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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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User1529865 · 26/05/2023 06:40

We bought our first house which was a 3 bed terrace in 1984, these days those houses are scorned on here and people expect a 3 bed detached, maybe smaller houses won't be so scorned now

C4tastrophe · 26/05/2023 06:42

Someone needs to rename this thread
‘6% mortgage rates’

itispersonal · 26/05/2023 06:51

Interest rates have been incredibly low for years and they were inevitably going to go up. My friend and I both bought our own first houses in 2010 and 5 year fixes then were 5-5.5% (just before all the rates starting falling)

When we remortgaged 5 years ago at 2% the mortgage provider stress tested us at 8%.

Maybe the BofE/ government has lulled us into a false security with incredibly low interest rates, which that and high demands of properties has caused house prices to go through the roof. But if people were (had to) stretching themselves at the low rates it was always going to be a problem when they raised! Granted we didn't know food, electricity, brexit costs would also add to the pressure.

newstart1234 · 26/05/2023 06:52

C4tastrophe · 26/05/2023 06:29

@ThankmelaterOkay well your assumption looks correct, however house prices do crash, builders keep building to feed their families, people sell as they cannot afford their mortgages, probates go as in a falling market money now is better than less money later.
This will unwind over the next year or two.

Sure, it’s always ‘different this time’, except, it never is.

Interest rates were so low there was only one way they could go. No doubt the government will try to fiddle, but they have no money, and cannot borrow to keep asset prices high.
Fortunately most property has no or small mortgages.
Maybe 50 year mortgages are incoming? Will modern new builds made of glued together sawdust ‘wood’ and cardboard last 50 years?

I'm interested in if things are actually different now . Paying for covid debt is akin to ww2 debt level and climate change seem to be factors at play here that are objectively different here to anything before. Happy to be corrected on that. Tory underfunding, selling national assets and smashing relations with the eu are recoverable imo over 20 years but the impact of climate change at a point that we can afford fuck all (as a country - I know some people are doing fine of course) is truly scary

Fizbosshoes · 26/05/2023 06:58

DanceMonster · 26/05/2023 03:31

And in the meantime, what were us ordinary buyers to do? Not buy a house in protest at the high prices and lack of regulation? And in the meantime we should live… where?

Agree. The longer people stay renting often they can't save, meanwhile property prices keep rising. What choices are there?

We were fortunate to buy a doer Upper in the early 2000s that was priced a lot lower than the average for the town/Street. Now the fixer uppers are priced barely any different.

C4tastrophe · 26/05/2023 07:06

@newstart1234 things do look bleak, I agree.

People are slowly realising debt is not wealth, and affluence is not a 600k debt to the bank and a RangeRover on PCP.

curtainsfringe · 26/05/2023 07:09
  • In 1991 mortgage repossessions hit a record of 75,000. In recent years the number has been no where near this figure, including 2022. It is not right for people to think things were easy for home owners in the past - let's just accept many people struggled then and people are struggling now.*

My understanding was that repossessions were higher in the past because far less people were on fixed mortgages. Also lending tightened up after 08 & people needed much bigger deposits & were limited to what they could borrow compared to the past.

I know people who had 95% interest free mortgages in the 90s - you wouldn't get that today.

Dibblydoodahdah · 26/05/2023 07:17

@Throwncrumbs the Leeds Building Society produced an interesting article earlier this year. They worked out that mortgage rates of 6.43% today are the equivalent of 25.7% in the 80’s. So no, people would not cope with rates of 15%.

Roselilly36 · 26/05/2023 07:20

Throwncrumbs · 25/05/2023 18:41

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

Yes I remember that too, 1989 when we took out our first mortgage at 15%.

curtainsfringe · 26/05/2023 07:21

They worked out that mortgage rates of 6.43% today are the equivalent of 25.7% in the 80’s. So no, people would not cope with rates of 15%.

Yep but you'll still get the "in my day" 🙄

curtainsfringe · 26/05/2023 07:22

Quicker than I expected! 😆

MyNewWittyUserName · 26/05/2023 07:22

ArdeteiMasazxu · 26/05/2023 05:57

7.6% of £82k is £6,232
£6,232/12 = £519
So if you were on an interest-only mortgage you'd be paying £519 per month in interest alone.

Obviously your actual repayment will be more than this depending on how many years you have left of the original term agreed - if it was a 25 year term that you took out with a 5 year initial fixed rate then there's 20 years left and the new payment would be around £666. Just pop "mortgage repayment calculator" into Google and you get a simple Google tool to put basic figures into for any other duration.

Show quote history

Thanks

VegetablesFightingToReclaimTheAubergieneEmoji · 26/05/2023 07:40

Dibblydoodahdah · 26/05/2023 07:17

@Throwncrumbs the Leeds Building Society produced an interesting article earlier this year. They worked out that mortgage rates of 6.43% today are the equivalent of 25.7% in the 80’s. So no, people would not cope with rates of 15%.

A big amount of interest on a small amount is the same as a small amount of interest on a big amount.

I did similar maths last year on a thread like this.
so last years interest rates - can’t remember what it was
but essentially people paid the same amount of interest on an average house price in 2022 as they did in the 80’s/90’s year I picked. I will dig the exact maths out. But basically we were living with the 15% interest last year, we are well over that now. But with less council housing.

Original poster
SaturdayGiraffe · 26/05/2023 07:46

Will banks repossess like before?

OP posts:
Twiglets1 · 26/05/2023 07:53

curtainsfringe · 26/05/2023 07:09

  • In 1991 mortgage repossessions hit a record of 75,000. In recent years the number has been no where near this figure, including 2022. It is not right for people to think things were easy for home owners in the past - let's just accept many people struggled then and people are struggling now.*

My understanding was that repossessions were higher in the past because far less people were on fixed mortgages. Also lending tightened up after 08 & people needed much bigger deposits & were limited to what they could borrow compared to the past.

I know people who had 95% interest free mortgages in the 90s - you wouldn't get that today.

So what if fewer people were on fixed rate mortgages? The pain of losing your home would be the same whatever the type of mortgage and I think 75,000 repossessions is just the tip of the iceberg regarding the huge number of people at the time who were struggling not to get repossessed.

But I had a mortgage in the 90s and don't know anyone who had a 95% interest free mortgage. The lenders always charge interest or what's in it for them? It was mainly endowment mortgages at that time which meant that people only paid interest (no capital) or capital & repayment mortgages.

Do you have a link for companies at the time offering interest free mortgages as I have never heard of it? Would be strange indeed at a time when most people were paying sky high interest rates.

Roselilly36 · 26/05/2023 07:53

@Dibblydoodahdah Average house price quoted isn’t what houses were selling for on the South East coast, where we bought a tiny studio flat, all we could afford for over double the price of “average” quoted in the article, just for context.

I agree buying is more difficult now, but it has never been easy for any generation to get on the housing ladder. We are in our early 50’s now, and made the decision to relocate our family away from the SE, as we knew our DS’ wouldn’t stand a chance of buying a property of their own, in the area they were born in. Even where we live now, they will need financial support from us to buy there first homes.

We really struggled to pay our mortgage, as a young couple both 18, we couldn’t go out, have holiday etc. took us 6mths to save up to have a landline installed BT charged £150 at the time to put the line in, obviously no mobiles/internet etc. we literally had £15 a per week for our food shop, done by bus as we couldn’t afford a car. My husband has two jobs to earn extra money. Those were really tough times, quite a few of our friends properties were repossessed or people took they keys back to the Building Societies. It was a really horrible time. I hope I never see a repeat of that in my lifetime.

Twiglets1 · 26/05/2023 07:56

SaturdayGiraffe · 26/05/2023 07:46

Will banks repossess like before?

No - the government have made it much harder for lenders to lend unrealistic amounts & will make them help homeowners to not lose their home.

I'm not saying there will be no repossessions, there are repossessions every year but it will not be like 1991 where 75,000 people were repossessed (apparently that represented 1% of the total number of mortgages).

newstart1234 · 26/05/2023 07:57

Roselilly36 · 26/05/2023 07:53

@Dibblydoodahdah Average house price quoted isn’t what houses were selling for on the South East coast, where we bought a tiny studio flat, all we could afford for over double the price of “average” quoted in the article, just for context.

I agree buying is more difficult now, but it has never been easy for any generation to get on the housing ladder. We are in our early 50’s now, and made the decision to relocate our family away from the SE, as we knew our DS’ wouldn’t stand a chance of buying a property of their own, in the area they were born in. Even where we live now, they will need financial support from us to buy there first homes.

We really struggled to pay our mortgage, as a young couple both 18, we couldn’t go out, have holiday etc. took us 6mths to save up to have a landline installed BT charged £150 at the time to put the line in, obviously no mobiles/internet etc. we literally had £15 a per week for our food shop, done by bus as we couldn’t afford a car. My husband has two jobs to earn extra money. Those were really tough times, quite a few of our friends properties were repossessed or people took they keys back to the Building Societies. It was a really horrible time. I hope I never see a repeat of that in my lifetime.

You had a mortgage at 18!?

Dibblydoodahdah · 26/05/2023 08:02

@Roselilly36 of course it isn’t. It’s talking about national average. Not average in the SE! A lot of people are getting fed up of older people telling them that they had it worse because interest rates were “higher” back in the 80’s and 90’s. The fact is that we (and by that I mean the country, not myself) are in a far worse position now because of (1) how high the property prices are and (2) the fact that wages have stagnated so much. I saw a job advertised a few weeks ago at an organisation I worked for in the early 2000’s. It was paying just a few thousand more than they did back then for the same position.

Roselilly36 · 26/05/2023 08:02

@newstart1234 yes, seems crazy now, I know, but we did, I had to wait for my 18th birthday to sign the paperwork! I don’t think anyone in our family thought our relationship would last, but we have, still together and happy.

Dibblydoodahdah · 26/05/2023 08:04

@Roselilly36 oh and add to that when my mum was worried about our house getting repossed in the 90’s she was concerned about us having to live in a Council house in a rough area as all the ones in the “nice” areas had been bought. Now she would be worrying about us being homeless because there is such a massive shortage of social housing.

ThankmelaterOkay · 26/05/2023 08:06

Hard to get on the property ladder at any time…gets on the ladder at 18 👍🏼

newstart1234 · 26/05/2023 08:12

A relative of mine was expressing indignation over a younger (mid 30s) relation but a flat in london when they could do what they did and move to a cheaper location to save money. We showed this relative their exact 'basic' house that they settled for in the 70s... it's now near enough £800,000. They bought it on one good but middle management salary ...

2thumbs · 26/05/2023 08:13

Dibblydoodahdah · 26/05/2023 07:29

It’s interesting that the Leeds BS have used 1980 for their comparison (when the average house price was £21k) and not 1989 (when the average house price was £55k). It’s almost as if they are being selective of their data to make their headline more ‘shocking’. I’m sure one could prepare a separate analysis using marginally different data (for example, average salary rather than average disposable income) to ‘prove’ the complete opposite.

The reality is that the two periods were, in broad terms, comparatively shit (although the nature on the shitness on an individual level would’ve been different), and I don’t see the value in taking the debate further than that (I’m sure many on both sides of the fence will vehemently disagree with me). I look forward to the future debate that will no doubt resurface in the 2050s.

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