What's the best way to protect/fend off impending mortgage interest rate rises?

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  • What's the best way to protect/fend off impending mortgage interest rate rises?
  • Premier Icon dannybgoode
    Subscriber

    If you have any degree of savings offset mortgages are worth looking into.

    Cheers

    Danny B

    slackalice
    Member

    I’m not a Financial Advisor, however, I do remember 1990, when rates were at 16% and my then measly £30k mortgage was about £300 per month more than I was earning.

    I handed the keys back. It’s a silly game, over which we have little or no control.

    Property ownership is an illusion, created by the financial institutions and the governing administrations, to make us think we are better off than we actually are. Our economy is based on over-inflated valuations of postage stamp sized bits of land with bricks and mortar on them. It will not, can not last.

    There will be many people with repayment only mortgages in this country up the creek if/when the rates rise by just 1%. I don’t think even a “possession is 9/10th’s of the law” will help them.

    Start buying lottery tickets is possibly one option.

    jekkyl
    Member

    Not really an illusion when upon retirement the house is yours versus renting, where you will have to carry on paying rent until you die. I know which I’d rather have. To the Op fix in 5 or 10 years

    Given the rates being offered on fixed rates i dont think the gamblers are seeing a massive rise in the next few years.

    Premier Icon theotherjonv
    Subscriber

    To insulate yourself from future rises you’ll have to lock into a rate that’s going to be higher than the variable you’d be getting now. Ok if you know what rates will be in the future, but the banks pay people to predict that too and i’ll bet they’ve set their rates so they dont miss out overall, unless their estimates prove to be wrong. Can you outguess them? Also allows you to budget on a fixed amount for however long.

    Alternatively – overpay as much as you can while the going’s good, to minimise the capital sum that higher rates will apply to. When rates rise, your overpayments get less but you’ve the discipline instilled to keep making the minimum at least, and assuming you’re paying more than the minimum still the equation keeps reducing all the time.

    Ultimately ng the way to insulate yourself completely has to be to overpay to the degree that the sum owed is zero or as near as dammit, then rates can do what they want; you’re covered.

    cheez0
    Member

    Option C:

    Patent a catchy forum sig and pay off your mortgage with the proceeds.

    Cheers

    Bradford and Bingley BS

    slackalice
    Member

    when upon retirement the house is yours

    Really!?

    Let’s hope that everyone with a mortgage can afford to maintain their interest only repayments and the ‘other financial product’ they are purchasing that will enable them to pay off the capital sum over the course of their mortgage term.

    My suggestion is that for many, they will have to sell their property and downsize to reduce the repayments. Or go for an equity release scheme to upset the kids inheritance 😉

    trail_rat
    Member

    so did you last have a mortgage when endowment mortgages were the rage …..

    slackalice
    Member

    Hehe! How did you guess?!! 😀

    TBF Ive had a couple since then, but as you can tell, I’m not really buying into this whole UK style of wealth accumulation. 😉

    trail_rat
    Member

    im not in it for wealth acumulation

    i got fed up with land lords stutting round like they owned the place and making us feel like we were inconvienancing them …… yes i have bikes in the living room – clean bikes , my TT & race mtb are always cleaner than your sofa here has ever been when i bring them in and there is absolutely no damage….

    coupled with jekkyls once you have finished the term and paid the sum off in full , you have only maintainance and bills to pay.

    Premier Icon Kryton57
    Subscriber

    Overpay & refix before it happens?

    slackalice
    Member

    Fair do’s TR. Each to our own motivations and I hear where you’re coming from. Fair play to you if you can pay off your mortgage.

    I’m also aware of many who will struggle to pay off the capital sum as even now, with relatively low interest rates, they can just about to afford the monthly payments as the cost of living has risen so much over the past few years.

    trail_rat
    Member

    i dont know if i can….. thats the gamble

    another 23 years to find out……

    Impending mortgage interest rate rises? Have I missed something today or are we talking 2025 impending?

    Property ownership is an illusion

    rubbish. Dont know where you live but wherever I’ve lived mortgage repayments (25yr repayment, not interest only) have been the same as rental payments for the same house. Except after 25 years (well, closer to 16 with the overpayments we’re making) we will own the house, and be paying nothing. Forgetting the idea the house is a valuable asset, I’ll still be living rent-free.

    I have issues with the UK obsession with house prices/values and the idea it makes you wealthy, but rental costs make mortgages affordable and sensible.

    Impending mortgage interest rate rises? Have I missed something today or are we talking 2025 impending?

    The new head of BoE is supposed to be making some big announcement tomorrow according to news, but I thought he’d already hinted there would be no change to current rates for some time?

    http://www.bbc.co.uk/news/business-23469370

    The Bank of England is expected to commit to keeping official interest rates low for a period of time.

    This is meant to lead to reductions in interest rates for mortgages and business loans, and encourage companies and individuals to invest by giving them greater certainty over future conditions

    The new head of BoE is supposed to be making some big announcement tomorrow according to news, but I thought he’d already hinted there would be no change to current rates for some time?

    Certainly lots of numbers have been mentioned recently, but mainly that the base rate won’t rise to 0.75% before 2016.

    andyl
    Member

    I am a bit wound up tonight over mortgages and property and not sure what to do.

    I bought a flat to live in when I was studying. I’ve been trying to juggle a major refurb (had all the damp done) and self employment and am not just about to finish it and rent it out (we are renting a whole farmhouse out in a rural location for the same as I 1 bed flat will fetch).

    Today all the owners get emailed saying they need to find £4500 by mid september and another £2k in spring for urgent works. Yesterday we had an urgent request for £600.

    Wondering if I should sell up (after paying the works) or rent it out for a year and then see what to do as the rent will almost cover the current impending costs 🙁

    Premier Icon mikewsmith
    Subscriber

    Protect yourself? Lock into a fixed rate mortgage for as long as possible at a rate you can afford? It will not the the cheapest currently but might do it it rises. In the end it’s a gamble, you could over pay to the same amount and gamble that rates don’t jump – they probably wont, but that is probably not certainly.

    As for the house ownership thing unless there is the sort of acceleration in house prices that played a big part in the financial mess that the world is currently in we have had previously you will pay a lot of money for an asset that has not grown bu much. The only way to release that is to sell and move somewhere cheaper (or die).

    The lifetime cost of home ownership (capital + interest repayments + maintenance + taxes + fees + stamp duty + improvements) is higher than people generally estimate and has been very hard to estimate based on the house price rises. Remember the home improvement shows which told people they would have made more money by buying a derelict house and selling it 12 months later.
    There have been a few reports showing that in the current conditions & starting points that renting and saving the difference can provide a decent amount of money to retire with. Though those who bought during/before the boom they will be along to explain how they made loads and why wouldn’t anyone jump on that idea.

    The lifetime cost of home ownership (capital + interest repayments + maintenance + taxes + fees + stamp duty + improvements) is higher than people generally estimate and has been very hard to estimate based on the house price rises

    regardless of house price rises, how does that compare to full lifetime cost of renting (including the other fees involved in renting and adding that up over the 50+year lifetime of the dweller not the 30yr lifetime of the mortgage)? Home improvement isn’t a true (ie. compulsory) housing cost, its an optional extra spend. Someone might choose to put a new bathroom in rather than go on a holiday for instance.

    There have been a few reports showing that in the current conditions & starting points that renting and saving the difference can provide a decent amount of money to retire with

    what assumptions did they make and what “difference” are they saving? I went from paying £700 a month rent for a 2-bed terrace to £700 a month mortgage for an identical house in the same part of the same town. I’m still paying £700 a month because I have left my D/D at that, which in fact means I’ve been overpaying every month as my repayments fell when the interest rates plummeted, taking years off my mortgage (paid off 12yrs in 8). If I was still renting I’d be paying over £700 now.

    Though those who bought during/before the boom they will be along to explain how they made loads

    Red herring. whether my house is worth more or less than when I bought it is irrelevant, I am talking about the costs of putting a roof over my head for the rest of my life. If renting was cheaper I would have happily stayed doing that! With the predominantly privately owned rental sector your rent is paying someone elses (buy to let) mortgage, plus agent fees etc. If affordable rental properties were widely available it would be a different matter.

    Premier Icon mikewsmith
    Subscriber

    regardless of house price rises, how does that compare to full lifetime cost of renting (including the other fees involved in renting and adding that up over the 50+year lifetime of the dweller not the 30yr lifetime of the mortgage)?

    The point of entering the market is different now though
    2013

    While the average age of a first time buyer is now 37, this increases to 38 for those looking to buy in London, while those in Yorkshire and Humberside will manage to get a foot on the housing ladder by 34 years of age.

    http://www.mortgageintroducer.com/mortgages/246147/5/Industry_in_depth/First_time_buyer_average_age_is_now_37.htm
    2012

    Average first-time buyer is now 35, research finds
    The average age of a first-time house buyer has risen to 35, up from 28 just a decade ago, due to rising house prices and reduced levels of savings, research has found.

    http://www.telegraph.co.uk/news/uknews/9533491/Average-first-time-buyer-is-now-35-research-finds.html
    So adding in 10-15 years of renting before getting a mortgage for 25-30 years neatly taking you into retirement.

    what assumptions did they make and what “difference” are they saving? I went from paying £700 a month rent for a 2-bed terrace to £700 a month mortgage for an identical house in the same part of the same town. I’m still paying £700 a month because I have left my D/D at that, which in fact means I’ve been overpaying every month as my repayments fell when the interest rates plummeted, taking years off my mortgage (paid off 12yrs in 8). If I was still renting I’d be paying over £700 now.

    Not got the links, was based on average repairs/maintenance/upkeep etc. in contrast my rents have mostly been less than mortgages for equivalent houses. The point is at the current entry prices it’s worth looking at the overall costs and making an informed decision. Everybody’s circumstances are different

    mike, thanks for the links. I am not rabidly pro-home ownership, I am a frustrated former renter! Lenders are finding ways to get people into the market, I know a young couple (early 20s) both earning less than the UK average who have just been approved for a 35 year mortgage 😯 .

    Everybody’s circumstances are different

    agreed, which is why I cited mine to see if they were typical (we might be hugely atypical for all I know).

    jekkyl
    Member

    It’s clear that our kids are gonna need some help getting on the property ladder, that plus weddings & cars & everything else. Otherwise they’ll be staying at home till 35¿! No thanks

    FunkyDunc
    Member

    Who said rates are going to rise any how?

    Premier Icon bruneep
    Subscriber

    when upon retirement the house is yours

    Whoo hooo no more work for me then. Paid off the mortgage yrs ago no one told me I could retire!

    Premier Icon totalshell
    Subscriber

    buying is by far prefferable to renting.. the simple math illustrates that eventually the mortgage will be paid whilst rents will always rise..

    like others we never paid more to buy than it would have cost to rent per month.

    and like others once the mortgages are paid you cannot afford to retire although mrs tts now only works 3 days a week. ( jammy sod)

    Premier Icon totalshell
    Subscriber

    buying is by far prefferable to renting.. the simple math illustrates that eventually the mortgage will be paid whilst rents will always rise..

    like others we never paid more to buy than it would have cost to rent per month.

    and like others once the mortgages are paid you cannot afford to retire although mrs tts now only works 3 days a week. ( jammy sod)

    Premier Icon mikewsmith
    Subscriber

    buying is by far prefferable to renting.. the simple math illustrates that eventually the mortgage will be paid whilst rents will always rise..

    Thats fine, if you can add up everything that you have spent on your house in repairs, taxes, interest, upkeep etc. stamp duty if you move, mortgage arrangement fees and anything else I’ll go with simple maths.

    Nearly every place I have lived in the UK I have paid less in rent than I would have done in mortgage for an equivalent house. Given that I moved 6/7 times to different areas due to work thats a lot of buying/selling fees to add on. Like I said there are a lot of different situations and circumstances out there.

    patriotpro
    Member

    What’s the best way to protect/fend off impending mortgage interest rate rises?

    If all the rumours are anything to go by there isn’t an impending rate rise.

    trail_rat
    Member

    the answer lies in where you live…..

    renting for me in aberdeen would be financial suicide…. my mortgage payment will rent me a 2 bed flat in town. – very little rural(but close to town) comes up for rental – the stuff that did was tiny and right next to the land lords house generally.

    lotta people movement here with work so qualtiy rentals in very high demand.

    Here rents are higher than mortgage payments for us. I suppose that includes a large deposit though so we should add that to the calculations. Renting does seem daft though.

    b r
    Member

    rubbish. Dont know where you live but wherever I’ve lived mortgage repayments (25yr repayment, not interest only) have been the same as rental payments for the same house. Except after 25 years (well, closer to 16 with the overpayments we’re making) we will own the house, and be paying nothing. Forgetting the idea the house is a valuable asset, I’ll still be living rent-free.

    For many folk who rent though they will be in exactly the same position as you, with benefits paying their rent as they’ve never been in a position to save for anything other than a state pension (and tbh if you are a low earner you’d be daft to have even a small private pension as it can easily mean you are worse off).

    We never fixed as this just felt like gambling, so most of the time used the standard rate (which in the past was usually 1% over base) but once trackers came along we used them as it was the same cost as been on the standard rate.

    We were in the lucky (and smart to take it on) position to lock-in our mortgage (now mortgage-free) to a 0.25% over base lifetime tracker (interest was less than £100 pcm).

    I feel sorry for folk with mortgages now, as the costs are horrendous (compared to the interest rate) plus lots of fees that we never had.

    And as for what is cheaper, mortgage or renting? It totally depends on your circumstances, where you live, over what period and more importantly what (and how) you earn – some folk will never earn enough to buy, so it’s irrelevant.

    Premier Icon cookeaa
    Subscriber

    We’re three years in on our first property, Fixed for the first two and we’ve just gotten through the first year on the default variable, We’ve been very lucky up to this point, No stamp duty, we had a deposit and found one of the last ‘reasonable’ mortgage deals going before everything apparently caved in.

    TBH Renting Vs Buying is about the same in terms of monthly outgoings (being in a commuter belt town) as Pricing is extortionate round our way (IMO), we’ve just been lucky…

    Considering the blather on the radio about Bank of England’s plans for forward notice / action plans for interest rates we will probably be looking for a fix agian soon I imagine, and I bet the Banks are sharpening their Deals to match the influx of customers remortgaging.

    Having said that dropping on to a variable has saved us quite a bit over the last 12 months, and I think interest rates would have to rocket up on our current deal up to exceed our ability to pay as we have a house / mortgage that matches our income reasonably well, we do know a couple of people who are maybe living a bit closer to the limit of their means…

    We just need to live a wee bit more frugally in general, maybe try and get some over-payments in while we can (and no new bikes for a while 😥 )…

    Are the banks really offering interest only at the minute? somehow I doubt it, I thought they were all extra risk averse now, if you can only afford an interest only mortgage that must make you a “Bad bet” these days?

    My Parents are of course living the dream, cleared their Mortgage early (mid 50’s) retired Early (late 50’s) so they are now Early 60’s Empty-nesters with good health, sitting on savings, living off of reasonable pensions, in a bought and paid for house that is now worth more than double what they paid for it…. Gits!

    mrchrispy
    Member

    just took a 5 year fixed at 2.49%
    pretty happy with that as it removes the stress of rates going up and down. when the 5 years is up the mortgage sould be low enough that I dont have to worry about it that much.

    Well, base- rate isn’t going to budge until unemployment falls below 7% apparently. Is it something like 7.9% at the minute?

    trail_rat
    Member

    thank fook for that . im 6 months out from remortgaging and it would be sodding typical for them to rise.

    Premier Icon kimbers
    Subscriber

    yay !!!!!!!!! the bubble remains intact

    😆 So, three years is the prediction then. SVR here I come.

    freeagent
    Member

    Thank God for that!
    We need to re-mortgage in about 16 months time and need to get fixed into a good rate…

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