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.

There’s been an extremely large push for people to return to the office, which coincidentally seems to have coincided with the interest rate rise. And the cost of living crisis. It’s almost as if it’s been done on purpose 🙄

Everything will be alright. You just have to "be patient" with mortgage rate rises. According to Jeremy Hunt. Does that help?

Everything will be alright for most people. Some people are gonna get caught in the crossfire of their fixed rate ending at the same time as the rates not being under control. Can we all say a prayer that it’s my ex-husband please? If anyone deserves it, it’s so him.

It's not realistic because those houses are almost impossible to buy with a mortgage.

They generally go to cash buyers at auction. Where you need to have the property paid for (with cash or a mortgage) within 28 days otherwise you forfeit your 10% deposit that you had to put down on auction day.

My property purchase (as a FTB) went through VERY quickly last year - and that took five weeks. I'd never have managed to buy something run down at auction.

Please answer a stupid question.... are the banks making bigger profits on the back of the interest rate rises or -

Is the surplus used as a balance against fixes, or hedge against inflation or something. Maybe the borrowing costs for banks for mortgage money supply is higher too. Haven't a clue, but always wondered.

I'm older now and no mortgage anymore, but I remember the days of double digit rates and no money left to heat the water and so on, but survived somehow, due to my parents buying me food!

@keyboardkat yes, record profits for the banks along with the utilities companies, tescos etc

I don't doubt you, but that is just so unfair. They are very slow to increase savings rates so they must be laughing at us, and back slapping the Bank of England!

I want to protest, my small savings pot hasn't grown in years, it should now though shouldn't it? When though...

If you're savvy you can make it work. I'm getting between 4% and 7% on all my savings at the moment.

But then you need to pay tax on them

If inflation is 10% and people are getting 1% - 4% on savings before tax (particularly for those bits of savings over the £1k or £500 etc interest tax free allowance) savings are losing money year by year.

yep

Govt agreed support measures: https://www.gov.uk/government/news/chancellor-agrees-new-support-measures-for-mortgage-holders

The lenders – which cover over 75% of the market - agreed to a new mortgage charter providing support residential mortgage customers. These are:

• Anyone worried about their mortgage repayments can call their lender for information and support, without any impact on their credit score and we would encourage you to contact your bank who are there to help.
• Customers won’t be forced to have their homes repossessed within 12 months from their first missed payment.
• Customers approaching the end of a fixed rate deal will be offered the chance to lock in a deal up to six months ahead. They will also be able to apply for a better deal right up until their new term starts, if one is available.
• A new agreement between lenders, the FCA and the government permitting customers to switch to an interest-only mortgage for six months, or extend their mortgage term to reduce their monthly payments and switch back to their original term within the first six months, if they choose to. Both options can be taken without a new affordability check or affecting their credit score.
• Support for customers who are up-to-date with payments to switch to a new mortgage deal at the end of their existing fixed rate deal without another affordability check.
• Providing well-timed information to help customers plan ahead should their current rate be due to end.
• Offer tailored support for anyone struggling and deploy highly trained staff to help customers. This could mean extending their term to reduce their payments, offering a switch to interest only payments, but also a range of other options like a temporary payment deferral or part interest-part repayment. The right option will depend on the customer’s circumstances.

Who would enter a mortgage contract right now I wonder? Must be hard on those eager to sell/buy/move.

@SaturdayGiraffe there is literally nothing on that list that is knew that you couldn’t do before Jeremy Hunt went into the room to negotiate.

It just confirms they will start to reposses 12 months after missed payment if missed payments continue x

I'm quite pleased as looks like I can now book in new deal six months ahead of current deal finishing, rather than the 4 months it was before. Deal ends Jan 24 so 👍🏼

It is certainly difficult for those with a large mortgage. I don't have mortgage or savings so in a sense not caught now (at 61 at long last) in either dilemma (and one reason I have no savings is because of divorcing a much lower earner and secondly choosing to help the children with housing and university costs to reduce eventualy inheritance tax - assuming I live 7 years which is very likely). So I am certainly not complaining.

It was always six months. Santander contacted me in June 2020 to confirm my new rate being fixed with them for December.
Literally no changes. Although actually as the lady above pointed out, it does confirm that they can start reposition proceedings within 12 months of the first miss payment, which actually most of them would be pretty reluctant to do if you were paying something towards the mortgage. My personal experience is as long as you are seen to be willing to put something towards the payment every month, no matter what. They will work with you if you pay nothing, they won’t.

My building society/deal was4 months, I've phoned them multiple times as rates have been rising to confirm this

Thank you for posting this. I think there are some small concessions but nothing drastic (which will please most of the people on this thread it seems).

Good to be able to lock in a new deal up to 6 months ahead, this is currently 4 with many lenders.

Good that customers can easily switch to interest only/extend the term without the worry it will affect their credit rating.

A minimum 12 month period from the first missed payment where lenders can't repossess - hopefully some will allow longer than this but who knows. You would definitely hope that they will allow longer than this where they can see that efforts are still being made to pay as much as possible.

If repossessions ramp up then I suppose the govt can lean on them to extend to 18-24mo.

From what they posted I see absolutely no change to what it was already available. Maybe some smaller lenders had different policies, which was say so "less client friendly".
What I (personally) would find helpful is the possibility to remortgage with the same lender if/when rates drop and not to be penalised with ERC

People will stop paying their mortgage when they know they're being repossessed. I can't see the banks accepting no payments for 2 years whilst the house depreciates even more in value!

Wow, reading the news this evening just the base rate is expected to be at least 6.25% by the end of this year !
That means the absolute best mortgage rate you will get will be 7 % plus - and that's only if you have a shining credit profile and loads of equity. Things are changing so rapidly.

This is really scary for everyone, but especially for those who have been forced to maximise their borrowing in order to get into their first home.

Imagine...

You basically have to take a ridiculous loan, mortgaging yourself to the hilt...just to buy a tiny, run down box of a place...then a couple of years later you suddenly get notified that you now need to pay an increase on your mortgage which is impossible to cover.

And people saying 'they shouldn't have borrowed so much' don't know that for the majority of people that is the only way to get on the housing ladder - and they are being actively encouraged by everyone in the industry to do so.