Interest Rates / Mortgages

Long term I found Nationwide competitive - no fees, I had a tracker very close to Base Rate, which was collared at 2% when base rates dropped below 2%.

Sometimes there were slightly better deals with other lenders, but you would have to keep switching and there could be catches as seen when Northern Rock collasped. NR had been very aggressive in the late 1990s/early 2000s to undercut Nationwide.
 
I used to work for Nationwides credit risk area and had a big hand in the scorecards and lending strategies from 2000 - 2010. The risk departments have a few levers to pull to manage risk.
1. Manage the credit score thresholds, these can be managed by LTV, Mortgage value, FTB/Subsequent Buyer/Remortgage - these wont be moved regularly and is quite a blunt tool, with lots of customer complaints.
2. Manage the affordability calculation, in my day it assumed a mortgage rate of 5% with an additional stretch of 2%. It would have been very prudent to increase the cost of living factors, and also to lower the residual income factors.
3. Adjust the LTV bands by Loan requested parameters.
4. Equity release, I made all sorts of rules to limit the risk of people releasing equity from their properties as often it is seen as a stress factor.

Lenders will have different views on a rising housing market/ declining market.
Another different but major lender I worked for didn't want to repossess in a declining market as this would result in a loss being registered. Instead we set up a pre arrears team who would identify borrowers in trouble and manage their issues before they defaulted. This would include, adjusting term/interest rates or repayment terms. This would keep a customer in their property until they either caught up to date, or their property increased in value enough to pay of the arrears and may give them back some additional capital to enable them to move on.
The banks have many ways to monitor your credit worthiness, either by refreshing your data from the credit reference agencies or by looking at their own data about your current accounts or credit card usage.

If it looks like the property market is likely to drop, the lenders will close down lending unless you are ultra low risk. I closed down lending following the last crash in the 2000's. Politically we couldnt change the risk systems. However we closed down the mortgage advisors bonus scheme, stopped brokers business and over ordered stock so that the interview rooms were closed.
 
We've just had the same discussion at home. We have a 5 year fixed coming to an end in April next year. If we renewed now, its a 2000 exit fee and a rate increase from 2.01 to 3.49. If rate rises continue to go up, when we start seeing offerings at 4%, that's our threshold for change and we'll have to bite the bullet. Its a do we or don't we tightrope decision. I hoped back in 2018 when I took this rate we'd be over Brexit and things would be settled. It looks further than ever from getting back to some sort of peacetime normal.
 
We've just had the same discussion at home. We have a 5 year fixed coming to an end in April next year. If we renewed now, its a 2000 exit fee and a rate increase from 2.01 to 3.49. If rate rises continue to go up, when we start seeing offerings at 4%, that's our threshold for change and we'll have to bite the bullet. Its a do we or don't we tightrope decision. I hoped back in 2018 when I took this rate we'd be over Brexit and things would be settled. It looks further than ever from getting back to some sort of peacetime normal.
I'm in this position too mate and I actually sought advice. I'm just going to sit tight I think unless things keep going daft.

I've been lucky with the rates over the last 14 years and managed to save a lot of money in the austerity days by having a tracker and saving or overpaying rather than spending that money.

You can't time everything perfect I suppose and with the early exit fee and immediate jump in payments over the next year, that's a lot of making up that's needed.

I am going to review my numbers though
 
In 1990 the interest rate on my mortgage was 15.4%.

Fortunately I don't have a mortgage now but I feel for anyone struggling to get on the housing ladder.
 
In 1990 the interest rate on my mortgage was 15.4%.

Fortunately I don't have a mortgage now but I feel for anyone struggling to get on the housing ladder.
That sounds rough, but at least houses were 5x cheaper and it couldn't get much worse, that must have been the peak?
15% on a 50k house is probably similar to 3% on 250k, but that's the best it's ever going to get. Rates are still going up and there's no property boom coming for them, possibly the opposite.
 
I've just looked and for my main one I got that fixed at 1.75% for 5 years in April, lender kept the same rate from a mortgage offered in early Feb, and I had the illustration done in Dec 21, at the same rate (based on different houses/ scouting around).

Seems like I couldn't have timed that any better, and made a good choice on the 5 year. Also looked at a 2 year and that was around 1.5%, glad I didn't go for that.

My mortgage was 1.5% above the base rate when I first looked at it, but when I first used it was 1% and now it's 0.5% over, and there's 95% of the term left.
 
That sounds rough, but at least houses were 5x cheaper and it couldn't get much worse, that must have been the peak?
15% on a 50k house is probably similar to 3% on 250k, but that's the best it's ever going to get. Rates are still going up and there's no property boom coming for them, possibly the opposite.
People were work multiple jobs to be able to pay their mortgage. That’s what my older customers tell me anyway. They tell me it was rough going back then.

How is 15% on 50k the same as 3% on 250k?

The person who is paying 15% in the 90’s will have more likely to struggle than a person in 2022 with 3% given the dynamics of each era/generation
 
People were work multiple jobs to be able to pay their mortgage. That’s what my older customers tell me anyway. They tell me it was rough going back then.

How is 15% on 50k the same as 3% on 250k?

The person who is paying 15% in the 90’s will have more likely to struggle than a person in 2022 with 3% given the dynamics of each era/generation

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In 1990 the interest rate on my mortgage was 15.4%.

Fortunately I don't have a mortgage now but I feel for anyone struggling to get on the housing ladder.
I was going to post the same.
I had a picture of Mrs Thatcher on my mantle-piece at the time and a candle either side.
"She did a lot for this country" you know.

"Eeeee, a luved Maggie me like"
(n)
 
People were work multiple jobs to be able to pay their mortgage. That’s what my older customers tell me anyway. They tell me it was rough going back then.

How is 15% on 50k the same as 3% on 250k?

The person who is paying 15% in the 90’s will have more likely to struggle than a person in 2022 with 3% given the dynamics of each era/generation
Yeah, my mother did the same, with two kids, on her own and paying for a 2 bed semi in a good area, but what she did is not even possible now. People are working multiple jobs to rent now, not saying it is better or worse, than at that peak, but it was the peak (rates were high previous, but values going up pretty much covered that). I can't see house prices increasing 5x in the next 30 years, bailing the new generation out, even if they can get on the ladder.

The comparison was fag packet maths, which is why I said probably similar, not the same. 15% of 50k on interest only is £625 a month interest (or £650 including capital over 25 years), 3% on 250k is £625 a month interest (or 1200 including capital).

The interest in £ is the same, but the guy now is paying almost 2x more a month, and only earning maybe 50% more, never mind inflation outstripping wages for over a decade or whatever.

It was rough then, it's rough now, but I don't see where people now can get a deposit from to even start, and there's less of a chance of a property boom to sell up and wipe the slate clean, and leave with a profit etc.

The average first time buyer is now 35 I think, back then it was near 25, and as the post by @Nano shows, P/E was around 4x, now it's around 7x. So not only are they unable to get on the ladder earlier, it's much more expensive v earnings when they do.
 
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A huge social house-building programme would free up the private rented sector, relieve pressure in the mortgaged house market, provide decent homes for the homeless and put people back into productive work.
It would begin to tackle the worst housing crisis since the second world war and take people out of temporary accommodation and out of unsuitable properties. The "market" has never been, nor ever will be, the way to give all our people a decent roof over their heads. The sale of public property has exacerbated the crisis and left many on the streets or in hostels. Until we stop the sale of public housing and start a national programme of new build public housing, the "market" wont be able to cope. Unscrupilous private landlords continue to screw huge rents for properties, with many ordinary people being socially cleansed - particularly in London - being forced to move out of the area, because they cannot afford extortionate rents
. Many young people, under 30, have no choice but to sofa-surf or stay longer at home with family [if they have one], with less chance of finding their own home - than they did 40 years ago. If people wish to play the Mortgaged Housing "market" - thats OK. But public housing is essential for millions of our people to have a decent roof over their heads.
 
My parents bought a nearly new 2 bed semi bungalow on Teesside when they married in 1958. I think it was £2,200 - probably £150k now and the area was posh at the time, now definitley not posh. Their joint wages were probably £2,200 too (gross). They both worked full time in offices in average paid jobs, they were secondary modern kids leaving school at 15 with little qualifications. I guess their joint wages today would be £50k. I think the mortgage rate was about 5.5%. They struggled, using push bikes to get to work, then one got a scooter in 1960. They could not afford holidays and were given things by relatives and lent (to pay back) the deposit on the house by my granny.

In my family's example wages have not kept up with house price rises by a wide margin and I would say Teesside has cheaper housing now relative to other parts of the UK over the period 1958 to date. The saving grace today is very low interest rates, alos older relatives significantly helping out many younger ones, the very low interest rates are not sustainable (1.25% interest against 9% inflation) . That affordability ration will have to drop from 7 times ratio. My guess is house prices will drop a little against 5% annual increase in wages over the next 3 years.
 
People used to tell me that renting was like pouring your money down the drain....

Seems like having a mortgage these days is like pouring your money down a different drain....

Thanks 👍
 
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People used to tell me that renting was like pouring your money down the drain....

Seems like having a mortgage these days is like pouring your money down a different drain....

Thanks 👍

To be fair, both can apply, it all depends on where you buy, when you buy and the rate you borrow at. Ideally, the obvious aim is to buy before prices rocket, and ideally do that by borrowing at a very low rate, but this does not happen often, but then you also have the problem that you've not really gained, as the house you would want to move to has gone up also.

I've read a lot that the way a lot of people do it is wrong, because they've been taught by people who don't know a thing themselves, and only do things as that's the way everyone does it.

Effectively some younger (and more likely single/ childless) people would be better off renting and moving around from job to job, place to place and climbing the income ladder faster, whilst investing a potential deposit (and savings) in something relatively high short-term risk (but low risk/ high gain long term). The gains in the investment and income can make equity gains in houses look like pennies, and more than cover rent, so much so that someone could buy a bigger house outright in 20 years and have the same money again left over.

I wish I'd just invested and rented, rather than getting on the ladder in Teesside 14 year ago or whatever, I'd have been much better off.

Doesn't seem like a great time to get on the ladder now, with rates going up, and house prices coming down, whereas the markets are in a hole and will probably get some hefty increases over the next 5 years or whatever.
 
To be fair, both can apply, it all depends on where you buy, when you buy and the rate you borrow at. Ideally, the obvious aim is to buy before prices rocket, and ideally do that by borrowing at a very low rate, but this does not happen often, but then you also have the problem that you've not really gained, as the house you would want to move to has gone up also.

I've read a lot that the way a lot of people do it is wrong, because they've been taught by people who don't know a thing themselves, and only do things as that's the way everyone does it.

Effectively some younger (and more likely single/ childless) people would be better off renting and moving around from job to job, place to place and climbing the income ladder faster, whilst investing a potential deposit (and savings) in something relatively high short-term risk (but low risk/ high gain long term). The gains in the investment and income can make equity gains in houses look like pennies, and more than cover rent, so much so that someone could buy a bigger house outright in 20 years and have the same money again left over.

I wish I'd just invested and rented, rather than getting on the ladder in Teesside 14 year ago or whatever, I'd have been much better off.

Doesn't seem like a great time to get on the ladder now, with rates going up, and house prices coming down, whereas the markets are in a hole and will probably get some hefty increases over the next 5 years or whatever.
Good post Andy, young people used to aspire to owning their own place like their parents...
It's not that simple these days 👍
 
I saw a video saying that some fixed 5-year rates are now lower than 2-3 year fixed rates, and there are some 5-year deals at ~4.5%, and 10 years at 5%. Compared to history, this still seems like a good deal, especially considering the turmoil and this could take out a lot of risk for people. Ok, it's still a 5% rate, but there is zero sign that this could get any better anytime in the next 5 years or whatever.

I also read that fears of a massive house price crash (as in a 30% drop) could be overstated, largely as the money lenders think people (more people than pre the 2010 crash) should be able to afford mortgage rate increases. Apparently, since 2010 the stress testing carried out on people to give them a mortgage has been much more stringent. Effectively for the last decade, they've tested people's income at 5,6,7% etc, whereas pre-2010 there was not a great deal of this going on, and up to 50% of people never even had to verify their income! Apparently, they're also factoring inflation in, and reckon people will just be skint, but not as much to the point of being repossessed. This still sounds **** mind, but at least the tighter lending since 2010 is not going to cripple people as much, we're still heading for a 10% correction to wipe out the fake pump from Covid jacking up house prices, I think.

I just think it's mad that loads of the new builds are still trying to sell at the same asking price as earlier on in the year, I can't see how that's going to work. Who is going to buy at top whack on a top whack rate, and which lender would lend to them? Then when the developer's houses stop selling, the building will slow down (they need cashflow from selling houses to carry on the building). The market could get propped up by a fake low availability until the developers then go bust that is (as programs drag on), and when they go bust they will take down a load of main contractors and subcontractors with them, never mind jobs. This will make restarting the industry slower. My company subcontracts to main contractors and developers (about 30% of our work), but I certainly won't be giving them the payment terms they've had over the last few years. Looks like a storm brewing for housebuilding/ construction, unless the developers accept the reality of the hole which is coming.
 
Good post Andy, young people used to aspire to owning their own place like their parents...
It's not that simple these days 👍
Yeah, it's a doddle when house prices are rocketing (apparently), but there's always a reason for price movements. The baby boom and foreign investment helped the last increase, but now the birth rate is 1.56 (per woman, but men don't give birth etc), the lowest since records began I think, and foreign markets see us as a risk now, compared to other places. When those reasons are not there, then it's time to have rethink.

The borrowing rates have been low for 13 years, yet in places like Middlesbrough/ Stockton, house prices are still 5% lower than 2007 (all property types). What happens if they go down another 10%, and the base rate (now 3%) keeps climbing for the next year (to around 5%)?

Will the foreign investment be there to prop the market up, or will they see the UK as a risk?
Are we likely to get an influx of immigration to prop this up, seeing as we've just left the EU?

Not much there to suggest a property will increase in value, over 5-10 years, so not sure why taking out a massive mortgage on an overpriced property should make any sense. If people can rent for the similar price of a mortgage (even if it means taking something at a lower standard) then this looks like the smart move now, at least for the next 5 years or whatever.
 
I work in the industry and there’s certainly no fears of a “major crash” similar to 2008.

There will be a fall next year, expected to be around the 10% mark, maybe slightly more. Due to house price increases turbo charging in the last 2 years, it’s seen more as a Market adjustment. The last 2 years have been crazy - unprecedented.

There will be a number of people affected by Rate Rises next year as they drop off fixed rates. The full extent is yet to be seen but many lenders tend to be a lot more cautious these days anyway, and do stress testing on rate increases as part of affordability checks. This should limit the impact.

The concern would be the wider economy if companies start making redundancies. The backdrop to that is most companies are massively struggling with recruitment as it is, so I’m personally not sure how likely that scenario would be.

The BOE should bring an end to rate rises by April/May next year. Banks are starting to lower rates already compared to a few months ago, despite further BOE rate rises likely. A lot of that is linked to swap rates dropping / stabilising since the mini budget announcement & correction after Truss went though.

It’s fair to say we live in very strange times at the moment. So many problems in the country and people struggling. Public Services on their knees. We’re in a bit of a mess!
 
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