Mortgage Rates

In 1988 the house/income price ratio nationally rose to 5 - houses were not cheap, but not the 9 they are now - on Teesside the ratio will be about 6 to 7. Mortgage interest rates were 11.5% MIRAS was around in 1988 but I think it ended in 1995. Stamp Duty was paid on the full value of a property if it cost £30k or more.

Bottom was it just as tough in the late 1980s as it is now to pay the mortgage. I get the impression a lot of young people get family help now, while in the late 1980s it was much rarer to get family help.

Ref should I fix at say 5.6% - I would say yes for 2 years.

I expect B of E rates to rise to at least 5.5% and mortgages to around 7% by mid 2023.

How can inflation of 10% come down if interest rates don't rise by a significant amount.
 
I used to work in mortgage risk until 2008 and set the rules for a big high street lender. We developed an affordability calculator that took into account a stressed interest rate check. That stressed rate was in excess of 5% which was considered a normal interest rate. A further cap was applied of 4.5 income multiple, differing if it was a joint or single application. These rules were picked up across the industry and adopted into prudential lending. The problem came when applicants were self-certing their income and basically just making up what they needed to get a mortgage. In another job I was asked to identify these customers as it is fraud to make a material falsehood on an application. We certainly went after brokers who encouraged this.

The argument about the difference between the days of high rates and now is interesting. Yes mortgage payments are higher now, but wages used to be much lower. The lending in the older days had a much higher default rate than anything seen in the last 30 years. The biggest difference is human behaviour, I remember buying my first house and having to furnish it with hand me downs and waiting to upgrade televisions/ fridges etc when we could afford to. In recent times, partially driven by these home programs on tv and they availability to get cheap credit, much nest building is done with new furniture appliances etc being purchased. I had the ability to review indebtedness levels pre and post completion which were very worrying, leading us to be stricter with ltv levels for first time buyers to give us a bigger buffer.

In 2008 there were massive interventions to stop house prices falling, the whole of the quantitative easing was designed to stop prices falling and to protect the banks liquidity levels. I would imagine the state will resist a fall in house prices again in the future. The banks do not want to repossess houses. If they repossess in a falling market they realise the loss, we used to keep people in their properties by adjusting interest rates/ terms/ repayment terms to keep people in their houses until they could either repay the arears or house prices rose to a point when we could repossess and not make a loss and the customer could retain some money from the equity of the property.
 
Good point on home building - nearly everything was second hand when we set up first flat - free cooker, second hand fridge freezer, second hand TV, all furniture was second hand except the bed.
 
sadgit said:
mine was 7.99% 25 years ago... thankfully in December I will be mortgage free..
Click to expand...
Congrats - big relief

I think the real issue is those who are going to get hit now have never experienced the historic highs, will not have expected the kind of rises we are seeing and will not have planned for it.

This is a huge hit and the consequences to the housing market are, frankly, incidental.

This is a financial disaster for many….. impact on family, mental health etc
 
I agree those with mortgages in the last 12 years have not experienced 6% mortgages, but in most parts of the UK (maybe not Teesside) there is full employment possibly for the first time since the early 1970s.

I could never imgaine a world of only 3% unemployment.
 
Fixed mine earlier in the year for 10 years at 2.09% I only have 12 years left on Mortgage. I like knowing exactly what I'm going to be paying and it looked like interest rates were only going to go one way.
 
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