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Original poster

5% mortgage rates

994 replies

SaturdayGiraffe · 25/05/2023 18:10

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.

UK homeowners and first-time buyers warned to brace for 5%-plus mortgage rates

Lenders forced to raise fixed-term deals after latest inflation figure pushed swap rates upwards

https://www.theguardian.com/business/2023/may/25/uk-homeowners-and-first-time-buyers-warned-to-brace-for-5-plus-mortgage-rates

OP posts:
Thread gallery
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spring33 · 25/05/2023 19:53

Throwncrumbs · 25/05/2023 18:54

Really? That’s not how I remember it, but you may be an expert in my life, finances and struggles… oh no your not though are you!

Show quote history

Not taking away from how hard it must have been in the 90s, but the rates were higher back then, whereas the salary multiples for mortgages were lower. So things become difficult at a lower interest rate now, than they did in the past.

watermeloncougar · 25/05/2023 19:54

@DrySherry it's not a competition! All I'm saying is it was shit then and it'll be shit now for people who suddenly find themselves with mortgages they can't service!

My point is simply that when people say 'oh but wow, you could buy a house for about 50k back then,' or assume that we were all living a life of riley with one parent working and the other being a SAHP - no, we weren't! Hardly anyone I knew in the late 80s or the 90s could afford to be a SAHP. And in fact until maternity leave was extended to 6 months, we were all back at work with 12 week old babies. It was seriously sh

watermeloncougar · 25/05/2023 19:54

Seriously shit and loads of people ended up being repossessed

NameChangeSorryNotSorry · 25/05/2023 20:06

It’s awful. It was awful then and awful now. And I agree with pp that as a younger person who wanted to buy a home and start a family we had no choice but to pay ridiculous prices and were lead to believe by everyone that interest rates would stay low.

Prettypaisleyslippers · 25/05/2023 20:09

Mine has just gone up from 1.2% to 4.36% huge increase

vejazzlement · 25/05/2023 20:10

These kinds of threads are interesting for anyone who has lived through really high mortgage rates. My last mortgage interest rate was somewhere around 1%, but when I took it out, I automatically assumed it would end up being 10% because was my formative mortgage experience. Hence I shrug at 5%. But if I'd only ever known low interest rates, I would be scared shitless. Not that this helps anyone!

People are very wrong to assume anyone who bought a house in the 80s or 90s was living the high life. It was bloody difficult.

The other thing that was drilled into me was you could only ever borrow 3x your income. So I suppose people were more willing to buy 'starter' type flats/houses, whereas people now are keener to buy their 'forever', Instagrammable house as their first house, rather than working their way up via scuzzy flats in crap locations.

ThankmelaterOkay · 25/05/2023 20:11

Prettypaisleyslippers · 25/05/2023 20:09

Mine has just gone up from 1.2% to 4.36% huge increase

sucks but least you got in before 5%, and had >5 years at 1.2%, or thereabouts

DogInATent · 25/05/2023 20:16

There's an argument that 5% should have been within the affordability equation for taking out the mortgage, but 5% plus 10% inflation and the current cost of living almost certainly wasn't within the affordability algorithm applied to most homeowners.

I'm not sure the UK has an entirely healthy relationship with the price of property.

DogInATent · 25/05/2023 20:18

People are very wrong to assume anyone who bought a house in the 80s or 90s was living the high life. It was bloody difficult.
MIRAS.

Aslanplustwo · 25/05/2023 20:24

Well said @vejazzlement. Back in the dim dark days when I bought a house my DH and I planned for various scenarios, such as job loss and interest rates rising, and borrowed accordingly. Young people today seem to have been living in fairyland, where interest rates were never going to rise from the ridiculously low rates they've been at for far too long. Anyone who suggested that they would rise at some stage was treated as a fool.

snowbellsxox · 25/05/2023 20:25

Mine ends in October
Thankfully it's a 20 yr mortgage and I'm 30 so going to extend it until hopefully it comes down

SpringBunnies · 25/05/2023 20:30

I remember my first mortgage deal was 5.99% in the late 2010s. However it is meaningless to compare to now because the house was only £190k. I saw they are around £350k now. A first time buyer with a 10% deposit will have a loan now of £315k compared to £171k just 15 years ago. It’s a much larger burden for the new buyers now.

And this is nothing compared to when the UK has 15% interest rates

ThankmelaterOkay · 25/05/2023 20:31

Aslanplustwo · 25/05/2023 20:24

Well said @vejazzlement. Back in the dim dark days when I bought a house my DH and I planned for various scenarios, such as job loss and interest rates rising, and borrowed accordingly. Young people today seem to have been living in fairyland, where interest rates were never going to rise from the ridiculously low rates they've been at for far too long. Anyone who suggested that they would rise at some stage was treated as a fool.

Well, the ones that bought long enough ago, have done very well by over extending themselves.

1-2% for 15-20 years (if bought in 2010ish), maybe more if they did a 10 year fix in 2021, but more like 2010 to 2027, so 17 years! If they started with 5x, they’ve jumped way higher than the ladder than if you’d “played it safe”, probably saving/accruing a lot of equity.

Like anything, those late to this party are the ones who will get burnt hardest.

SpringBunnies · 25/05/2023 20:31

I am still on a 1.79% fix and I dread what will happen when the deal ends.

HollyFern1110 · 25/05/2023 20:32

Throwncrumbs · 25/05/2023 18:41

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

We coped = you personally coped. Many, many thousands were repossessed.

Original poster
SaturdayGiraffe · 25/05/2023 20:34

With all due respect to anyone who lived through the 14.88% base rate of 1989, this is 2023 and I don’t think people have been properly made aware of what is happening.

We created a huge amount of money and now they’re trying to mop it up. I read a saying that once inflation is rampant it’s like trying to put toothpaste back in the tube.

From what I can gather, this is not just going to drop quickly, it’s like turning a tanker around and could last for years.

OP posts:
ThankmelaterOkay · 25/05/2023 20:34

SpringBunnies · 25/05/2023 20:31

I am still on a 1.79% fix and I dread what will happen when the deal ends.

Assume you meant late 2000s when you first bought? 5.99% would be awful for late 2010s. Did you move and increase your loan size substantially?

curtainsfringe · 25/05/2023 20:35

The double digits rates of the past are equivalent to todays rates in terms of impact on people's income due to house prices.

Original poster
SaturdayGiraffe · 25/05/2023 20:36

snowbellsxox · 25/05/2023 20:25

Mine ends in October
Thankfully it's a 20 yr mortgage and I'm 30 so going to extend it until hopefully it comes down

You could try and lock in a rate now before the lower ones disappear.

OP posts:
HollyFern1110 · 25/05/2023 20:36

I think our first flat had around a 5% interest rate. But the flat cost £36,000 and the mortgage repayment was less than £200 per month. Smug idiots telling you that we coped with much higher interest rates previously are just that, idiots. It's irrelevant when borrowing was so much lower then.

curtainsfringe · 25/05/2023 20:36

There was also MIRAS in the past

curtainsfringe · 25/05/2023 20:37

Yes house prices were lower, but so were incomes so proportionately it was just as hard.

No it wasn't though

back then there were no tax credits, no free childcare hours when the child was 3...

But the equivalent to child benefit was universal...

DogInATent · 25/05/2023 20:38

curtainsfringe · 25/05/2023 20:36

There was also MIRAS in the past

I think we may have to explain this to the youngsters (and as a reminder to those that claim to "have survived" of the state benefits they had to afford those rates).

snowbellsxox · 25/05/2023 20:39

Thanks I'll try do that Smile

curtainsfringe · 25/05/2023 20:39

high interest rates but high prices due to the equity built up by existing homeowners, again due to QE.

yep and don't forget the impact of QE on wages plus we now have the highest tax burden since WW2

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