal considering paying the exit charge and remortgaging. Mine is 3% of mortgage balance....

@socialmedia23 We are 6 months ahead of you. What we did was:

Speak to a mortgage broker and get a mortgage in principle now (it will last 6 months and don’t trigger)
In 6 months time before your mortgage deal is about to expire you should be able to secure a deal with your current lender to start at the end of your current deal.

Compare the mortgage broker deal vs your banks detail. Calculate your ERP and if it’s worth breaking your deal. If it isn’t stick with your bank deals, which can be edited and changed normally with no issues until a week before your current deal finishes.

Hope that makes sense?

NewNovember · 28/05/2023 13:33

Xenia · 28/05/2023 12:47

Interest rates going higher cause people a lot of problems but remember most people are no a repayment mortgage and some of what they repay is capital repayment. That does not mean it is all very easy, but it does mean a 1% rise does not mean the monthly payment goes up 1%.

On Labour's possible land value tax I think my recollection was that if my house is worth £2m and the cost of the land (empty plot) is worth about £1m going on what plots might go for around here 3% of £1k is about £30k a year.
" ‘3% of 55%’ so effective 1.5% " I was taking 50% rather than 50% for simplicity If we went 1.5% of whole house price that is also about £30k a year. If we went for 0.25% of whole house price that is £5k a year. That is quite a lot given council tax is already crippling at about £4k as I am kind enough to house adult student age children so don't get the single person council tax discount. I also face ULEZ ( unless my lovely Tory London brough is able to win its case against Khan ) at £4500 a year later this year which is £9k out of income before tax. Tax tax tax and more tax and so many more people now going into the 40% bracket too compared to in the past., never mind massive 20% VAT rates and insurance premium tax.

We need a much smaller state and much lower taxes.

Your council tax cost is split between multiple adults so you are saving money.

Lightsgoingout · 28/05/2023 13:34

@socialmedia23