Andrew Sentance: Base rate could rise this year

[d000hg]

Imagine how many new home owners will be in the tulip even if it does cap at only 3%.

That depends. The disparity between lending rate and base rate is large right now. If you got a tracker mortgage when the base rate was 4% you probably were only paying base rate + 1%; these days you're likely paying base rate + 3%. This disparity would presumably narrow again if the interest rate increases from an artificially low level?

[NorthWestPerm2Contr]

as long as it is after I re-mortgage in the summer then that will be fine.....

[Martin@AS Financial]

About time - given very high taxes (especially higher rate) it was stupid to base it on gross multiples, suppose in the past mortgages were allowed to be paid from gross before tax, but that I think ended sometime in early 90s.

This was a letter to Mortgage Strategy from a underwriter who had this to say:



“If a lender has been using income multiples and is now moving to affordability then, even taking into account other expenditure, they may have a larger maximum loan. Those who end up with a lower loan will have a lot of other financial commitments.”

It is amazing that this has only just come to light as we have been struggling to make the affordability calculator more prudent.

The fact is that single people on large London incomes will be able to borrow large sums of money (and I mean much larger than currently) which will only add to the potential for a ‘bubble’.

Interestingly families with children will find they can borrow less than before because of the way the system is set up.

Some lower income applicants will find that the affordability says ‘no’ to any amount of money. I am all for prudential lending but the FCA have really cocked it up this time."

[AtW]

affordability will move away from income multiples. Part of assessing affordability will include a stress test which takes into account rate increases.

About time - given very high taxes (especially higher rate) it was stupid to base it on gross multiples, suppose in the past mortgages were allowed to be paid from gross before tax, but that I think ended sometime in early 90s.

[Martin@AS Financial]

Imagine how many new home owners will be in the tulip even if it does cap at only 3%.

The Mortgage Market Review comes into force next month and whilst it's too early to comment as yet, lenders are telling us that affordability will move away from income multiples. Part of assessing affordability will include a stress test which takes into account rate increases.

[TykeMerc]

Imagine how many new home owners will be in the tulip even if it does cap at only 3%.

Considering how long the base rate has been negligible I'd expect that to be a large enough number to put the wind up the press at the least.

[AtW]

Was planning to buy a house year, maybe give it a miss - house price crash could be just around the corner

[northernladuk]

Imagine how many new home owners will be in the tulip even if it does cap at only 3%.

[Martin@AS Financial]

These predictions have been going on since the base rate fell to an all time low of 0.5%. However, to be fair to Sentance, as a former member of the Monetary Policy Committee, he was pushing for a rate rise as far back as 2010.




Andrew Sentance: Base rate could rise this year | News | Mortgage Strategy