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.

What are you talking about? I have never had a post deleted on Mumsnet and it’s easy enough to tell when people’s posts are deleted as you well know.

Ummm, yes you have!

Ooh I didn’t notice that. I always assumed that Mumsnet would inform you if they were deleting a post you made 🤷🏼‍♀️

@CrashyTime agree that it would be better for everyone if property were cheaper, but everyone is still waiting on the hidden hand of the market to do that — and it isn’t. And the BoE is not just thinking of the property market when making its decisions — there is a lot more going on in the economy than a million or so property transactions. Supply is and has been a problem since Thatcher introduced the right to buy and forbade councils to replace the council houses that were sold, leaving renters at the mercy of private rental markets or fighting to get a foot on the property ladder. While they may be living somewhere, it is likely to be in flatshares or with family — the supply issue is with homes for them to rent or buy themselves in ones or twos. Finally, and I keep on saying this, if people don’t want to sell they won’t, and no amount of calling their home overpriced is going to reduce the price at which they want to sell it.

"while most people just got on with life (oblivious as to what was going on around them)"

That is the problem though isnt it, being oblivious and following the crowd? A lot of those people are now trapped with unpayable mortgage debt while someone "on the sidelines" (not really sure what that means TBH?) with no debt and savings isnt really being caught in the fallout from debt being re-priced?

"Following the crowd" translates as buying homes like many people do. It's not that radical.

People who bought 15 years ago probably have half the debt that people who bought 2 years ago do. They paid half the house price and have paid off half of that in mortgage capital repayments. They have been unexpected winners in this fiasco. They got on with life and are on the way to owning their own homes outright. The people who sat on the sidelines - not buying because they expected a fall - are not in such a lucky position.

To be clear, I'm talking about those who didn't buy 15 years ago because they expected a crash. Ultimately they made the wrong choice.

Nobody is "fighting to get on the property ladder" now though, so at least there is some progress? I would describe it more as a Property Snake, or a Debt Ladder now. Thatcher is long gone, people need to stop invoking and blaming Thatcher, society gets what society wants and recently society seems to have wanted to go along with the bankers debt bubble, so society will just have to cope with the fallout from all that debt suddenly going up in price (people used to boast about paying a lot for their house didnt they, well now is the perfect opportunity because mortgage debt is suddenly pricey again!)

Nobody cares if some deluded soul sits in their house pretending to themselves that it is worth X when the market is telling them it is worth Y, the market is made by people who have to sell or move to get on with their lives, the person holding out for X gets their house re-priced to Y by the market whether they sell or not, they will be like the Japanese soldier holding out on the island thinking the war is still on as the world around them moves on.

You're a bit premature with your smugness.

Yep, a proper "run" on the currency would be something to behold all right, there was a small taster with the Truss budget but swap rates actually went higher for a short time under Sunak, without the media fanfare? I think the Truss episode is the reason they have started getting serious about QT as well, or was that well underway beforehand?

Not really, thousands are coming off cheap fixes every month now and entering the real world of debt, and there is no smugness involved, I have long cautioned people to keep their mortgage debt/general debt to the absolute minimum in preparation for the inevitable day when UK PLC could no longer kid the bond markets and avoid global events such as inflation returning.

As the source is a VI I would expect the reality to be that price falls are steeper than that. Bond market is looking "interesting" today to say the least, expect much higher mortgage rates IMO.

Ok can someone please tell me this as I am confused by everyone saying what a good thing this new normal is. Doing some really quick calculations:

If you were to take out £120k mortgage at 1% you would pay £143,972 over a 25 year mortgage. If nothing else changed, prices stayed flat you'd have paid off the mortgage the bank would make £26,976 in interest and you'd walk away with £120k

If prices were for example 20% reduced but mortgage rates had gone up to 4% then you would pay £142,500 for a house worth £100k and have paid the bank £42,500 for the privilege.

Obviously these are only example figures and even if it's only roughly in line with broader inflation you'd expect house prices to increase over 25 years but to be clear, I'm asking about the principle, why is this better for prices to be lower and interest rates higher for anyone other than the banks?

Only 5.3 % in a year? That actually seems a fairly small percentage to have dropped since September 2022 (considering some of the alarmist forecasts), even considering the time lag.

Talking about house prices is a bit off topic on this thread which is really about mortgage rates. Still, the two things are of course connected.

I have to agree with this article written in August 22 forecasting that the market was heading for a "long slowdown not a crash". And also that "a crash, which is generally understood as a price drop of 20% or more, is unlikely".

https://theconversation.com/uk-house-prices-history-says-the-market-is-in-for-a-long-slowdown-not-a-crash-186072

Two basic reasons

1. With less initial debt you have a chance to pay the loan off quicker and you are less exposed to interest rate risk over the years. Some people could save up enough cash (or a much bigger deposit) to buy a cheap house if prices correct far enough, all good IMO, cheap property is the number one best thing for hard working ordinary people, and in both cases the bank has less opportunity and time to milk the initial loan and less time to "own" the debt (and the house if you don`t pay)

2. Your example has rates moving to 4% from 1%, what has actually happened is that rates have moved from under 1% to pushing 6% (that is base rate, mortgage rates could go much higher) Using real world rate examples I think it is unlikely that a price correction would be as small as 20%, that amount evaporated for recent buyers almost as soon as rates hit 4 or 5% (mortgage applications and sales transaction numbers tell us this)

The reality is probably down a lot more than 5%, a headline figure from a VI isnt really worth much attention IMO, in the same way that taking what an "economist" says at face value isnt really very sensible. The problem with the article is that previous crashes happened under very different economic circumstances, the monetary policy from 2008 onwards was a never before tried global experiment, there is no history for that, and anyone trying to link the pre 2008 and post 2008 periods to say that house prices will somehow float along with a tiny correction after the interest rate changes we have seen is just expressing their VI in either prices staying high or in selling mortgage debt IMO.

It’s factual data Crashy

All the housing price stats publishers use different methodologies, you can make stats say different things depending on the narrative you want to put over. IMO the narrative now is "Prices are not crashing as much as you think". You are better off looking at mortgage lending and number of actual house sales to see where the market is heading IMO.

Have you found much data to suit your narrative of a house price crash of 30% over the last 2 years as you are claiming on another thread?

If someone cant sell their house and wont drop their price the data won`t exist yet, I am putting myself in the shoes of someone borrowing to buy and looking at affordability plus the reality of falling transactions (a sure sign that houses are too expensive after the buying frenzy we have seen for the last 15+ years)

That’s a No, then 😂

US Ten Year just hit 2007 levels, that is where the real story is, anyone buying would be advised to pause IMO.

I am one of the lurkers, I thought this was the thread about best mortgage deals for remortgaging, is there another? Not interested in market value particularly...

I've got a fee free one held for January on a 2 year fix with current lender, we have a good LTV of about 25% or 30% if crashy is right, ha! Doesn't matter much anyway. Big increase from the current 1.14% but not too bad given the term and principle amount. Nonetheless a noticeable increase.

I've got a 6.09 agreed with no strings but they are coming down already and any advice is welcome.

Best I can see on MoneySuperMarket is 5.53% with Barclays. For 2 year, sorted by initial term cost.
Borrowing 225k over 25 years, £75k deposit.

@Lelivre 6.09 sounds a bit high to be locked into for 2 years, but is it really a fixed rate mortgate if there are "no strings"? I would suggest you also look at Tracker mortgages if you haven't already. If you are willing to take the risk of the fact that with a Tracker the rate could go up or down over the 2 years, they are more "no strings" as you can leave early with no penalties.

I would also check with other Lenders using a mortgage comparison website.