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.

QE a failed experiment to make us look richer than we are. It's going to be much more painful than 2008.

Assuming it was the same in 2001 as 1993 rates varied massively back then depending on deposits and credit ratings. Hence using just the average

The government isn't going to be giving out any schemes or free money if they don't want to the economy to completely implode.

They never let the market properly reset in 2008 as it was supposed too, they used QE to keep the debt bubble high and wages low causing asset inflation. This from the decisions from 2008 not just covid

this is true

Good call, I have stopped two younger members of my family doing the same. By 2025 they should be able to leapfrog a couple of rungs of the ladder.

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.

This is so obnoxious & completely ignores the issues with renting.

By 2025 they should be able to leapfrog a couple of rungs of the ladder.

If prices fall that far there will be knock on impacts on taxes & jobs...

Recommended mortgage interest rate was 8.04 in January 1993.

@curtainsfringe you were talking about interest free, which of course was never a thing as it wouldn’t make sense for a lender to lend money without charging any interest.
Interest only is a thing - endowment mortgages - which is probably what you meant

It's much easier to upsize in a falling market vs an increasing one with a large deposit. I've been throwing down money on my mortgage I will have 40 percent LTV for when I move, bigger houses lose more value vs smaller ones.

QE a failed experiment to make us look richer than we are. It's going to be much more painful than 2008.

How that pain is shared will be interesting since a lot of people are now mortgage free. However we have a crisis in social care, the NHS is struggling & an aging population. I think any gov is going to come after that housing wealth as they can hit income any further.

I want to buy a bigger flat and in theory i should wait for the house prices to fall (thats what DH says). But I only have £100k equity in my current flat so I will need a mortgage. We can take up to 8% interest rates on our current flat. Will the lower prices offset the far higher interest rates we have to pay for any additional borrowing?

@Meixo It is much easier to upsize in a falling market. A crash is different though in terms of impact on the economy.

As they should to be honest.

Yes thats not really fair. A lot of young entrants have had little choice but to do what they had to to buy. They are going to suffer the most and saying they were living in fairyland is not helpful or accurate. They were simply looking at the status quo for reference and haven't had the experiences of older generations who went through the late 80's early 90's bust.

@Twiglets1 I never meant interest free (never heard of that either!). I had no idea I even typed that so it didn't register we were talking about different things. I was referring to interest only which post crash are much harder to get & you need higher earnings/higher deposits to access them.

can't hit income any further!

The point is you didn't give into the idiocy that prices would rise forever and rates would stay low.

You made a choice not to take on a big mortgage, other people decided to take on large amounts of debt and bid up house prices. As a result they have had a few years living in the posh house, while you have lived in a more modest place.

The question is, should you now be punished for taking that stance while people who did should be bailed out ?

This is not a trivial question, because it sits at the heart of how we want society to be run and whether or not we want people to be responsible for their own actions.

It also tells you a lot about bubbles - that people are generally happy when the bubble is inflating and they are making money, but when the bubble bursts they are crying that they should be bailed out.

If housing is that central to basic living requirements (I believe it is) then governments should manage prices in order to prevent bubbles, and their inevitable collapse.

Successive governments since 1997 have failed to do this.

They’ve all used the same stat page from the national office of statistics for quick comparison. There are obviously a lot of variables and some of the years had huge variables within them.

Was there talk about a land tax at some point? What happens to people who are asset rich, but income poor? People who bought a modest home which is now worth stupid money, but they are living on a modest pension? Which is true for a lot of older people.

I found a document which lists the recommended mortgage interest rates, from the year dot, but I can't link to it!

How much was your mortgage though?

They were simply looking at the status quo for reference and haven't had the experiences of older generations who went through the late 80's early 90's bust.

My experience of that is parents bought house in 80s on one salary for about 50k. Yes it was tough when rates went high & parent lost job but switched to interest only & got a better paid job. House is now worth close to 2m. I'm not in fairyland though & know my house won't see anything like that growth.

Nothing is certain and nobody really knows - but my guess is yes, you will save considerable amounts of money if you wait for the falls to work through. By the time that has happened and your ready to make your move inflation will hopefully be under control and interest rates coming down again. Two years is my estimate.

It depends on how much they fall I don't think rates will go up much more than 5percent 6 and above will probably cause mass repossessions. I'm going to bet 5.75 percent, it depends on how much you planning on stretching yourself your LTV and the area. Larger properties lose more value than smaller ones. If you need to buy now bargain hard, property falls take time it's like a mexican stand off at the moment with buyers and sellers.

I would be willing to bet they fall around 20 percent or above from Summer 2022 peak prices. It's so much worse than 2008 as they don't have QE to inflate the debt anyway government have ran out of options.