Current Affairs Mortgages

[maltablue]

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.

Out here in Malta, whatever age you are, your mortgage is until the day you retire, atm 62 but rising each year (possibly the elder of the two is the benchmark) You also HAVE to have life insurance linked to the full value of the mortgage.

When I bought my first house in 1985 I was allowed x4.25 of my salary + x1 of my partners, any body got an idea what the protocols are now?

 

[catcherintherye]

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.

How so though mate? If they add on 5 year terms for all, they will lose money between what the rates they charge and Libor.

If the government step in, it just adds to the bubble.

It could be harsh, but it would be completely disjointed for the government to have fiscal policies that caused higher interest rates, and then to offset the needed monetary reaction by taking on the bad debt.

 

[catcherintherye]

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.

If you have a lifetime mortgage, and are happy then it's most sensible to keep the asset.

 

[The binman chronicles]

How so though mate? If they add on 5 year terms for all, they will lose money between what the rates they charge and Libor.

If the government step in, it just adds to the bubble.

It could be harsh, but it would be completely disjointed for the government to have fiscal policies that caused higher interest rates, and then to offset the needed monetary reaction by taking on the bad debt.

The interest rates will go up, the extension of term just means you pay less of the capital off per month. The longer you take to pay off your mortgage the more the banks rake it in - so long term it's a benefit to them.

The sad thing like I said is that even if you add 5 years the average person will only see a hundred or so pounds a month, therefore the interest rise will still mean you pay more per month, however if that change to the term is the difference between keeping your house and going under then it is an option to take seriously. Live to fight another day and if you can later on get a decent rate then you could claw back some of those years.

 

[catcherintherye]

The interest rates will go up, the extension of term just means you pay less of the capital off per month. The longer you take to pay off your mortgage the more the banks rake it in - so long term it's a benefit to them.

The sad thing like I said is that even if you add 5 years the average person will only see a hundred or so pounds a month, therefore the interest rise will still mean you pay more per month, however if that change to the term is the difference between keeping your house and going under then it is an option to take seriously. Live to fight another day and of you can later on get a decent rate then you could claw back some of those years.

Ah got you.

I think the problem with this is:
1) The level of increase for most people would mean that even just paying off interest wouldnt allow monthly repayments to stay at the same level.

2) Often mortgages are lent to people on a term that will end at retirement. I cant see the mortgage holder wanting to extend to people into their retirement, as it's a risk. Particularly as prices will probably fall.

It's a really thorny issue. The best thing the government can do is to try to take inflation fiscally, by raising taxes, particularly on those with most disposable income. This will reduce the need to raise interest rates, and if money is used to pay off the deficit, likely lead to the gilt rates reducing.

 

[The binman chronicles]

Ah got you.

I think the problem with this is:
1) The level of increase for most people would mean that even just paying off interest wouldnt allow monthly repayments to stay at the same level.

2) Often mortgages are lent to people on a term that will end at retirement. I cant see the mortgage holder wanting to extend to people into their retirement, as it's a risk. Particularly as prices will probably fall.

It's a really thorny issue. The best thing the government can do is to try to take inflation fiscally, by raising taxes, particularly on those with most disposable income. This will reduce the need to raise interest rates, and if money is used to pay off the deficit, likely lead to the gilt rates reducing.

Yes there is no easy situation here and you are right it depends on your age, equity you have in your home, how much you have borrowed and how long the term remains to whether it is an option. it's just another to consider, for instance if someone had a £150,000 loan left to repay with 20 years left at 2% the current monthly payment would be around £759:



If that person's deal was ending and it jumped to 5% it goes up to £990



Play about with the term and 25 years gets you to £877



30 gets you down to £806:



If someone hasn't the extra to pay the £230 p/m (alongside the increase in energy and food shopping) it might be sensible to fix a deal for a couple of years at the longer term. Once that deal is up and drops to the SVR, hopefully things have settled a bit and they can over pay or fix it again at a reduced term. It can get people over a short term hump if used wisely. Of course if you never reduce the term then you can see above how much extra you would have wasted in interest repayments.

 

[Daveysgingerlovechild]

I tell thee, the Nomadland approach looks more and more attractive/ viable thevway it is going.

 

[catcherintherye]

Yes there is no easy situation here and you are right it depends on your age, equity you have in your home, how much you have borrowed and how long the term remains to whether it is an option. it's just another to consider, for instance if someone had a £150,000 loan left to repay with 20 years left at 2% the current monthly payment would be around £759:

View attachment 186868

If that person's deal was ending and it jumped to 5% it goes up to £990

View attachment 186869

Play about with the term and 25 years gets you to £877

View attachment 186870

30 gets you down to £806:

View attachment 186871

If someone hasn't the extra to pay the £230 p/m (alongside the increase in energy and food shopping) it might be sensible to fix a deal for a couple of years at the longer term. Once that deal is up and drops to the SVR, hopefully things have settled a bit and they can over pay or fix it again at a reduced term. It can get people over a short term hump if used wisely. Of course if you never reduce the term then you can see above how much extra you would have wasted in interest repayments.

I'm not sure where you are getting those numbers from mate.

But in simple terms, on the 150k you used. At 2% you pay 2% if 150k each year to service that debt (3k, or around £250 pcm).

At 5% you pay £625 pcm.

The calculation becomes more complex if there is repayments involved, and the gap closes proportionately. But you can see the problem, that just adding another 5 years on is not going to be enough to hold mortgage rates down.

It's worth saying as well, even a reasonably cautious estimate is the commercial rates are likely to be 8/9% currently.

 

[bullybeef]

They had an IFA on SkyNews before PMQ’s today.

He said that the CofE held a meeting with lenders last week. He was expecting some kind of plan for mortgages to be announced but it hasn’t… yet!

 

[bullybeef]

Interest rates will not fall even if Truss, as expected, does a massive you turn.

Lenders will be raking it in, just like all those oil companies.

Completely Sickening.

 

[Rita_Poon]

The public have had enough of us, time to ratchet up the pain and suffering for one last hurrah.

 

[Brennan]

Talk now that mortgage rates could hit 7 or 8% next year.

 

[ForeverBlue92]

Interest rates will not fall even if Truss, as expected, does a massive you turn.

Lenders will be raking it in, just like all those oil companies.

Completely Sickening.

Starting to believe this myself.

Far too many rich companies using "inflation" as an excuse to hike prices up.

 

[Tramps_mate]

Talk now that mortgage rates could hit 7 or 8% next year.

Yep people will be screwed!

I dread my remortgage in two years..

 

[Ivo]

Yep people will be screwed!

I dread my remortgage in two years..

Same, but in ten months...
Think I might start over paying again before it goes up. Firstly it's good anyway because it reduces the balance and mortgage term, but secondly it will get me used to budgeting to pay more each month when it goes up for real.