5% mortgage rates

[SaturdayGiraffe]

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

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.

my Five second google tells me half the top 1 % live in london. so yes, a higher proportion. Still not average. And still not most people.
to use an annoying phrase my teenagers use
check your privilege

They wouldn't have been in the place to buy in the first place!

where you are. In other places people have absolutely bust a gut to get on the housing ladder, stretched themselves as much as they can. Bought new builds with everything chucked at it, bought shared ownership. Of course there are places only affluent people can buy who will be lucky enough to cope. They will probably also be the ones able to profit by buying buy to let’s at this time or upsizing. That’s not the average though.

No idea what your point is.

Again, your colleagues in your particular firm within your London bubble have very little relevance to the wider picture.
It is also very naive to suppose that everyone who owns a property in London is resilient. Lots and lots of people have over stretched on the assumption that everything was going to keep rising forever.

Lots and lots of people have over stretched on the assumption that everything was going to keep rising forever

And lots of lots of people have over stretched out of necessity, because it was the only way to buy a property. House prices are so high comparative to income that many people have had no choice but to ‘overstretch’ to buy a starter home.

We borrowed 4.5 times income to buy a 2 bed flat in 2019. How did they overstretch more than us. I think that was the maximum!

And we had a 15% deposit.

You’ve already said that you knew you’d be getting significant pay rises in the not too distant future, which enabled you to weather the increases. This isn’t the norm.

To be honest I’m not sure what your point is. You seem to be saying that because you’re ok, and some colleagues of yours are ok, due to their particular circumstances, then everyone should be ok?

Totally agree. The way house prices have out stripped income rises has been very damaging. It was only possible because of rock bottom interest rates and billions of QE. There has been a general assumption that this would continue and some people have based their decisions on this assumption and many (in London particularly) have invested rather than simply bought a home based on this assumption. There is an article in The Telegraph today about very wealthy people who are now in trouble because of the huge rise in interest rates.
The situation has now changed and there will inevitably be significant consequences, although mostly not very good ones!

not everyone would be ok (not everyone is ok even at the best of times). But in terms of those who bought in the past 10 years, those without resources or decent incomes have been excluded from buying. Its very different from my MIL's time when a legal executive in a tiny law firm and a secretary managed to buy a flat in london (their combined income would have been maybe £50-60k at most today so would need lots of help from parents to buy).

I can see that those who have bought in commuter land and now have been called back to the office may find it tight, particularly if they bought £500-600k houses and now face £500 per month season ticket costs. So they have london style mortgages with high interest rates and travel costs on top (while we don't have a car and DH's commute costs zero as he bikes to work). I suppose in the tight labour market, they could find hybrid work though and perhaps even go without the childcare.

you can’t imagine how people might over stretch to buy a house?

im starting to think your a goady troll or just so naive and young you’ve never seen a proper recession. You cannot be this clueless as to how fortunate you and your colleagues are. Some will always weather the storm, some will be lucky enough to do well out of it. But for others it will be catastrophic, some of that is good planing. Most of that is sheer luck.

you also don’t include renters in your “im alright Jack” hypothesis. Just because they don’t own, doesn’t mean they are ok. As mortgage rates increase landlords put up the rent. Or may sell. In past recessions landlords have defaulted on mortgages leaving paying tenants with no recourse when bailiffs appear.

I didn't know that.

We just applied for jobs like crazy until we got ones that paid better. This is normal in London; i was at my old job for five years and at the end, everyone was saying that I should really leave for my own good as you really do need to switch roles every 2-3 years (and usually a switch comes with a 10-20% pay increase or even more). If i had left when I should, i would probably be earning £10k more today.

2022 was known as the year of the great resignation and most people would have switched to jobs with higher pay. Much of this would now be swallowed up to pay for mortgage or rent but at least they can make ends meet. It is what it is.

You keep saying ‘this is the norm in London’. We don’t all live in London. We don’t all live in places where there is an abundance of jobs available in our industries to switch between. Many of us have caring responsibilities which mean we’re stuck in low paid jobs that work around those responsibilities. Some of us have to take pay cuts because our life circumstances have changed dramatically and we can no longer work the hours or under the same pressure as we were previously (this happened to me when I had a disabled child).
For someone in their 30’s, you seem to know very little about peoples lives outside of your bubble.

And of course many people will never achieve significant pay rises due to the industry they work in.

@socialmedia23 'not everyone would be ok (not everyone is ok even at the best of times). But in terms of those who bought in the past 10 years, those without resources or decent incomes have been excluded from buying'

This is absolute nonsense. If you genuinely believe what you are writing in your posts, you must be exceptionally naive and under informed about the UK in general.

It’s pretty weird to take over a thread just to talk about yourself. Your friends, your colleagues, your finances, your comfort.
Just saying.

Anyway…

@socialmedia23 do you think that get a 20% pay rise every couple of years a teacher needs to just move to different schools? Or a nurse just has to move to different hospitals?

It’s ok. They don’t have or need them in london.

divorce, redundancy and death doesn’t happen in london either. So everyone’s protected in the housing crash.

Spoke to my mortgaged colleagues and some friends over the WE. Sample size 15-20, but still (those would be the mix of relatively poorly paid academics and working class people)
they aren’t burying the heads in the sand and fully aware of the situation, but none of them seem to be really worried and think they can weather the storm and tolerate the rates going up to 6-7% reasonably well. Some overpaid, some are planning to chuck a lump sum of savings before remortgaging, some soon will have kids out of expensive childcare and in primary school, some had (small) pay rises, promotions etc..It’s not quite I m all right Jack and I m aware some people will feel the blow, but I doubt we will be seeing house prices dropping by 70% like someone suggested here and mass repossessions..

All the talk today on the radio is the base rate will go up next week.

@Onegingerhead ditto. Everyone I know who is mortgaged is certainly not sticking their heads in the sand. Some are setting money aside to overpay when their low rates end, those who can’t save to overpay are making plans to change childcare/ switch to longer terms/ general re-jig of finances.

I agree I don’t know anyone who is burying their head in the sand. I know a lot who are very worried, but no one who isn’t aware of what’s happening.

I guess at that point all you can do is be completely upfront with your lender and hope they can come up with a compromise solution that will allow you to remain in your home until things improve.
I believe things were this bad in the past and most people didn’t have their head in the sands then either. There were still a lot of repossessions in the early 1990s but lenders should have learnt from that experience so less likely to happen now.

When we almost bought last May with a 2.77% rate (FTBs) the paperwork urged us to consider if we could still pay the mortgage if it rose to something like 7%.

So yeah, they are. I think there's a lot more regulation these days around stress testing.

That said, if you don't meet the criteria on a 25 year mortgage they seem more than happy to bung a 40 year one up until the age of 75 at you.