6% mortgage rates; trouble a'ht Mill

[Twiglets1]

This is a new 6% mortgage rates thread as the last one is almost full.

Thanks to KievLoverTwo for suggesting the second part of the title to reflect all the squabbling these threads are causing. Which could be a thing of the past of course. But realistically, it won't be.

https://www.msn.com/en-us/money/realestate/mortgage-arrears-surge-by-50-per-cent-to-seven-year-high-as-brits-squeezed-by-higher-rates-and-costs/ar-BB1jKR8m

I’m currently in the process of buying a house applying for a mortgage and today my broker rang me to say the lender I have my AIP with emailed this afternoon to say they were putting rates up this evening. I was kinda surprised as everyone around me tells me rates are coming down!

@ilikeeggs that sucks! Sorry to hear that.
Did he say what rate they're going up to?

In mid Jan 2024, my friend got Barclays 4.10% , and another friend recently (March 2024) got Barclays 4.53% (same LTV).

That's a huge difference to pay per month!

How annoying! I would ask the lender via the broker if they will hold the rate for you but reduce it if mortgage rates fall again before you start the actual mortgage.

Will post a link to an article I posted on another thread

Recent This is Money article highlighted 3 main points:

• OBR reported average mortgage rate will hit peak of 4.2% in 2027
• Markets only forecasting base rate to fall to 3.5% in 2027 and no further
• Fixed-rate mortgage pricing has already factored in upcoming base rate cuts

In a section entitled "What next for mortgage rates?" the article noted that the Office for Budget Responsibility says the market is now expecting base rate to fall this year from its current peak of 5.25% to 4.2% by the end of 2024. However, looking further ahead markets are currently only pricing in for base rate to fall to 3.8% by the end of 2025 and eventually reaching 3.5% in 2027.

For mortgage borrowers, these market expectations are reflected in Sonia swap rates. If and when the base rate starts falling, this may trigger good signals to the industry meaning swaps could fall further. But it doesn't necessarily mean there will be significant rate cuts across fixed rate products straight away due to the fact lower rates have already been priced in because there is already an expectation rates will fall.

https://www.thisismoney.co.uk/money/mortgageshome/article-13173595/Mortgage-rates-wont-head-lower-despite-better-ONR-forecasts-heres-why.html

'My fear is for those people taking out 30/35/40 year mortgages, to get the lowest repayment possible, then finding prices drop, their LTV evaporates potentially to zero, and then being stuck paying the most horrendous SVR's going because they cannot remortgage to anyone else.'

Exactly. I am genuinely worried that a lot of people are going to live to regret this.

But you will lose equity if prices fall which is very likely.

People are not really paying attention if they think rates are coming down.

That"s right, the idea that you are "building equity" by borrowing at peak prices in a rising/volatile interest rate environment does not really stand up to scrutiny.

The historical average base rate for the UK is something like 7%, don"t hold your breath for this mortgage debt ad to hold any sensible forward planning advice, the "market" re-prices things in minutes as information changes, no one knows what will happen to rates in 2027.

Okay, but that's I'm going to have to take that as my mental health is in the gutter house sharing and if it continues to get worse, I will have to leave work because I cannot continue like this.

what do you all expect us to do? Do you just expect us all to be really ill from house sharing and in bad renting conditions? I physically cannot cope in House sharing any longer and renting a 1 bed in London is largely unaffordable.

Don’t let them upset you ❤️

I'm really sorry to hear that. I feel extremely sorry for people who are struggling due to the ridiculous house prices. The situation is completely unsustainable, particularly in London.
I think you need to think through your options really carefully and consider all options (outside London too). Your mental health will be a great deal worse if you borrow heavily and end up in negative equity, especially if you then need to remortgage or sell. I'm not saying this to make you feel bad but because I think it could well become a reality for lots of people and mostly it will be people like yourself who have no good options at present.

It's a risk I'm willing to take to escape the rental crisis

@MotherOfRatios it's your choice, obviously. I would just encourage to consider all options carefully, especially the potential downsides of each.

To be clear, I'm not looking to buy a property in London that is like over £300,000 the new builds are very overpriced, the max I'll pay is £240k. I don't think we'll ever see really small house prices in London. Sure house prices will fall but I don't see London ever been 'cheap' for houses not a while

If you're buying a home and you can afford the repayments even if the interest rate goes up a fair bit, and intend to stay there for at least 10 years then you have nothing to worry about.

At the end of your mortgage you'll own your house outright regardless of whether it's worth £10 or £10 million.

The worry is when you start talking about building equity and you appear to assume the value of your house will go up.

It could go down and stay down for a long time, many did in the 90s but also many people stayed in those houses paying their mortgages and are now mortgage free.

Just make sure your job is secure and you can afford the repayments.

You can walk away from a house share to another house share if you wish, you can leave London for a cheaper 1 bed somewhere else, but you can"t leave a mortgage debt at London double bubble prices (unless you go bankrupt) Tread carefully, don"t get caught between the bond market and a bursting bubble.

Unfortunately all house shares are the same prices, job satisfaction is important to me and I would have to find a different career if I wanted to leave London and that's not something I want to do.

at the end of the day it's my debt not yours and I'm satisfied with the risk I'm taking

Good luck.

The other issue with moving out of London is commuting costs if you keep your job and get the train in. It's like having a mini mortgage on top of your actual mortgage. Good luck, try and overpay if you can. I understand it's not always possible with high prices on practically every essential but even £10-50 a month is something. Some people use banking apps with pots to move tiny amounts into a pot for it, i.e. if you don't buy something, move the money into the overpayment pot and overpay later.

"and renting a 1 bed in London is largely unaffordable."

How are people managing to afford it then? A rip off yes, unaffordable no, not yet, when the job losses start then it will be and prices will have to come down.

Why not move out of London (not too far) and then WFH some of the time and go in one or two days a week?

Seriously so much negativity for poor old @MotherOfRatios biying a house. I think if you can afford the repayments and possibly even get a second bedroom so you can rent out a room if necessary it’s a no brainer! Yes even in this market. Of course many people bought in the 90s and entered negative equity but many more people bought and hold onto their houses and now they’re worth a hell of a lot more. And let’s put aside then being worth more now, say they don’t rise much (which of course they will eventually), at least you’ll be paying a mortgage off rather than rent. If you want until the market feels less risky you’ll be adding ok the rent you paid a month due to that rent. So say you waited a year and were paying 1000 a month, that’s another 12k rent you would have paid! A mortgage for you makes much more sense.

Please excuse phone typos