Saturday, Jan 23, 2010
First Direct mortgage offer
HSBC: Our latest mortgage offers
Five minutes ago I got a card through the door from First Direct offering me a fee-free offset tracker mortgage at BoE base rate + 2.49% (3.0% APR). What a great deal, I thought. No surprise that house price have stabilised if people can borrow at 3%. Unfortunately
1. When base rate goes back up to 5%, as it was at the start of 2008, I would be crucified paying them 7.5%
2. Their offer is only up to 65% loan to value, though you have to look very carefully at the card to find where it says this
3. In any case, although I earn twice the national average salary, I could only borrow half of the purchase price of the house I'm in now, though I can comfortably afford to rent it.
My conclusion: once bank base rate starts to go back up (4%-6% 1992-2008), house prices have only one way to go.
9 Comments
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1. paul said...
Trouyble is, unless the Bank of England's hand is forced, I don't think rates will go up for a long long time - remember they are unconcerned about the effects of inflation or the wider economy, only house prices.
2. fallingbuzzard said...
Personally, I think base rate +2.49% is a license to make easy money (2.14% margin) against their 5 year fix at 4.73% (0.66% margin). And with HSBC's in-house view for bank rate at 1% in June and 2% by December, it's a mortgage deal that only offers upside to them. It doesn't surprise me at all that they want to sell it!
3. mark wadsworth said...
"although I earn twice the national average salary, I could only borrow half of the purchase price of the house I'm in now, though I can comfortably afford to rent it."
I am in similar position, I am sure most tenants are. But Paul's guide to future interest rates is as good as any. And if the markets force them to raise interest rates, then they'll reintroduce MIRAS, reduce council tax, give below market rate government mortgages etc etc.
4. Tqo31 said...
@ 1, 2, and 3
We STR'd in June 2007, but are sadly forced to contemplate buying again due to expanding family. The concensus here is that should rates go up then, for sure, that should put downward pressure on prices, but, what will catalyse such a rise in rates? Neither NuLab or Tories (seem to) have the appetite for putting them up, MPC are having their strings pulled by gummint, so where can the driver come from - currency crisis and IMF assuming control of IRs?
Having waited this long it would be a pity to re-enter the market at such a high (and overvalued) moment, but I do have to house the war department and sprogs somewhere that is practical for work, family, schools etc, and we have been very lucky to be able to rent somewhere that ticks all these boxes, but it's not a long term solution.
"Stumped of Wandsworth"!
5. stillthinking said...
I am not so sure rates will go up, but I think that with additional taxes, wage doldrums, and less government spending, for mortgage holders effectively rates may as well have gone up because the burden of repayment will become heavier. Why make a strong distinction between taxation and debt servicing costs when the effect on disposable income is the same.
If the government actually truly push borrowing costs up then a horrible meltdown will ensue, fair enough, but I just don't think that will happen.
6. quiet guy said...
Unfortunately, I agree with Paul and Mark Wadsworth.
"I would be crucified paying them 7.5%"
It's interesting to see how we've become conditioned to viewing anything like free market rates for money as somehow being usurious.
7. drewster said...
Talking of direct mail, today for the first time ever I received a flyer for a new housing development 20 miles away. Sounds like new-build developers are still struggling.
8. hpwatcher said...
Trouyble is, unless the Bank of England's hand is forced, I don't think rates will go up for a long long time - remember they are unconcerned about the effects of inflation or the wider economy, only house prices.
House prices, yes - but only with an election looming, but I think the times are changing.
Whatever option the UK chooses, either way the effects are likely to be long lasting and very severe.
9. monty032 said...
I don't agree that we have permanently entered an era of interest rates at 1-2%. Bubbles are always formed by a mass delusion that "things are different this time". In the medium term (3-5 years) interest rates will be back in the 4-6% band, just as they have been almost all the time since 1992. But people aren't going to be earning a lot more then.