Saturday, Sep 29, 2007
While the base rate is flat, the REAL interests rise!
FT: Homeowners face payment shock
lenders have struggled to securitise mortgage assets into the capital markets, will lead to borrowers paying more each month. This could trigger growing numbers of home repossessions as borrowers struggle to repay loans. S&P estimates that those who are able to refinance to another deal will face an average increase of 26 per cent, or £167, in their monthly payments. It estimates that those borrowers who cannot get another deal and so have to move to standard variable rate could face a monthly increase in payments of £415. “one of the largest payment shocks witnessed since the 1990s”... say no more!
Posted by confused76 @ 05:59 PM (959 views) Add Comment
9 Comments
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1. deepak said...
Ouch! that really hurts. Read through the article and it talks about rise of upto £800 per month.
Remember as payments are Net and Salary is gross.
So in order to pay £800 Net you need to earn on a 22% tax rate £976 per month before tax or £11712 per annum
or £1120 for higher rate tax payer or £13440.
Ouch it hurts again. And thats when you have the average mortgage but if you are mortgage to the hill meaning 80-90% mortgage which is common.
then it will be higher.
Ouch it hurts again.
2. confused76 said...
Yes, but you still have a nice devaluating asset that you call home... or is it of the bank by then?
3. inbreda said...
Wow - and I'll bet this will hurt the recent buyers massively more than those that have already paid 20 years off their mortgage. That will force a lot of sales. And that will spiral.
4. inbreda said...
It strikes me that for years I have been coming to this site and we have been finding evidence that we point at and say "that is unsustainable".
Recently all the reports are actual bad news - not stuff that we think will lead to bad news.
So long as the bad news being reported is getting worse we will know for sure that the crash has started.
Compensates for the weather!!!
5. enuii said...
So if were counting chickens we have:-
The Mortgage Chicken
The Inflation Chicken
The Pension ChickenThe Taxation Chicken
Saturday, September 29, 2007 07:56PM
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I'm not counting some of the other Chickens that have yet to roost and I can't think of at the moment but 2 of them are the Public Sector Chicken and the Sterling Chicken.
6. Cheekie Charlie said...
It seems the BR and real interest rates have become detached ( a bit like CPI and RPI). The banks seem to be in a race to raise capital by raising savings rates, especially Bradford and Bingley - I wonder why! The thing is with banks offering great rates on 1,2 3, year bonds like Stroud and Swindon's 7.05% it's OK raising this capital to fund their loans but in the short, medium, and long term it has to be paid back! This must surely mean there is no returning to cheap loan deals even Gordon Brown can't sneak his way round this one and he knows it. He'll be foolish not to call a November election and I don't think he's a fool.
7. crash bandicoot said...
Coming, as we do, from a certain viewpoint, and having had several years of logic-defying house prices. We see these news articles as vindication of our ideas. But what of the housing bulls, or rather those who have listened to the housing bulls (David Smith etc). How many of these stories can they read and dismiss as crackpot? When will the truth sink in, and what will the result of that be? The normal human reaction is denial until it is too late. The wise ones will understand the need and react, the unwise will have the decision made for them. Is this financial Darwinisim?
8. wiltshire said...
The Debt Chicken - which is actually about the size of a blue whale. The more the Mortgage Chicken, the Inflation Chicken and the Taxation Chicken get settled into the roost the more settled the Debt Chicken becomes with them.
What's the impact going to be like for The Christmas Turkey though? Could be a very very quiet Christmas on the High Street this year.
Overall I think the economy has cooked it's goose.
Right, I'll get me coat......................
9. David Smith's Sub Prime. . . said...
I don't understand this:
Can someone who knows something about economics help me?
"...those borrowers who cannot get another deal and so have to move to standard variable rate could face a monthly increase in payments of £415..."