6% mortgage rates

[spring33]

Old thread https://www.mumsnet.com/talk/property/4813815-5-mortgage-rates?page=1

New thread, let's hope the next one won't be 7% interest rates or higher.

My savings account AER went up 0.26% overnight. I doubt they're giving me more than Wednesday's BOE rise out of the goodness of their hearts?

Yesterday it was 4.12% (which rose a week after the BOE went up to 5%).

It's only an instant access savings account.

Hmmm.

I can't help but be deeply cynical.

My OH is convinced that mortgage lenders and banks are somehow told what's going to happen before the BoE announce anything, rather than just making changes via market speculation.

So you think they will go up 0.5%?

I think 0.25% (only because I’m going with the majority view)

4.35% is still below inflation though, they arent doing you a favour

Or your accounts are ‘behind’? I have two easy access both paying more than 4.36% and MSE easy access account list is higher than that.

I find it difficult to believe they're giving me the full .25% plus an extra 0.01%. But, like I say, I'm in permanent cynical mode at the moment.

It wouldn't surprise me too much if they go with 0.5 despite what economists are saying, just to make a political point about taking busting inflation seriously. They have to start pulling some political moves to start getting voters back on their side at some point, don't they?

I hope it's not 0.5 for the sake of mortgage holders and small businesses.

We’ll find out soon enough @KievLoverTwo
I’m the optimist sort & think we’re close to the peak now so I’ll stick with expecting a 0.25% increase & will be disappointed if it’s 0.5%.

I don't think my optimistic side is going to return until I find a bleeding house to buy that's not a complete rip off. Two and a half years, three rentals and two failed house purchases really knocks the wind out of you.

I just had one come through that sold in 2021 for 175k. They tried to sell it in August 22 for 295. It's had kitchens and bathrooms ripped out, new, redecorated. No mention of electrics, plumbing, boiler upgrades. Just cosmetic. Now they want 280k for it instead.

The neighbour has right of way across the garden, too.

gaaaaaaaaaaaah, people!

I used to be annoyingly optimistic all the time. 0_0

I really hope you find something soon to restore your optimistic side.
( dare I say it but new kitchens & bathrooms can be very expensive. And may well have required new electrics/plumbing).

You know your area better than me though and will know if that house doesn’t represent good value for money at 280k compared to others on the market.

Yeah I know that. There are various others out there paying quite a bit higher, too. I went for the one that didn't have a bunch of shitty feedback on Trustpilot, knowing I wasn't getting the best rate.

They work fine for me. Transfers are in my bank within minutes.

Even this one?

Aww, thanks. I'm considering hibernating until next summer.

Best of luck @KievLoverTwo

@KievLoverTwo There's one near me like that. Last sold in 2021 for £375k, they put on a big double extension, the latest owners have put it on at £485K. Done nothing and want an extra £110K. Madness.

Yep. I reckon that ^^ up there is a 1.5k kitchen.

Aww, thanks. You're all making me feel warm and fluffy inside.

Three more big lenders cut mortgage rates

NatWest, Halifax and Virgin Money have said they will cut rates on some of their mortgage deals following cuts last week by Nationwide, Barclays, TSB and HSBC.
Virgin Money said it would immediately cut rates on some mortgages offered through brokers by as much as 0.41 of a percentage point.
Halifax will reduce the rate on its five-year fixed-rate remortgage deal by 0.18 percentage points and lower its 10-year rates by 0.27 points. NatWest said it would cut rates for new purchases and remortgages on two-year and five-year deals by up to 0.3 of a percentage point from Wednesday.

Isn't it strange that they're cutting mortgage rates ahead of the next base rate increase on Thursday?

Not really, they are looking at longer term forecasts

I thought this too

I'm no economist (lol) but I am worried it will be counter productive like people will start getting mortgages thanks to the slightly lower mortgage rates but then they'll shoot the base rate up more because of that 😩😩

I really hope I'm wrong

@mortgagequandary

The base rate won't be increased because people are taking out mortgages so don't worry about that.

Oh okay 😳😳 thank you for clearing that up !!

I am confused as to how people want a better deal for young people but are simultaneously bemoaning a fall in house prices.

A major crash is bad, is a slight correction from the silly season?

Higher interest rates are likely to stifle house price increases which will effectively make them more affordable the more years pass.

I guess the unlucky ones are those who bought as things were going up ridiculously and who also chose a short fix at a time when the base rate was at an all time low.

I do question why brokers recommended two year fixed when mortgages under 2% were commonly available on five and 10 year fixes. I questioned several family members on why they didn't want to take longer and never understood the logic unless an imminent move was likely.

If house prices are falling then current buyers are losing out in terms of mortgage rate but gaining by paying less.

Those who bought pre 2021 might see a fall but have likely also had a big uplift in value so are probably no worse off in house price terms, though will be monthly if they chose not to fix.

I do question why brokers recommended two year fixed when mortgages under 2% were commonly available on five and 10 year fixes

Because they were making a nice amount from the commission.

The cost of mortgages is not dependent solely on the base rate. It's dependent on the price the market demands for lending you money.

That is a complex function of things like default risk (the fact that you might not pay), inflation (that the money paid at the end of the loan will not be worth as much as it was at the beginning) and margin (how much money the intermediary for the debt wants in reward for risking to lend to you).

Back in the good old days when mortgages largely tracked the base rate a rise in the base rate was reflected in the price of the mortgage instantaneously.

Now the price of a mortgage more reflects the cost of taking on debt at any particular time.

The 2 year and 5 year gilt yields are a reasonable proxy for 2 and 5 year mortgage rates (there are better ones, called swap rates but these will normally do). These are the yields the market charges to lend the government money for those periods. The government can borrow money at less cost than a mortgage owner because it is considered more reliable (hence the lower yield on the 2 and 5 year gilts compared with mortgage rates), but still, the yields tend to move in harmony.

The 2 and 5 year gilt yields spiked around 10 July, but have dropped around 10% since then to now (about 0.5% or so), so it is reasonable that the mortgage rates will have dropped somewhat since then as well.

if you take the 0.25% base rate rise that will almost certainly happen tomorrow, that could be interpreted in two ways :

i) the government is serious about reducing inflation by increasing the rate. 2 year gilt yields will go down, because investors are more confident the money they will get back at the end of the loan period will be worth more - mortgage rates go down.

ii) the government is not serious about reducting inflation because it hasn't increased the rate enough. 2 year gilt yields will go up because investors are worried that the money they will get back at the end of the loan period will be worth less. Mortgage rates go up.

There's more to it than this, but these are some basics that show how the base rate can increase while the actually mortgage rate decreases.

I was listening to Rishi this morning on LBC.
It’s clear that inflation is the top priority, and if people can’t afford their repayments the only sanctuary is extend the term or go interest only for a while. Or sell up.

High mortgage rates may be bad for government popularity amongst some voters, but most governments are smart enough to know that high inflation will end them with certainty. There is plenty of historical evidence for this. So it's a matter of taking the pain now to avoid a lot more further down the line. The next indicators for where inflation (and where mortgage rates) are likely going will be the US inflation figures plus the UK CPI figures.