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.

Your analysis is spot on. Bond yields are rising and they are going to implode. It looks like the bond market is crashing in slow motion, and the yield curve will finally normalize after fifteen years of artificially low interest rates. This will be catastrophic for many countries which have built entire economies and governments on a foundation of cheap money.

Who are you talking to? It looks like you're talking to yourself! 😬🤣

Your analysis is spot on. Bond yields are rising and they are going to implode. It looks like the bond market is crashing in slow motion, and the yield curve will finally normalize after fifteen years of artificially low interest rates. This will be catastrophic for many countries which have built entire economies and governments on a foundation of cheap money.

Just put it right and thanks for your observation.

I've seen mortgage rates have steadily been coming down the last few weeks. We were going to fix for 5 years for 5.2% but are we doing ourselves a disservice by locking in for this long ?

Depends on how you look at it. 5.2% for 5 years is a lot of interest to pay.

Obviously there are lower 5 year rates out there but it all depends on your personal situation. If you have a smaller deposit than 25% for example, it may be the best 5 year deal that you can currently access. I would check with the lender that they can hold it open for you at that rate with the ability to reduce it if their rates go down in the next 6 months.

As to whether you should fix for as long as 5 years at current rates, that’s a hotly contested dispute on Mumsnet. Personally I wouldn’t as I think rates are likely to fall in that time - down to 4% or slightly lower. But others think rates could go beyond 6% or even 7% so you’re not going to get an easy answer, I’m afraid. Some people say it’s worth fixing for 5 years for peace of mind that you know you can afford it at 5.2% or whatever & that’s a valid argument so it partly depends on your attitude to risk.

It also depends how big your mortgage is.

The fee to remortgage is usually around £1k. Whether or not the shorter/longer fix is better will depend of the size of the saving you might get by being able to reduce your %rate vs the extra fees you'll pay when you need to remortgage.

The lower your outstanding balance, the lower the chance that paying fees to frequently remortgage will be worth it.

True.
Some fixed rate deals are fee free but where there is a fee, that definitely has to be taken into account.

Yes. The fee free ones typically have a slightly higher % rate, but if your balance is low they will be better value overall. The headline rate definitely isn't the whole story.

Global events are pointing to inflation (oil price) if it really ramps up there could be a tipping point of demand destruction which will throw us into a recession (neither scenario is good for high house prices)

What do you think would happen to interest rates in a recession, Crashy? As this thread is about interest rates not strictly speaking house prices.

Judge for yourself. IMO the last really severe recession was early 80s, 81 to 83 specifically, that was a totally different world to what someone brought up under the cheap money umbrella could imagine (they might get a sense of it from music videos on YouTube or documentaries but wouldnt be able to conceptualise the kind of hopelessness that existed in many parts of the UK at the time) https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp
If we get stagflation house prices and growth will stall while interest rates stay high. You have to remember that what has been going on in the last decade and a half isnt part of the "normal economic cycle" that can be judged against historical data, it was a global monetary experiment that eventually caused more problems than it solved, it wont be repeated in our lifetimes IMO, the global politics has changed, nations are now looking out for themselves not just agreeing with the U.S/UK/Japan etc. big central banks that we need to save the debt bubble at all costs, and there are many countries now that would like to see the ridiculous U.K/U.S debt bubbles burst as that weakens our economic influence over the rest of the world. My prediction is major bond market volatility and much higher interest rates going forward.

The headline rates, even if that is the rate you could get, wont help FTBers, their debt costs have really soared recently, many will just stay out of the market.

their debt costs have really soared recently, many will just stay out of the market.

Our broker sent me the below yesterday. Bear in mind we never get the 'best' quoted because despite the fact that my OH earns six figures, I cannot work (and am six years older than him re: retirement age so that restricts us re: lengthening term), so am considered a 'dependent', so they always put us on higher than the 'best available' rates, albeit not by a painful amount.

The best tracker rate I was quoted around 4 weeks ago was 6.19%.

For fuller context, in March 2022 we actually got a mortgage at 2.77% (the purchase fell through.

In May this year, 4.99%.

The purchase fell through.

October 23's rates:

90% loan to value
2 year fixed rate - 5.74%
5 year fixed rate - 5.25%

95% loan to value
2 year fixed rate 6.31%
5 year fixed rate 5.64%

Let's take a 300k mortgage and assume I only have a 5% deposit. For October I'm going to choose the 2 year fix at 95 LTV but add 0.30% because we never get the best rates.

March 22 - monthly payments 1317. Total repayable 410k.

May 23 - monthly payments 1664. Total repayable 514k.

October 23 - monthly payments 1943. Total repayable 598k.

This illustrates pretty well to me how people have to be ultra careful. My other half argues 'but mortgage rates could fall/we could overpay' and I wave around me at the general cost of EVERYTHING and ask him to show me the data that says mortgage rates are likely to be below 6.60% and when exactly are things going to start to become cheaper. He can't. Nobody's got a crystal ball, we can only hope and pray.

That's an extra 188k of debt over a lifetime and because continual price rises, that 300k will now buy you a lot less house than it would last Spring.

Don't just look at 'can I afford £1943 a month?'

You need to look at: can we, as a couple, afford to sink an extra 188k into a house over the lifetime of our mortgage instead of, say, our pensions.

Without a doubt.

Do I want to?

Hell no.

I suspect this will be far less applicable to people who already have strong pensions, but I'm 48, and at the moment, mine's just a run of the mill government one.

Younger people are going to get caught out by looking at the 'can I afford it' scenario, and when they can't, they'll get sucked into 35/40 year long mortgages instead.

40 years on the 6.60% I quoted is a total cost of 826k for a 300k property.

I'm sure someone will come by and say 'but their earnings will increase over time.' Sure. That may happen, but wages have mostly stagnated for decades, kids come along and cost probably as much as your house to raise, and life gets in the way of good intentions such as overpaying on your mortgage for a lot of people. On a personal note, every time we've moved rentals in the last 4 years it's cost us about 5k, and trips to and care of my dying mother in France over a nine month period set us back around 10k. Furnishing our first flat was 4-5. So, if you wanna kid yourself that life will never, ever get in the way of overpaying a mortgage, be my guest. Who could have predicted that I'd go from earning a bloody good London wage to absolutely nothing in the space of a year? For the foreseeable future. This is not a whinge about our circumstances, it's an illustration that really prudent planning is quite a good idea.

deep breath

It was good to get that out of my system.

Yes, very interesting points, you can`t really predict what will happen hence the reason that "stress testing" by banks is essentially a farce, the majority that blew the bubble up though were definitely not on 6 figure salaries, I know care workers who bought 500k New Builds at peak madness a few years ago, long before the final blow out of Covid and SD Holidays, that was savings, pooled equity from previous sales (couple) and a mortgage, luckily for them they got the benefit of very cheap interest rates for a long time, which was probably the only reason they could do it. There was a time when people were throwing every scrap of money they could find, borrowing from family even, into property, it was madness, an addiction and the closer to the rates rising point that you bought the bigger the hit you will have to take going forward.

Cheap mortgages (and debt) and people overpaying is what’s ultimately led to the house prices rises though (along with daft government incentives). Look at how BOMAD has almost doubled. That extra cash injection, whilst absolutely well meaning, is partly why we are where we are today.

Even if it was true that the headline rates won't help FTBs (which isn't universally true because some FTBs do have deposits of 25% or more) this thread is not only aimed at FTBs. It is aimed at anyone interested in mortgage rates, which includes people who are remortgaging and they are more likely to have sizable deposits.

The headline rates quoted are not rates that everyone can get, that's true. Personal circumstances are going to affect each person's mortgage application. Nevertheless, they are rates that some people reading this thread will be able to get.

Bank Of Mutually Assured Destruction, make money on property - throw that money into property - property crashes in value due to no more cheap lending = all property gains gone, only debt left. If that was someone down the bookies it would be frowned upon, but the property madness was roundly applauded by many of the UK public like drunken sailors at a horse race.

I doubt very many people will be getting mortgage rates below 6% now, and I`m not sure if re-mortgaging automatically means that you will have "sizable deposits"?

Not automatically no, just more likely than FTBs as I said.

There are several people even on this thread who have secured offers of fixed rate mortgages at under 6%.

There are plenty of mortgage holders who have a good enough LTV to access rates below 6% right now. Anyone who has been paying a repayment mortgage for a few years, for a start.

The more recently someone bought, the harder it is likely to be, but I think the majority could get rates <6% unless they have adverse credit. My lender is offering rates below 6% even for FTB with only 5% deposit, and they aren't out of step with the wider market.

Excellent post @KievLoverTwo. Really sorry to hear about your recent illness.
I totally agree with you. Life often gets in the way of good intentions. Sure, some people are lucky and have access to the BOMAD or an inheritance to bail them out of financial difficulties. Equally, many do not have this safety net and encounter negative life events. As you say, some FTB seem to rush into buying without fully considering the costs of raising a child or two.
The fact is that current 20/30/40s, even 50s somethings are going to be much poorer in retirement than the current retirees. House prices have been and are a huge mill stone around people's necks now and wages have fallen in real terms for many people. I can only see things worsening as we hit official recession and things get worse.

This thread is a load of people from that weird House Price Crash forum talking to themselves isn't it?!

I see house prices went up again in September. Unlucky lads!

You also get some who struggle with their paranoia and are unable to understand basic things such as statistics and simple economics.
Which would be fine if they didn't come on forums and give poor advice to others.