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.

https://propertyindustryeye.com/opinion-house-prices-if-i-was-wrong-it-aint-by-much-and-not-by-nearly-as-much-as-the-doomsters/

I couldn’t even read this article properly there was so much wrong with it.

If you are 40 years of age or older you will remember what high interest rates really look like. In 1992 the Bank’s base rate reached 15%

Most 9 year olds I don’t think have a clue about interest rates.

He also seems to think that people have got a spare few hundred quid per month to throw at their extra mortgage.

The whole thing is written with no awareness that other peoples lives aren’t like his.

He obviously didn’t pay a variable rate mortgage in 1992 where the BOE base rate was 15% and mortgage rates were higher. My mortgage was 7% above base other peoples might be 1 or 2% above that and whilst opting for a fixed rate might be only 6.01%. At some point that fixed rate will end.

I forecast he will give a doom and gloom forecast in a few weeks then what ever the outcome he can crow that he was right

I am selling to downsize as I no longer need 4 beds and an annex so why keep paying the upkeep on it. Valuation given at the end of March was £800k which I thought was too high but 3 estate agents came in at that figure so I listed it for £800k . Two weeks later after a small trickle of viewers I revised to a more accurate £750k and just accepted an offer of £700k. The buyers only require a small mortgage which was the deciding factor on me accepting. In contrast a house one road over which is comparable to mine listed at £775k slightly before me then reduced to £750k. Then came off the market and came back a couple of weeks later with a new agent at £725k and has now just dropped to £700k and still unsold. I decided to take the price hit rather than nibble away and keep chasing down the market. I am in a fairly affluent part of the south east and after covid property was flying off the market at inflated prices. Completely different market now and you need to be adjust your expectations or you just won’t sell.

How far you can "adjust your expectations" obviously depends on your circumstances though. If you own an expensive house outright, the "value" is mostly irrelevant.

There is certainly is no right price - it is whatever someone will pay. House next to me is up for sale wanting a quick sale but probably over priced so I doubt they will get a quick sale.

On the UK now has borrowing at 100% of GDP for the first time since 1961 (when I was born ) - that is part of our problem - we as a nation have borrowed and borrowed. The Truss plan was to borrow even more to grow - not wise at all. The furlough scheme also got us into massive debt as a nation.

The radio item I heard yesterday that people are living so long now that there are a lot of people without mortgages has certainly changed things a lot (although not in my family - my mother died at 75, we die young in my family and my father in his 70s too). However it is in a sense power to the people as the state cannot control the people through interest rate rises affecting their mortgages or their rents through their landlords as they have that freedom of a free hold house completely paid off. Obviously that is no comfort to younger people but they become older too and those who have been able to buy will find ultimately they have more choices, more power, more freedom for being a home owner particularly as their debt gets less and less (unless Labour adds new taxes to those who own a home).

I agree with you on both your points.
I think that the run up to the election could see them do a massive u turn if we are facing a crisis of homelessness at that point although this may be later on after the election. If they do provide help to mortgage holders, I suspect it would be very unpopular overall and lose them votes both with the older, die hard Tories who generally have no mortgage and with renters, some of whom vote for them although less so they could choose to do nothing and let Labour inherit an absolute s**t show!

I see Jeremy Hunt has ruled out mortgage help - which is always a warning sign they are thinking of it. I've never known as much political certainty as hearing this lot say they will (or will not) do something...inevitably seeems to lead to the total opposite.

Ha, ha. They are utterly useless!

I was thinking this but wasn't sure! My DH is convinced they would help which is why he wants to hold off paying £8k exit charge to exit our deal and remortgage before the rates get dreadful in 2024.

Not that he agrees with them helping but says its the Tories....

I think they weee warning us to stop asking for pay rises, and stop spending.

I spoke to a broker about paying a £4k exit fee and they very much advised against it.

He's talking to the banks on Friday to ask them to help lenders.

It will probably end with 50 year or multi generational mortgages or something equally obscene.

Not only that would be unpopular, but unethical decision to help someone to pay their debts. If that’s the case, they would have to help everyone who maxed out their credit cards and can’t afford the interest anymore.

Most people who took out mortgages above their means, have an option to sell and go back to renting. Go onto repayment plans if something is left unpaid after sales etc etc. Because all they own is a loan on the house, not the house itself until it’s paid out, and whole lot doesn’t care how big it is until times like this. Bank advisor smiled at me when I was worried if the properties I’m looking at are within my affordability, when in fact my affordability is double of what I was looking at. It’s really difficult to feel sorry for someone facing eviction when they over-borrowed to keep up with the appearances.

Why is it unethical to help with mortgage interest, but not to pay housing benefit on a privately owned rental? What's the difference?
And where do you propose all these people should live/should have lived? It's not as though renting has been the more sensible or reliable choice in recent years.
I don't recognize your version of reality in which everyone is overstretched in extravagant houses.
It's not my fault that house prices have been allowed to spiral. It's not my fault interest rates were kept artificially low. It's not my fault I paid going price for an ordinary house in an ordinary area. Something has gone very wrong, but it's certainly not individuals that are to blame.
If you can afford double, good for you - but that doesn't reflect reality for most people.

Exactly @Oliotya. The narrative that everyone with big mortgages are living in massive houses to show off on Instagram etc is really out of touch.

I have a big mortgage as houses are extortionately expensive and as I don't qualify for any kind of social housing, it's have a mortgage or pay even bigger rents with even less security.

Reality is that many people chose to buy and borrow without thinking further than one year ahead. It’s all down to individual decisions. I know many people that decided to have one too many children, overstretched on mortgages, borrowed to go on holidays, pay for private schools, have multiple cars, make expensive renovations and list goes on and on. So afterwards, you can’t just ask those that lived within their means to bail you out. It is your own fault to put yourself in such position. When you signed up for a loan, you must have read that your debt percentage is only fixed for a certain amount of time right? And that interest changes will be adjusted based on the market conditions? No one ever promised you to have cheap debt forever.

Housing benefits goes to majority in need, disabled, old, ill. Those abusing the system make up a very small percentage.

Like I said, where should we all live that is so much more secure and affordable?
It's all very well saying people should think ahead, but all the thinking ahead in the world doesn't make housing affordable.

My house is an excouncil 3 bed terrace. My neighbor pays about £600 a month rent. Next year my mortgage will likely be close to £2000. Does anyone really want to tell me that I've been greedy and irresponsible?
We compromised ( a lot) and bought this place because we got yet another section 13.
If there's no help coming, fine. Whatever will be. But I will not tolerate this narrative of irresponsibility. It's the government that has been irresponsible, not me.

And you're wrong that housing benefit is just for ill, old and disabled. And it's not "abusing the system" to be unable to afford your rent.

The second someone cannot afford their rent, council sends them to cheaper area, unless there’s very solid reason not to.

You’re just upset that everything you learned in life such as, rent is dead money and houses always goes up in value etc etc. turns out not to be very true at the moment. You probably will end up paying more in bank interest than your neighbours pay for rent. However, you did have years and years of low interest rates which essentially should’ve allowed you to pay down the mortgage quicker, put some money aside etc. If you did that, I’m sure you can weather the storm. Unfortunately, you cannot expect someone to pay for the costs of your debt whichever way you put it.

I do find it ironic that mortgagees are asking for renters tax money to bail them out.

"Unfortunately, you cannot expect someone to pay for the costs of your debt whichever way you put it."

This, this, this

I didn't have years and years of anything. I'm under 30 and bought a house last year? What have I ever benefited from?
We can weather the storm. We can service our mortgage up to 12%. But not everyone can and they shouldn't bloody have to.

5% rates now are the equivalent of 16% then. People are now vastly over-leveraged against their salaries. Ie house prices are more expensive by many orders of magnitude now while salaries haven’t kept pace. This has been explained many time in many places recently. But Mumsnet is a place where people do love to showcase their terminal dimwittery.

Honestly though, what will people genuinely do. How is anyone on normal salaries going to be able to afford anything right now?