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.

For anybody looking for a ready reckoner to guide them thru what's affordable at what interest rate and whether extending the term will make a material difference:

5.25 now, it's edging closer to 6%

Alex produces excellent models.
Main point is that increasing the term to 35/40 years makes little difference to affordability at higher rates. That's apart from the fact that you pay far, far more in total with a longer term.

Makes it clear that rates will not be coming down any time soon.

If they'd held then people would be hoping for a drop next time, but that's definitely not happening.

That’s good it’s 5.25%
It was going to be either 5.25 or 5.5%

It's still pretty shocking. How did we get here in such a short space of time?

What's shocking to me is that we had emergency level base rates for over a decade. Plus QE.

I honestly don't know what this is showing me.

Very easy to foresee this coming over the last few years and about what levels we would have to rise to, the treasury yield curve inversion and rates gave it away. Look over my comments the last three years on here.

Scaremongering.

On BBC:
The Bank also says it expects inflation to fall below 5% in the final quarter of 2023

The government has pledged that inflation will be 5% or below by the end of the year - but the overall target remains 2%

This is very much the issue and I don't blame you. I blame the educational system for not teaching basic personal finance at school. This is why so many people can be conned into over-paying for houses and then be sold debt for longer than 25 years. This is one of the primary reasons behind unsustainable house prices - debt pushers/dealers.

Well normality is interest rates above inflation, so 6% is certainly not scaremongering.
The only was we’ll get to 5% inflation this year is another 0.5% on the base rate.

Base rate is expected to start falling in Q1 2024 and fixed rate mortgages are already starting to be reduced.

So I don’t agree that rates will not be coming down any time soon

I'm interested in it because we just extended our term from 16 years to 25 to help keep our repayment down with the new rates.
So is this telling me that actually we've just signed up to paying more for no real gain?!

Did you not play with a calculator to see what difference it would make?

Exactly. That has been far more shocking and has created asset bubbles everywhere.

Well the ‘gain’ is you can more easily afford the lower payments.
The ‘loss’ is you’ll be paying more overall as you will make many more payments.
In your case 9y X 12m = 108 extra payments to clear the debt.

And according to The Telegraph the BOE have signalled that rates are likely to remain > 5% until 2026. This may or may not be true but I think it would be a mistake to assume that they are likely to fall back significantly.

So we fixed for 2yrs (actually it kicks in in December) and then once the two years is up our child will be getting free hours if nursery so we will have Alot more expendable income. We will Laos be ok the 60% loan to value so when rlwr remortgage we should get better rates and also reduce our term to 14years )so reducing down as if we never increased the term in the first place). If that makes sense.

@Hungrycaterpillarsmummy that’s exactly the way to ride out this storm.
May not work for everyone though.

Sorry about those spelling errors!

Ok thank you, that's reassuring me :)

25 years is a reasonable term for a mortgage although shorter terms are better (just my opinion - others say that the term doesn't matter because you can just over-pay - but how many do and how many just spend the available money on non-essentials). But extending the term to 30/35/40 years is evil! The debt pushers are extorting money from their clients for very little gain in terms of affordable payments, especially with rates above 4%. That's one of the things that the graph shows. It also shows how people could be parted from their money to overspend on houses when rates were low - but can't now.

Bought my first house in 1989 for 53k mortgage rate was 15.5% and my monthly mortgage payment was £515. I was earning around 25k a year so mortgage was around 25% of my gross earnings.
Based on the same property recently valued at 160k and with same deposit, current mortgage rates and updated earnings ( can accurately estimate this at 70-80k)
my mortgage would be 15-17% of gross earnings.
Defo would have more residual income in 2023.
I lost money on my first house when the market crashed in the early 90s Sold it for 45k in 1996. But of course our next house was less as a result. We also sold two houses to move in together and had a deposit of 50%. We never moved up the property ladder, big houses cost big money and cost more to maintain and run. If you don’t need 6 bedrooms why bother. As a result we now have a house worth 300k and are almost mortgage free.
We shouldn’t have to defend our personal choices or be constantly berated for having not overextended ourselves. Having lived through sky high mortgage rates followed by a total collapse of the housing market most Gen X and boomers are understandably cautious. We’ve definitely benefited from the years of almost zero interest rates but have also lost out on being able to benefit from savings interest rates.
In the last few months I have seen monthly interest on our savings go from a few pounds a month to enough to cover my monthly food bill.
My advice to anyone starting out. Buy small, live big. Buy a flat, low maintenance, no garden, fixed costs. Spend as little as possible on your home and start saving as soon as you start earning. With the recent reduction in capital gains allowance and buying to let becoming less ands less appealing why put your money into the property market short term.
If you buy big, convert to flats and draw an income from your own property. Particularly if you buy rurally and can convert outbuildings. Rentals in rural areas are like hens teeth and you’ll never be short of tenants.

No it’s not it’s closer to 5% than it is six 🙄

I do think we will see interest rates fall in Q1 2024, probably to 5.5%, as long as there is a drop in wage claims and awards.