Currently on some low tracker rate and paying about £380 (interest only) on a £110k mortgage.

Can change to a fixed rate 5 year for about £500 / month
What does the STW crystal ball of interest rate future increases / decreases / staying the sameness predict…

Can only go up from here, particularly now inflation is taking hold. With Brexit on the horizon, I’d want some certainty thrown in.

I’d say your low tracker rate isn’t that low, especially for interest only!

I have a £105,000 tracker mortgage (1.25% above base rate – 45% interest only, 55% capital repayment), and my monthly payment is £328.00

do you have a repayment vehicle?

do you have a repayment vehicle?

Is that German??

All vehicles paid for

How do you intend to repay the money you owe?

How do you intend to repay the money you owe?

Slowly.
Overpayments when i have spare cash.
Bank Job.
Lottery win.
Inheritance.

Not sure…

so, nothing then.
Switch it to repayment, (or as much as you can afford) extend the term to make it affordable and take a 5 year fixed rate.
Five pounds please. 😀

People on interest only mortgages with no repayment vehicle will the next big problem.. if you can afford to pay it back, why not?

You won’t be able to take out a new interest only mortgage unless you can show a method of repaying capital sum – new rules an that, well so my mrs’s bank tell us anyway

I suspect that interest only mortgages will be the next mis selling ‘scandal’ I reckon loads of people won’t have to pay back all of what they owe. So you could play the very risky games of assuming you won’t need to pay it back.

With regard to interest rates, Imo they will be low for a few years yet,but your circumstances will determine whether you can afford the risk,if it were me I’d take the risj

Interest rates…

Can only go up from here

…or they may stay the same, or the may go down.

FIFY

Hmm.. if the £ drops then levels off, inflation will go up then back down again though?

Using interest rates to control inflation only works on certain causes of inflation. The rise in prices due to the collapse in the pound relative to other currencies, especially the dollar, isn’t one of them so it is unlikely that interest rates would be put up for this reason. When the price of oil rose a couple of years ago inflation went up but the BoE didn’t change interest rates as it wouldn’t have made any difference.

Using interest rates to control inflation only works on certain causes of inflation. The rise in prices due to the collapse in the pound relative to other currencies, especially the dollar, isn’t one of them

I’d disagree. Generally, higher interest rates on a currency encourages international investers to hold that currency, which in turn makes the exchange rate move in favour of the currency.

I don’t think this will happen; It is risky as large, singular currency movements generally cause large, singular spikes in inflation (ie, the inflation rate next year might be 4%, but the year after it could be back to <1%). raising rates to control the imported inflation would slow investment to the point where you’d risk deflation in the medium term, so bankers will probably keep rates on the floor, and we’ll just have to suck it up

My mortgage calculator says you’re paying about 4.2% if interest only which does seem high.

https://docs.google.com/spreadsheets/d/1cLH5NU8s4ghbiB7wlc_a1obAcjXdY59TZuW5jhStqjc/edit?usp=sharing

IANA financial adviser but if you have an interest-only mortgage and no clear, proper plan to pay off the capital (the actual money you’ve borrowed) then you could well be in serious trouble.

As referenced above, IO mortgages are setting up to be the next big debt problem coming through – IIRC around 25% of people with them have no way of paying off the money borrowed and as and when the bank ask for the money back will end up homeless… listen to the case study in the programme below…

Listen to this episode of Moneybox on Radio 4 from the weekend and get yourself down to a financial adviser as a matter of urgency…

Radio 4 Money Box – Interest Only Mortgages

In 2014, excluding buy-to-let, there were around 2.8 million interest-only mortgages outstanding within the UK. Borrowers pay interest on the loan, then the capital has to be paid back when the mortgage term ends.

The popularity of that type of mortgage has fallen significantly over the years, however most lenders will have borrowers still on those deals. Some of those customers may find themselves in a situation where they don’t have a plan in place to repay the outstanding capital. We hear from Christine who is facing a £150,000 repayment after her interest-only deal with Santander expired. Dean Mirfin, Group and Technical Director with Key Retirement discusses the wider issues around interest-only mortgages and potential options that may be available for people who are unable to repay.

Housing and mortgage debt are not our proudest moment in the UK – we’ve been conned into believing a mortgage is somehow an asset rather than the biggest debt we’ll ever take on…

People on interest only mortgages with no repayment vehicle will the next big problem..

Yup – try telling our friends that – the ones with a lovely big house yet are still planning on getting something bigger, have four cars despite only two drivers, just been on holiday (to Dubai 5 star) which was their third foreign holiday of the year yet an interest only mortgage and no repayment vehicle.

Utterly batshit mental.

Yes got to have a repayment plan – that’s what got me to start creating my mortgage spreadsheet as wanted an interest only mortgage and to use the capital part for investments rather than repay, tracking the amount of capital that I needed to have paid off helped me know if I was on track or not.

Some have this idea that can just realise the capital in the property at some later point and move into a cheaper place – a smaller one or in a cheaper area perhaps. This kinda works but is a little risky as relies in decent capital growth over the mortgage period.

Some have this idea that can just realise the capital in the property at some later point and move into a cheaper place – a smaller one or in a cheaper area perhaps. This kinda works but is a little risky as relies in decent capital growth over the mortgage period.

Also forgets that a whole generation has the same idea and when they all try and sell at the same time to downsize, the whole ‘supply/demand’balance will shift and they may not just find lack of ‘decent capital growth’ but rather, no capital growth or even loss…

The case study above in the R4 prog is a woman in Liverpool who bought mid-noughties and has seen zero capital growth – and having done NOTHING to pay off the money she’s borrowed she’s now facing homelessness…

up – try telling our friends that – the ones with a lovely big house yet are still planning on getting something bigger, have four cars despite only two drivers, just been on holiday (to Dubai 5 star) which was their third foreign holiday of the year yet an interest only mortgage and no repayment vehicle.

Utterly batshit mental.

I was speaking to my mum last week and she was lamenting that she has spent her whole life doing it by the book, only buying what she can afford, paying her debts, providing for her future, whilst people like that have ignored it all and had a ton of fun.

When you step back it does make you wonder who the batshit mental one is.

Not building up any kind of savings is pretty crazy and most people would hopefully have some idea of how property prices are going for them. No increase in price over that period seems unusual but in undesirable areas I suppose isn’t unusual.

It does feel like the period of large house price rises is over but there are pockets that are still going well, so can be lucky. I guess things will be subdued whilst the Brexit thing is sorted out but hard to imagine prices not steadily rising in the long-term overall. As a side point I think it a good thing that people might have to downsize their property later in life as reduces this unfortunate situation of old couples living in family houses whilst we have families struggling to find decent homes.

When you step back it does make you wonder who the batshit mental one is.

there is a fine line.

I know some folk stressed to the hilt about making the right payments on the right days to keep their “lifestyle” on track.

I know some folk who are not worried in the slightest as they are reliant on inheritance to pay off the mortgage/debts.

Biggest thing i came to realise was – learn to be happy with my lot and dont be envious of other people – you dont know their circumstances. No one ever tells you the whole truth.

Currently on some low tracker rate and paying about £380 (interest only) on a £110k mortgage.

Can change to a fixed rate 5 year for about £500 / month

Well what interest rate would your current tracker have to rise to before you are paying £500pm?

Rates probably may well go up, but they are not going to go from 0.5% to 10%.

Sage words trail_rat

The rates don’t seem great. Our repayment mortgage of £125k is £495 a month! 5 year fixed at 2.25%

up – try telling our friends that – the ones with a lovely big house yet are still planning on getting something bigger, have four cars despite only two drivers, just been on holiday (to Dubai 5 star) which was their third foreign holiday of the year yet an interest only mortgage and no repayment vehicle.

Out of interest, as and when the endgame plays out and they end up in the bankruptcy courts or homeless, who do you think they’ll see as being mainly at at fault? Themselves, the bank, ‘marketing’…

ie: are they knowingly playing fast and loose with debt and hoping to get away with it or are they being deluded into thinking they’re wealthy and their lifestyle is sustainable from now until they die?

It’s thoroughly depressing watching the UK economy break like it did in 2008, seeing all the negative social and political impacts that have resulted and nearly a decade later we’re continuing with the very behaviours that created that crisis without actually wondering just where it will end…

Currently on some low tracker rate and paying about £380 (interest only) on a £110k mortgage.

You’re not on a low tracker rate if you’re paying 3.75% above base.

Inject some capital, shop around and you’ll be able to half that interest cost.

Banks are having to tighten up the requirements for Interest Only Mortgages, so i’d be surprised if you can get another deal without proof of a repayment strategy, or you’ll be shafted by a high interest rate.

the op’s done one, hopefully to get some financial advice!

Thought id better go to work and not mess around on stw today..
I do need to start being a bit more financially responsible…
Head has been buried in the sand for too long with regards to mortgages..

Start with working out exactly what you are on at the moment (rate, time left, outstanding amount, value of property).

It’s dull stuff, but could cost you a hell of a lot of money if you just ignore it.

Lots of folk on here will give you decent advice and the mortgage comparison sites will give you a reasonable idea where you stand.

Wow 😯
What were you thinking when you took out the mortgage? I guess you weren’t?

I can understand a partial IO with an idea to fund the capital repayment or pay a chunk off at the next remortgage step but all you are doing is renting from the bank but it’s you fixing the boiler.

What were you thinking when you took out the mortgage? I guess you weren’t?

Im pretty laid back and tend to not worry that much about money.
Its way cheaper than renting and put alot of money in making home improvements (new bathroom, kitchen, decorating, wooden flooring, log burner etc).

Lumped just under 10% today, it was that or buy another bike..

Low rates are here to stay , as others have said extend to the longer time frame, to ensure lowest capital repayment and over pay what you can without jeopardising a happy life

Debt today is worth less in the future due to inflation so both sides have valid arguments

Wow
What were you thinking when you took out the mortgage? I guess you weren’t?

Probably that it’s better than renting?

I bought my house for £400k 10 years ago on an interest only mortgage. Now worth £800k…though I did have to fix the boiler. What was I thinking!

I’ve just got sensible and switched to a repayment mortgage.

IO’s a valid product like any other. You don’t need a repayment vehicle (or at least you didn’t). Though of course you need to think about how you’ll repay at some point. I’ve took a couple of mortgages that way, knowing my income would rise and using the spare capital to do them up. Now switched to repayment after 9 years and with offset will be done earlier.

Yes there are some people who perhaps don’t think these things through, to others though it’s the right strategy at the right time.

Personally I think people should be free to choose if they understand the risks and rewards.

Yes interest rates will go up in future? However you seem to hve to pay a higher rate to get a fixed rate so its always a gamble and don’t forget to account for any fees. I’m a bit of a gambler – i’d go tracker at the lowest rate you can find. Want a safe bet go fixed but be prepared to pay more if interest rates stay lowish. Want a gamble get a tracker but put the difference aside or use to pay off capital.

However I am a financial idiot in general so my advice is worth what you paid for it

I’ve been on an IO mortgage for 12 years and have been quite happy with it. Unfortunately my area has not benefitted massively from house price growth and it’s only gone up about 15% in that time but I occasionally pay some extra off it a make my savings elsewhere. Seeing as my lifetime tracker is currently sat at 0.73%, even my cash isa rate exceeds that, let alone my other savings.

I will,at some stage, get a sizeable inheritance (maybe 2) but hopefully not before I retire. As above though, I’ve always played it safe whereas with the benefit of hindsight, I should have borrowed massively for a bigger house in a better area and I’d now be quids in. A £400k mortgage would currently be costing me around £260pm and I’d be in a much nicer house with loads of room for my family. Whether I’d be happier or not I couldn’t say.

I’m an ifa and in my experience the people who’ve gambled (not recklessly) have generally done very well, although the wealthier they are, the more convinced they are that they’ll lose it all. Sadly, lots of these people die with massive assets that they never got to enjoy. I wonder sometimes why they worked so hard to save it if it never does them any good.