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.

In the UK if a repossessed house sells for less than the mortgage, the remaining loan is still owed by the borrower. It's always better to sell up before repossession even say at auction at no cost to the seller provided it's priced to sell.

7% is still as negative as 0.5% was, so borrowers continue to be subsidised and are still being paid to borrow. It's probably those who were near retirement 15 years ago who have lost out the most since they have been subsidising borrowers and still are.

I doubt we will see much in the way of repossessions this time. Sure there will be an increase but not huge numbers. There is, though, going to be a pretty big crash in values I think.

I agree we won’t see a huge number of repossessions, and also with the PP who said it would be much better to sell rather than wait to be repossessed (& people will have at least a year to do so from the first missed payment).

Just feel really sorry for anyone who finds themselves in the extremely difficult position of struggling to pay their mortgage.

You wont be repossessed if you pay something, you really do have to bury your head in the sand to get to that stage. Pay a token amount and they will work with you.

@maryso. That happened to my DH in the 90/ recession

houses and flat were repossessed and there was a large shortfall of about 45k when the houses and flats were sold at auction but because he went bankrupt they couldn’t get any money off him

so they chased his ex wife for years 😂 everytime she paid something i think it reset the 12 years limit that they could chase her
eventually she stopped paying anything and I know right up until a few years ago she still got letters

If you can't pay the full amount due to a temporary situation like being made redundant yes they'll help. If you can't pay whilst in full time employment because the rates have gone up then they're not going to keep accepting a token payment for years on end. Yes you will get repossessed.

Not at all comparable because house prices were much much lower as a multiple of income.

Actually, that’s the other way round. If you’ve been made redundant, they’re more likely to swoop more quickly on the basis that you may or may not get another job. If you’re in a job, you’re still on the hook and in a good position to pay, so yes, they will, indeed drag that situation out until it fixes it self one way or the other. It costs the bank a great deal of money to repossess you. And if they have made one mistake on the application or the underwriting, the judge will throw it out and they have to start the whole process again.

Things are very different from the 90s

So yes, I’m not suggesting anybody lies to their bank, but you need to be careful what you tell them. Basically, if they think they’re not getting the money and they’re flogging a dead horse. They’ll come for you sooner.

We've recently made the decision to hold off and wait (for goodness knows how long!) based on the uncertainty. We could afford to double our mortgage payments, which was what we were looking at doing only a month a go, but with our ported mortgage fix rate due to end soon, that could double again if interest rates rise too much, which would be unmanageable and we would lose the house.

Tempted to check the figures with our mortgage advisor, but dp says they're definitely right and it's pointless.

Seems ludicrous to me.

Yes, even if those savings rates are half the rate of inflation.

Just look at the facts. 33% of households own their home outright. I would say that's a pretty big proportion.

There will be another huge chunk who have small mortgages (less than 6 figures) because they purchased years ago. So yes, I think that most of the burden is mostly being placed on a small proportion of young people who have bought recently AND who are coming to the end of their fixed term.

I don't see why there should be a 'clash' between mortgage holders and renters. Most mortgage holders were renters once. It is not the fault of mortgage holders if you are paying still paying rent

Exactly. I have every sympathy with renters because I was one until recently. It took 10 years of renting, including 4 section 21 evictions due to the landlord wanting to sell, in order to be able to scrape together enough for a deposit. I’m now in the position of a high mortgage (necessary to get on the property ladder) with our first fixed deal due to expire soon.

I'm not sure that paying for a roof over your head really counts as an 'investment'. That may be the case for landlords, but not owner occupiers. They are simply paying for somewhere to live.

I'm inclined to agree. Rates might go up another 0.5 but I think that they are more or less at peak. What's less clear is how quickly they will come down. I think that they could be stuck around this level for another year.

If I had to remortgage this year or next, I would be tempted to go with a tracker - unless I could get a fix at under 5%

One thing that kind of bothering me now is what is the likelihood for the lenders to pull all mortgage products in the near(est) future for good and force all people into SVR?

I'm not sure, these things usually go hand in hand. In order to see a big crash, you need a lot of repossessions. Personally I think that there will be a price dip, but not a big crash.

Even existing mortgage holders? Why on earth would they do that and risk a significant % of home owners defaulting or simple refusing to pay?

Besides a mortgage is a binding contract between both parties - lenders also have a duty to abide by its terms

They won't do that. If there are fewer FTB about, it won't be long before banks are competing for mortgage customers. They want to make money!

This is what you have to remember repossessions are not in the banks interest, their ideal scenario is they keep you paying the interest for as long as possible.

they pulled the mortgage offers in 2008/2009/2010 crash it’s when the government had to step in.
they just stopped lending money as the risk was too great. Existing mortgage holders struggled to remortgage unless they had decent equity

The credit crunch was a very different scenario to the one we’re facing today.

Not until the current fix, whatever is it, expires. But there is nothing stopping the lenders the pull the mortgage products altogether at some point. At the moment we can switch the product with current lender or remortgage to a new one if they offer a better rate. What if nobody offers fixed rate/tracker? Existing mortgage holders will just have to go for SVR. Lenders aren’t obliged by contract to offer a fixed deal I think.

That crash was caused by irresponsible lending. Lots of people had were given mortgages that they couldn't afford and were defaulting on their payments. Lending criteria tightened up a lot after that.

Ah I see what you mean.

Even so, highly unlikely as it's not in the lenders' interest as as they would face the risk of massive defaults. They would also come under significant pressure from the government (likely Labour who would not be as tolerant of such extreme capitalist manoeuvres )