Current Affairs Mortgages

[Tennessee Blue Mike]

Personally I'm sticking to my long term plan of NOT paying down my mortgage. I accept that rates are heading higher, but my plan remains unchanged which is to to let inflation erode my debt over a long time period while I continue buying asset that, over the long term, will compound at a higher rate. You have to takes ups and downs of any strategy - if you always jump ship to another strategy then all you are doing is effectively selling at the bottom of the cycle

Very sensible.

 

[Tennessee Blue Mike]

Wait, jumbos are cheaper by a full percentage point?

That is a massive statement about what lenders think is going to happen, and who is going to be affected.

Good Point! The middle class will be priced out the market the affluent not so much.

 

[LinekersLegs]

Wait, jumbos are cheaper by a full percentage point?

That is a massive statement about what lenders think is going to happen, and who is going to be affected.

Yeah I don’t think it is something squirrelly with the numbers, Bankrate isn’t as dramatic a gap as they have Jumbo the same as conventional but that is unusual in itself or at least has been whenever we’ve tried to get a loan/refinance!

Daily Mortgage Rates Archive

Whether you're looking to buy or refinance, our daily rates pieces will help you stay up to date on the market's average rates.

www.bankrate.com

 

[Martin Alvito]

Yeah I don’t think it is something squirrelly with the numbers, Bankrate isn’t as dramatic a gap as they have Jumbo the same as conventional but that is unusual in itself or at least has been whenever we’ve tried to get a loan/refinance!

Daily Mortgage Rates Archive

Whether you're looking to buy or refinance, our daily rates pieces will help you stay up to date on the market's average rates.

www.bankrate.com

Right, where you are every loan is a jumbo. As you know, normally jumbos are more expensive due to higher perceived risk on the deal (the house can be hard to get anything approaching 80% LTV on). Sometimes, that risk premium goes away or reverses mildly, because reasons.

A full percentage point lower is something I have never, ever seen on the odd occasions when curiosity got the better of me and I pulled up current rates. Both the loans I did on my own houses were ones no rational person would ever refinance, and I haven't been in the industry for a very long time indeed.

 

[catcherintherye]

I think it will go higher, and stay higher for longer than expected. Which given our fix is due to run out is awful, but that's just how I see it.

 

[Martin Alvito]

I think it will go higher, and stay higher for longer than expected. Which given our fix is due to run out is awful, but that's just how I see it.

The impending rate raises over here make it very likely that they will go higher and stay high for at least a while. Reality is that everyone else is, to a greater or lesser degree, pegged to what the Fed does. The alternative is disruptive currency fluctuations, which often aren't worth the benefits of standing pat when the Fed moves.

 

[catcherintherye]

The impending rate raises over here make it very likely that they will go higher and stay high for at least a while. Reality is that everyone else is, to a greater or lesser degree, pegged to what the Fed does. The alternative is disruptive currency fluctuations, which often aren't worth the benefits of standing pat when the Fed moves.

I was reading some cultural stuff from the 70s earlier this week. At the start everyone said it was just be transitional, gone in a year etc. That was said most years. It didnt go.

It was only when people stopped saying that, and ultimately lost hope and started saying they would never get rid of inflation did it disappear.

I think we are way off that point.

I should add, this makes me very alarmed and I hope it's not true as frankly the methods used to tackle it are worse than the disease in lots of ways.

I should add, I am also a permabear in outlook. But that's my view anyway.

 

[Martin Alvito]

I was reading some cultural stuff from the 70s earlier this week. At the start everyone said it was just be transitional, gone in a year etc. That was said most years. It didnt go.

It was only when people stopped saying that, and ultimately lost hope and started saying they would never get rid of inflation did it disappear.

I think we are way off that point.

I should add, this makes me very alarmed and I hope it's not true as frankly the methods used to tackle it are worse than the disease in lots of ways.

I should add, I am also a permabear in outlook. But that's my view anyway.

It is likely to be shorter than stagflation (we've learned a thing or two) and longer than the Volcker pain. The Fed did some absolutely crazy stuff to head off the financial crisis, and while it tried to slowly unwind that the pandemic then hit. No one is likely to be able to get a mortgage at the rates they have been available at again for a very long time indeed.

Very interesting (read: bad) things happened to universal life policies during the last huge rate spike under Volcker. I would imagine that similar things are going to happen once again. This will be disruptive. How disruptive remains to be seen, and will depend largely on how bad things get and for how long.

 

[catcherintherye]

It is likely to be shorter than stagflation (we've learned a thing or two) and longer than the Volcker pain. The Fed did some absolutely crazy stuff to head off the financial crisis, and while it tried to slowly unwind that the pandemic then hit. No one is likely to be able to get a mortgage at the rates they have been available at again for a very long time indeed.

Very interesting (read: bad) things happened to universal life policies during the last huge rate spike under Volcker. I would imagine that similar things are going to happen once again. This will be disruptive. How disruptive remains to be seen, and will depend largely on how bad things get and for how long.

I see it as quite worrying mate. But as indicated I'm a perma bear on this stuff.

 

[bullybeef]

This looks like it’s the next big cliff edge that the government will need to step in and sort out.

Some kind of arrangement with lenders to offer extended term mortgages is my best guess.

Otherwise it will be repossessions galore come this time next year.

 

[The binman chronicles]

I was reading some cultural stuff from the 70s earlier this week. At the start everyone said it was just be transitional, gone in a year etc. That was said most years. It didnt go.

It was only when people stopped saying that, and ultimately lost hope and started saying they would never get rid of inflation did it disappear.

I think we are way off that point.

I should add, this makes me very alarmed and I hope it's not true as frankly the methods used to tackle it are worse than the disease in lots of ways.

I should add, I am also a permabear in outlook. But that's my view anyway.

You have to think back though that the Government used to set interest rates, for Tories these should be high, (especially back then when the economy wasn't built completely around commercialism and debt) so those with money in the bank benefit the most.

We had 18 years of that same Government, which helps explain a lot of that period. The BoE are likely to be a little bit more balanced, however the rates were ridiculously low and we shouldn't expect a return to those unless some more serious crap hits the fan. I think the banks are hedging their bets at the moment, so it is artificially high at 6-7% and this will come back down to 4-5% when it settles.

It will be a shock for many but hopefully within a few years people will have adjusted to the new norm.

 

[catcherintherye]

You have to think back though that the Government used to set interest rates, for Tories these should be high, (especially back then when the economy wasn't built completely around commercialism and debt) so those with money in the bank benefit the most.

We had 18 years of that same Government, which helps explain a lot of that period. The BoE are likely to be a little bit more balanced, however the rates were ridiculously low and we shouldn't expect a return to those unless some more serious crap hits the fan. I think the banks are hedging their bets at the moment, so it is artificially high at 6-7% and this will come back down to 4-5% when it settles.

It will be a shock for many but hopefully within a few years people will have adjusted to the new norm.

The problem is mate that over the last 10 years, there has not been growth at any level that would have required a rise. Inflation had been very low. Rising rates into that context would have led to a serious risk of deflation.

As a country, there will be serious pain I'd rates stay at 4-5%. That is going to lead to a lot of mortgages doubling, and a lot of people losing their homes as a result. It's not that we have ben dining out on low rates, but we have been keeping ourselves afloat on them.

This is really the conundrum this government has got us into. A decade of very low rates, after a crash was perfect to have large growth. Theyve messed it up with a mixture of ideological stupidity and incompetence. So we are not prepared for such a rise at all.

 

[catcherintherye]

This looks like it’s the next big cliff edge that the government will need to step in and sort out.

Some kind of arrangement with lenders to offer extended term mortgages is my best guess.

Otherwise it will be repossessions galore come this time next year.

Why would the lenders agree to this.

 

[Lobster Johnson]

Personally I'm sticking to my long term plan of NOT paying down my mortgage. I accept that rates are heading higher, but my plan remains unchanged which is to to let inflation erode my debt over a long time period while I continue buying asset that, over the long term, will compound at a higher rate. You have to takes ups and downs of any strategy - if you always jump ship to another strategy then all you are doing is effectively selling at the bottom of the cycle

This is our plan as well. We bought out first house in January: the house we want to live in and we don't envisage ever moving again. We got a fixed rate for the whole life of the mortgage, thanks to a huge stroke of luck on a massive deposit, and I'll let inflation take care of business.

 

[The binman chronicles]

Why would the lenders agree to this.

They get more interest in the long run. The more trouble with it is even adding 5 years on to a term doesn't reduce the monthly repayment that drastically.