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.

Yup totally agree👏. This is the most sensible post on here.

Those of us that have been able to have overpaid our mortgages during this time to become mortgage free as soon as we could.

I think it’s all very well the smug poster above (can’t remember the name) saying they were borrowing well within their means, stress tested etc but everyone’s circumstances are different and certainly for first time buyers it often takes borrowing to the max and every monthly penny before it eases over time.

furthermore, from memory, when we borrowed (feb 22) even the banks were only stress testing at 4% or so (on our rate which was thankfully a 5 year fix at 1.29). I agree that interest rates were always bound to rise, but no one and I mean no one foresaw the rate at which they have risen and therefore banks pulling deals on no notice.

Can I ask a dumb question? It keeps been mentioned that banks stress test, how do I find out what was the rate they tested to? Do they do that if you remortgage/do product transfer with the same bank?
Also, about negative equity. Banks mainly go with desktop valuation which is based on the price of similar houses sold at a given postcode. So presumably, it will take a bit to feed through.

Of the 31 properties added/changed on Rightmove in the Bristol postcode area today 21 are reductions. Totally unheard of.

I'm also noticing in this area -
Houses that were sold subject to contract a few months ago are returning to the market at a discount now (buyers realising better deals can be had perhaps?)

Lots of mid range family homes coming to the market and languishing there despite reductions. Some for more expensive properties up to £2mill plus.

Properties being discounted more quickly and more often.

Houses that are selling are the cheapest of first time buyer type properties (smaller flats/coach houses).

Major developers are discounting new build properties even before the build is complete e.g. Taylor Wimpey.

And a follow up question. Say someone was stress tested at 5% and passed the test 2-3 years ago. At the remortgage/product transfer the same household gets stress tested at 7-8% and what happens if bank deems it unaffordable? Does it push the family into SVR as they efficiently can not remortgage?

They don’t stress test if you stay with the same lender. They don’t ask you any questions at all about your current salary etc, as long as you aren’t asking to borrow more money.
They just write to you a few months before the end of your Fixed rate deal asking if you want to either move onto a different Fixed rate deal or onto their SVR

@Twiglets1
Thank you, I thought so. We locked in a new rate starting from September with the same lender and I couldn’t find anything about stress testing on the paperwork. They only mention that theoretically they could lend us £XXXXXXX against our property and it’s a huge amount of money literally 3 times our mortgage. But no mention of stress test.
Therefore, if someone is sticking with the same lender they are good. Relatively spreaking

Houses in Bristol are insanely expensive though. I'm not seeing this where I am in the north. I'm still getting regular flyers from estate agents saying that buyers are waiting and properties urgently required!

Interestingly, the average salary in Bristol isn't much higher than it is here, despite the fact that housing is far more expensive. I imagine that it is these areas, where house prices are most out of line with wages, that are going to be hit hardest.

exactly. plus, if you've already stopped going to the cinema, out for food, to the theatre, to live comedy or gigs to save money, £10 a month for hours of entertainment and the opportunity to still experience most of those things, albeit not live, is pretty good value. There's a difference between 'cutting back to save money' and 'living like a medieval peasant, reading by candlelight and going to bed as soon as the sun sets'

@Onegingerhead I've been wondering (and worrying a bit!) about the same thing! I've been looking at our paperwork from when we got our mortgage about 6 months ago and it gives us example repayments at what the SVR was at the time (4.4%!) and to be aware if rates went up to 11.94 % (which seemed a very random number) our repayments would be £xxx.

But I couldn't work out what they stress tested us to? And whilst I think we could just about manage rates of 6-7% if we threw everything at the mortgage, there is no way we'd pass a stress test at 2-3% over that - so presumably we are effectively stuck with our current lender?

It's always a gamble to some extent - you can't really predict whether the interest rates are going to go up or down, and how fast - we're all just doing the best we can with the information we have available at the time.

The problem here is that interest rates have gone up very fast as a result of unforeseen factors (Brexit, Ukraine, Covid) this time. This after a long period of very low interest rates had lulled everyone into a false sense of security, which meant that house prices had gone up more than they would normally have done if the interest rates had been higher.

Add to that the increase in the cost of living relative to incomes and it becomes a very difficult time. A lot of economists are saying that we're likely to go into recession over the next couple of years (although, again, no one can predict 100%).

It does seem that this time the banks are more on the side of borrowers though, having learned from previous episodes, so there aren't as many repossessions - as explained in this article https://www.bbc.co.uk/news/business-66133116 )

@hettiethehare being stuck with the current lender is not necessarily a bad thing (unless they force you into SVR) as they offer extremely competitive rates for product transfer. Mine, HSBC offered 5 year fixed at 4.07% (no fee) and it was the best rate out there at the time (end of May).

I also got offered a very competitive rate last year when I moved to another Fixed rate deal with the same lender. They don't want to lose you. In fact they want to keep you as a customer if you have kept up to date with your mortgage repayments as you are low risk.

@MidnightMeltdown You might well be right. Prices do seem to be dropping and more so each week.

@BunnyBettChetwynd
my son is buying in Bristol
and while he was looking we noticed most house go on the RM and then reduced within a few weeks so 325 —315 -then staying at 300 and most flats can’t be sold atm unless a DOV is done for GR so he had to look at houses

my son was looking in the 325 and under bracket for a 3 bed 2 bath house and he struck lucky with exactly what he wanted

House is a bit unique but it’s been totally refurbished to a very very high standard
he offered 10k less and the sellers accepted straight away .

he was the first person to look at it and they had other viewers lined up the next day but my son is a good FTB with the best part of 100k deposit

he could have held on and offered less but the house is perfect and is one he could live in forever if he stayed in bristol .

he and his partner aren’t on very high wages NHS security & Cabin Crew but they can afford it together quite easily due to the deposit and their present flat mate is going to move in as a lodger as they all get on and they plan to use the lodger money to overpay the mortgage for a few years

But I agree Bristol prices are insane

@Im99912 Sounds like he was in a great position and got a brilliant deal. Getting an offer of £10k under asking accepted just shows how the market has changed here. Last year houses were going to sealed bids and people were paying well over asking price.

Not sure what "DOV is done for GR" means I'm afraid.

Really hope it all goes well for him and his partner and that they're very happy here. House prices are ridiculous but I love Bristol, it's a brilliant place to live especially for young professionals.

Plus “borrowing well within your means” is fucking useless if you can only barely afford a home in your local area. We’ve got a family so we bought a family home, we paid the going rate for that family home. We actually bought one that needing gutting out and redoing, and did a lot of the work ourselves. Unfortunately I live in the SE where prices are high. I’m sure I could have moved somewhere cheaper, but this is where our family, friends and jobs are. I bought in the same town I grew up in. Do these smug posters think some of us have bought newly refurbished mansions?

Plus, we did buy well within our means. We bought the cheapest we could get away with. Then my husband lost his job during lockdown. And our second baby came as a BOGOF deal so childcare is eating a lot more of our income. And it isn’t just our mortgage that’s increased but our utilities and food and fuel and everything else. It’s all very well these smug posters saying they planned for this, but how fucking much do we need to plan for?! We tried!

You mean the system where nowdays young people are riddled with debt (student "tax") for years that previous generations didn't have? To the tune of 30k for an undergrad degree with interest.

Do you always avoid facts on purpose?

Not to mention the fact that graduate salaries just aren’t a thing any more. We’ve got a young lad working for us Who’s got about three GCSEs 22 and he’s on £30K. I tell everyone unless you do in a vocational degree not to bother.

The state for a fairly short period imposed a stress test on the lenders which I think has now gone. However before it came in and after it went banks have always tried not lend to people who might not be albe to repay the loans so to an extent there have always been stress tests of various forms as banks are not charities.

I don't think you can plan for all those things happening at once. Everything is more expensive now, and it's gone up quickly and everything at the same time. Food, energy, rent or mortgages. The basics are so expensive now, with housing making up a large chunk of that. Many of the people who are ok have just been lucky with the timing, it's not just (or possibly not at all) down to being financially prudent. If this had happened when we bought our first house, we would have been in the shit. It's only ok as we have paid more of it off. We couldn't even buy that house now - adjusting for inflation without promotions, - because not everyone moves into higher paying jobs and in the same jobs we had back then - we would be about 30% out with our deposit and mortgage. It was a starter home, not extravagant and we didn't do expensive renovations/buy expensive furniture etc, we weren't living beyond our means.

Sounds like you want other people to be responsible for your mistakes.

@kidcrazy erm sorry to disappoint but no. Whilst we have definitely made the odd mistake here and there with property I’m not sure it could be said to be as you’re implying. We currently have about 44% equity in our home, likely to increase to around 66% once our works are done (and for that, whilst we have secured some extra borrowing, we are only using it as contingency and drawing down if needed, rest cash). It’s also our 25 year home so we are not too troubled by dips.

Furthermore, we bought early 22. By sept 25 we will be 3700 a month better off than we were when we borrowed (not even taking into account any pay rises for 2024/25) due to my increasing hours, end of nursery fees and husbands salary increases. So no, not blaming anyone for my “mistakes”.

the point of my post was rather to express understanding and empathy for first time buyers who often have no choice but to go chips in to get on the ladder and to say that absolutely no one, not even the markets, saw this coming so how could they?

it’s also people like my sister in law who are struggling and they bought 10 years ago - how could they stress test for something happening 10 years hence?!

try developing empathy, it might make you a bit happier wit yourself

We hardly if ever hear from the typically un-smug people who saw it coming from day 1 and weathered the ridicule from typically smug chancers for not jumping onto a temporary free money bandwagon. A colleague refused to buy a replacement family home at overinflated prices, and rented for eleven years raising their lovely well-adjusted children in (shock horror) rented homes. Despite "pouring more than twice the price of two average UK houses down the drain" in rent, as well as subsidising all these "clever" borrowers through negative rates, they exchanged this week on a family home that was priced realistically. They saved over three times what they spent on eleven years' rent in 2022's fantasy house money and paid what they should have paid in 2008 prices. Their children have always had a good home, so no change there. Another great outcome is they've reduced their subsidy to borrowers substantially.

Rate rises don't matter for the majority of home borrowers who can service their contractual obligations. Also there still is time to reduce outgoings while rates are still below inflation. No house will fail to sell if priced correctly. Fear of under-pricing in an open market is just unfounded fear. The obsession with buying especially for lower priced homes makes for sticky price falls and meteoric rises. That combined with hyperbole that negative rates were the "new normal" will always find those who choose to hand over their own confidence in the greedy pursuit of fantasy.

In 1900 I tihnk 90% of people rented and that was from private landlords and plenty led happy lives. You certainly don't need to own a property to be happy, but people do prefer the relative stability of it and when is the right time to buy will vary. My view is ifyou can afford it buy before you breed with 2 full time salaries which is what my parents did - they put children off for about 8 years until they could buy) , I did, etc