Want a fixed rate mortgage?

[SueEllen]

Sunny Slough a decent two bed flat is £250k. You can move into a war zone for cheaper.

Is that next to the train station or near the M4?

[mattster]

Yes, this caught my attention in the recent Nationwide thingy posted by Martin@AS Financial.

I assume mortgages have followed a similar trajectory. I remember the days when all you could borrow was 3x single or 2.5x joint. These days, the multiples must be much higher, which is fine when interest rates are rock bottom. But with them now at 6%...
.

Yeah, I mean it is an obvious point but almost always (deliberately?) ignored by boomers when they go on their weekly (daily?) "I used to pay 15% interest" rant. The bottom line with mortgages is that people are willing to pay about 30% of their monthly income on a mortgage, and they don't really care if that is low interest on a massive principal or high interest on a low principal. The latter is the less risky proposition by far, with plenty of upside potential (lower rates, retain the low principal) vs all downside risks when starting at 1% interest on a massive loan. Rates return to long-term trends and suddenly you are paying 6x per month on the interest component, and still have a massive principal. At least one hopes that inflation will help a little in this situation and erode the real value of the debt fast but could be tough few years for some until that happens.

[Lance]

I imagine the ratio for all Southern regions (excluding London) would be pretty high.

I guess we'll find out over the next year or so whether 6% interest rates are a problem.

Much as I think a house price drop, caused by interest rate hikes (like the early 90s), would be beneficial for the market (if not my pocket), it wouldn't stick for long as there are not enough houses.
If the prices do drop, then BUY BUY BUY.... No good for me, I bought in August.

[Lance]

Yeah, I mean it is an obvious point but almost always (deliberately?) ignored by boomers when they go on their weekly (daily?) "I used to pay 15% interest" rant. The bottom line with mortgages is that people are willing to pay about 30% of their monthly income on a mortgage, and they don't really care if that is low interest on a massive principal or high interest on a low principal. The latter is the less risky proposition by far, with plenty of upside potential (lower rates, retain the low principal) vs all downside risks when starting at 1% interest on a massive loan. Rates return to long-term trends and suddenly you are paying 6x per month on the interest component, and still have a massive principal. At least one hopes that inflation will help a little in this situation and erode the real value of the debt fast but could be tough few years for some until that happens.

the people (boomers mostly) who bang on about higher interest rates forget some salient facts.

- In the 90s when interest rates high 15% for a few hours, there was a recession, a drop in house prices, negative equity and defaults
- the 80s. Inflation and interest rate were high and had been for some time. It wasn't an unexpected surge. Also the inflation ate away at the debt, so what was a difficult loan to service became far easier as wages increased. Defaults were only a problem in the first year or two of the mortgage.
- 60s 70s similar to the 80s with far higher rates across the medium term
- THERE WAS SUFFICIENT HOUSING

none of those facts apply now

[DealorNoDeal]

Much as I think a house price drop, caused by interest rate hikes (like the early 90s), would be beneficial for the market (if not my pocket), it wouldn't stick for long as there are not enough houses.
If the prices do drop, then BUY BUY BUY.... No good for me, I bought in August.

That's probably why they didn't go down that much after the 2008 financial crisis. (Unlike in Florida and the Costas.)

From a selfish PoV, I don't want prices to go down because I'm counting on equity release to top up meagre pensions in a few years time.

[Guy Incognito]

Hi, Gricer

??

[GregRickshaw]

We thought we were dead clever and that by having our mortgage fixed at 14% for five years.... way back when 92 I think.

It went down every single year after we signed.

[vetran]

We thought we were dead clever and that by having our mortgage fixed at 14% for five years.... way back when 92 I think.

It went down every single year after we signed.

to be fair we have fixed ours between 4-2% occasionally we have paid more but the security is worthwhile.

Penalties for leaving have reduced since then.

[Martin@AS Financial]

Apparently the contractor lenders will lend to an Umbrella contractor based on their day rate. How's that going to work???

N.B. that was a year or two ago, not sure if that is still the case.

Afternoon NLUK

Yes - this is still true in that some lenders can ignore the umbrella payslip and work on the gross value of the day rate. Other lenders will look at the value of the payslip (ie basic / holiday pay / commission). and deduct the umbrella costs as a commitment.

Just out of interest - do you think we will now see a return of contractors offering their services through their ltd companies in light of the recent news or will it still be determined by the end client? (assuming the IR35 reforms do not get reformed in light of Kwarteng going?

[SueEllen]

Just out of interest - do you think we will now see a return of contractors offering their services through their ltd companies in light of the recent news or will it still be determined by the end client? (assuming the IR35 reforms do not get reformed in light of Kwarteng going?

They will change the law after a GE.

So some clients won't change their stance, others will.