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.

I think in recent years many people just said "I want that house!" and looked at the nice cheap monthly payments (due to zero rates, QE etc.) and dived in! Historical base rate is around 7% average I believe so buying anything now could be a very pricey few decades for a mortgage debt holder!

The problem with being "competitive" is that the bank is only thinking of its own profit (mortgage applications are down 40%) that means new buyers could get lured in at rates that will later be much higher, the problem isnt mortgage rates (well it is if you already took out a mortgage) it is house PRICES (although obviously they are a function of too low for too long rates) The rate setters and the public`s greed for cheap debt have caused a right old mess TBH.

Coventry also seem to be offering reasonable rates for existing homeowners switching to them (exact rate depends on LTV).

Pretty close. TPTB exploit the lack of financial literacy of the general public. For example, Help to Buy and Shared Ownership weren't really set up with the home buyer being the primary beneficiary. You just need to ask who else benefits from this.

But I don't blame the general public. This stuff can be difficult and dull to get to grips with (purposely?). I worked for a global financial company for 20 years prior to retirement. A leader of mine retired early and thanked me at his leaving do. Apparently, ten years earlier, I had explained how you could overpay your mortgage. He hadn't realised this was a thing. He cleared his mortgage early enabling him to save more for his early retirement. So if folk in finance don't understand the rules of the game then we can't expect more from the general public.

Help to Buy and Shared Ownership weren't really set up with the home buyer being the primary beneficiary.

Totally agree! It frustrates me that more people can't see this.

The stamp duty holiday was similar - the net effect was that house prices shot up in that period as people spent what would have gone on SDLT on the house instead. No saving for the home buyers at all, just an artificial bubble to benefit sellers and housebuilding companies.

The stamp duty holiday did have the unfortunate side effect of sending prices rocketing due to the false sense of panic it created amongst Buyers especially FTBs. It’s partly why prices had to adjust back down to a more normal level once the “holiday” was over.

I’m not as cynical as some on here and don’t think the government intended it that way. I think they were just trying to inject a little life into the housing market during a difficult time but it went crazy. Just another government fuckup basically.

As a proud cynic, who seeks to expose the real motivations behind government actions rather than taking them at face value, I present this (biased?) analysis of HTB after it closed.

"Osborne tweeted on Thursday that it had “helped hundreds of thousands of families buy their own home and supported thousands of construction jobs”. But experts argue the real legacy has been to massively inflate the market, swell housebuilders’ profits and leave many buyers in negative equity."

https://www.theguardian.com/society/2023/mar/31/10-years-on-what-did-george-osbornes-help-to-buy-scheme-really-achieve#:~:text=Osborne%20tweeted%20on%20Thursday%20that,many%20buyers%20in%20negative%20equity.

I can’t be bothered to read that because you’re preaching to the converted re Help to Buy. I do already feel cynical about that, and SO.

The Stamp Duty holiday was different in my opinion, and I don’t think government predicted it would cause the buying frenzy it did followed by the inevitable fall when it ended. They created a monster which I personally doubt was their intention.

Relevant article:

https://www.bbc.co.uk/news/business-67080383

How much do we pay these economists? Their job is to follow the Fed + 1%. Anything else will impact our exchange rate. We could just get rid of them all and write an algorithm.

Yes an interesting article @XVGN

FTB here so apologies if this sounds to stupid, but how does help to buy work (truly)? On surface it looks like it benefit buyers.

It did help some desperate FTBs buy a property. Unfortunately the scheme was generally only available on new build estates which meant the value of the properties tended to go down in the first few years rather than increase. Also, the costs very much increased after the initial phase.

Some would say it was designed to let more savvy investors (chums of the government basically) dump property before the inevitable happened, they knew that the massive money printing exercise for "Covid" would produce higher rates. Looks like they didn`t foresee (if you believe that theory) the resistance from people to stopping WFH (I think they genuinely believed most people would be happy to get back to the office) because it is commercial property that is getting really hammered, not residential (yet)

It is no longer available, but it encouraged you to borrow more for an overpriced house instead of letting market forces create the market (cheaper houses) so that developers (chums of the government) could make lots of money.

The scheme ended, thankfully, and so cannot trap other people who are not fully aware of the details.

My take is that it encouraged people to buy over-priced, often low quality, new builds - especially flats - creating a debt trap. The value of the sub-standard home is much less than the price paid and can therefore prevent people from moving on.

From the article above,

"But many homebuyers have accused private developers of using the scheme to inflate the price of new flats, effectively pocketing the state subsidy for themselves.

A report in January last year by the Lords’ built environment committee found the loans inflated prices by more than their subsidy value in areas where it was needed the most, concluding that “this funding would be better spent on increasing housing supply” directly, through local authority and housing association building projects. "

If you are low paid and dont have any debt you wont be getting punished, you might get a pay rise due to all the inflation and anything you manage to save will be rewarded not punished by higher interest rates, if on the other hand you borrowed too much mortgage debt for a house, whether you are low paid or not you will be getting severely punished going forward.

The public lapped it up though, as they did with other aspects of debt and over-priced housing, mind-boggling that people thought house prices were set by anything other than cheap borrowing.

From Monday, Halifax to trim fixed rates (I won't quote the ridiculous word "slash" used in the article) for home movers with 40% deposits.
Its cheapest five-year fixed rate will be 4.73 per cent with a £999 fee
Its cheapest two-year fix will be 5.24 per cent with a £999 fee.

Halifax has also launched new deals for those borrowers buying with smaller deposits. For example, those buying with a 25 per cent deposit (75 per cent loan-to-value) will be able to secure a rate of 5.29 per cent when fixing for two years, or 4.82 per cent if fixing for five years.

Nicholas Mendes, mortgage technical manager at John Charcol, welcomed the news and says he expects more lenders to follow suit over the coming weeks.
'This is great news and slowly edging closer to 4.5 per cent hopefully by the end of October.'

Halifax becomes latest lender to slash mortgage rates (msn.com)

Fantastic news. Things going in the right direction!

With a healthy deposit, yes. It's not as good with 10% deposits.

The difference between having a 40% deposit and a 25% deposit is not very significant at all according to the above example.

For people with a 10% deposit or less, yes I'm sure the difference in rates is more significant. It always has been harder for people with a small deposit to get a good rate, unfortunately.

This is one of the main reasons house prices are going to drop substantially. Plus all the other economic factors to which are going to accelerate this crash for example the bond markets imploding.

25% is a healthy deposit, IMO. So I'm not surprised the rates aren't that much different.

Wimbledon is packed every year, it was also packed in 2008-2009. Waitrose was also packed earlier on. This is not a reflection of how the rest of the economy is actually doing.

Agree 25% is still a healthy deposit