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.

Nah I’m bored of this now. Going out to dinner actually. Hope you have a pleasant evening.

P.s @groupery I’ll put in a good word for you if they try to come after those £2M houses you’re expecting to inherit.

I think it’s entitled if FTBs think they have a right to move straight into a house because flats are generally cheaper so if you can’t afford a house it’s logical to buy a flat. Two bed if you can afford it. It may not be ideal but that’s life.

FTBs are a lot older now though & often are at the house stage when able to buy. Plus the issues with cladding & leases I can see why some are put off flats.

Nah I’m bored of this now. Going out to dinner actually. Hope you have a pleasant evening.

I didn't expect you to have much of a response but assumed it would be better than that!

I’ll put in a good word for you if they try to come after those £2M houses you’re expecting to inherit.

Now, now, don't be jealous 😆

My DS bought a house last month. His mortgage offer was made in February and he was stress tested.

I’m guessing Banks can still opt in to stress testing if they feel like it.

What are people thinking about fixed or tracker now?

I am not sure that the rates can go much higher before society implodes and the BOE have to stop pulling the level. I have historically been a fix it kind of person but wondering if a tracker is now the way forwards. FWIW I would be okay up to about 10% so it would not be too much of a gamble.

We are about to buy a place worth 95k 10 % deposit 1st time buyers in late 30s and early 40s 2 kids, yes a bit scared as I am a carer for my eldest so don't work, otherwise we stuck in private miles away from family but close to husbands job here but no quality of life with me stuck at home all day as the only adult around. Hoping like everyone else rates don't go to 15% lol

Exactly this. The amount of people near me and pretty much most of my friends are in houses they don’t need (but want) to be in. New extensions, 2 cars,2 holidays AND they ‘need’a nice big house with an extra bedroom because Dave works from home, all brand new expensive furniture. They HAVE to have a garage & a drive is non negotiable. Far bigger houses than they need. Family advising get the biggest you can etc, people falling in love with their ‘dream’ home.

i could’ve got a big house had I mortgaged myself up to the hilt. Instead, I was extremely cautious & got a tiny house (to basically get a roof over our heads) and stick at 1 child because of it.

I don’t think it’s appropriate to be bailing those out that have overstretched themselves.

@StarDolphins yes yes yes. We moved a few years ago. The mortgage company offered us way more than we actually thought they would. But we didn’t take it. We wanted to move into something that we could stay in for when we got older. So we bought a bungalow.

you wouldn’t believe the people who have said oh it’s small. Why would u move to a bungalow when u don’t currently need it. Why wouldn’t u just get a bigger house.

we have had to re mortgage this year and it has only been £200 extra a month which is annoying but completely doable. If we had taken all the money they had offered we would have been screwed. But we were sensible and didn’t.

I think nowadays people want that Instagram house and life style. And couldn’t possibly do without all the extras. ( am aware that is a sweeping generalisation but lots of people I know have done it to )

i could’ve got a big house had I mortgaged myself up to the hilt. Instead, I was extremely cautious & got a tiny house (to basically get a roof over our heads) and stick at 1 child because of it.

There's a middle ground between mortgaging yourself to the hilt & a tiny house/sticking to 1 dc because you're cautious.

I would say i'm cautious, I took a long fix last yr.

https://www.theguardian.com/politics/2023/jun/22/labour-would-not-back-subsidising-mortgage-holders-starmer-says

Sounds like Keir Starmer is basically advocating the same response as the Tories - telling banks to show more flexibility to homeowners struggling with repayments, such as allowing them to switch to interest-only mortgages and delaying repossession proceeding.

It's only LibDems who are suggesting a care package for homeowners most at risk of repossession via grants worth up to £300 a month. And they won't be winning the next General Election anyway so I can't see that policy getting adopted.

I wouldn't personally fix at today's rates, though obviously they could go a bit higher. If I did fix it would be for 2 years, no longer.
I'm more of a variable rate type of person generally, though I did fix while rates were extremely low.

Agree with above.2 year fix now only. given where we are. it cant go much higher or for much longer.

I actually do think that this type of attitude is “unique”
Unique in the last 20 years

I think the change coincided with Labours University for all policies and ignoring the manufacturing area of our economy to push 50% of young people into university.

When I left school the percentage of people going to university was still in single figures. It meant that a university degree almost guaranteed you in time a salary in the top few percent of salaries
When 50% of young people get a degree, the degree becomes average. But instead people still expect the top salaries and not the average ones. And with that expectation they expect to buy the 4 bed detached as their starter home because they have a degree. They do not seem willing to move or buy anything less than their dream house and they seem very reluctant to slum it in a basement flat or a studio over a chicken shop at 23 /24 then move every few years slowly edging their way up the ladder They prefer to rent for another 10 years in a nicer area.

I’d definitely 2 year fix. It’s going to go on longer than the 15% did as it’s not working and not filtering down quickly due to fixes.
so expect it to continue to rise and go on for a while.

No one i know expects a 4 bed detached. And i went to a Russell Group university to read law and almost all my friends were at RG universities/Cambridge law.

The one who went to cambridge bought a 3 bed terraced ouse in romford. She did rent for years but spent some time at home. in any case her FTB property was in the same price bracket as our z3 north london flat. vast majority of my friends are in 2 bed flats or 2/3 bed houses, all early 30s. The size of the house depends on whether we chose to stay in zone 2/3 london or move out to the town/zone 6. But more or less same price bracket and the houses are still pretty small.

not much difference between the 1/2 bed flat. Might as well go for the two bed flat as its more 'future-proof'. Also due to the supply shortage, a lot of flats/small houses in zone 4 and zone 5 or in commuter towns are the same price as the 2 bed flat in zone 3 when you factor in two sets of commuting costs even if its hybrid working. So the 1 bed flat in a slummy commuter town faraway from london makes even less sense and you are only a FTB once. You lose your stamp duty relief for the first 500k for any subsequent transactions. So it makes sense to buy something you wouldn't need to keep moving for. in london yes you definitely can't buy your forever home as your first property and it wasn't the case in the 1990s. But i think a 2/3 bed flat is a good compromise.

Don't go for a 2 year fix because you think rates might be cheaper in 2 years (I doubt they will be). Only go for a 2 year fix if you think your life circumstances in 2 years mean you will be able to find another couple of hundred quid a month if rates go higher - for example, you might have finished paying for nursery fees and your household income will rise.

Otherwise I'd take a longer fix that allows me to plan according to my life circumstances.

@manontroppo I semi agree with you and understand your POV. It all comes down to appetite for risk vs peace of mind.
I took 5 years for peace of mind, and managed to get it at 4%.
But considering we all paying a ton more than before... even more so now at rates of circa 6%, I would not want to fix for 5 yrs at this rate. Defo 2 yrs... i really dont believe rates can get much higher.

But each to their own.

I’m a millennial, who went to university (studied law at a Russel Group uni). All of my friends have similar qualifications from similar universities. Most are fairly high earners now. I don’t know a single person who expected (or got) a 4 bed detached house in their desired area as their first house. So as someone in the demographic you’re disparaging, with friends all in that same demographic, it’s not an attitude I’ve encountered. Weird that you’ve met so many.

But instead people still expect the top salaries and not the average ones

TBF, the more recent graduates are all saddled with 0000s of debt, so no wonder they hope for a good salary as a result of it.

As a millennial who also read law at a Russell Group uni, i actually feel that the higher earners ironically are more likely to buy flats as their first home. The higher earners I know generally want to live in an expensive area and so 600-700k would only buy you a 2 bed flat. So thats what they go with. I am 31 but I guess many would manage to buy houses later on. I even know a higher earner couple where they each bought a 2 bed flat in the same period conversion (so i guess they effectively have a house in zone 2!)

People with lower salaries may feel that they could never afford a house in the expensive areas so opt for a small house in a less desirable location with the expectation that they can extend or put in a garden office later on. And the house would often be 3 bed (2 bed and box room) cos that is much more common than 2 bed house.

very reluctant to slum it in a basement flat or a studio over a chicken shop at 23 /24 then move every few years slowly edging their way up the ladder They prefer to rent for another 10 years in a nicer area.

this is nonsense today. Moving costs & taxes make moving frequently prohibitive.