The Real Price Of A Mortgage: 6.49%

[Home_To_Roost]

The real price of a mortgage: 6.49%

Forget interest rates at 0.5%. First time buyers are paying the highest rates in years - which is why talk of a housing market recovery is bunk

Patrick Collinson

What's the most popular mortgage in the market at the moment? Well, the truth is out. No, it's not down at 1.99%, indeed it's nowhere near that level. "The most popular mortgage product applied for by nearly 800 Countrywide consultants across the UK required a deposit of 10% with an interest rate of 6.49%," said the company.

This fact stands out in huge contradiction to the guff put out by high house price promoters keen to convince us that the market is "recovering".

..................

Not only are real interest rates, if anything, higher than the rates on offer in 2007, but the deposit required is huge.

..................

So, we still have high house prices, high interest rates, high deposits, and no wholesale funding. Just what sort of base do the "optimists" think that this forms for a "recovery"? I'm still in the other camp of optimists - those who feel optimistic that prices will stagnate or fall for years to come.

The full article is here:http://www.guardian.co.uk/money/blog/2009/...ty-house-prices

[Guest KingCharles1st]

And yet people still want to play their game..

[Wait & See]

It's a joke country run by bankrupt banks. WTF are they doing giving us this sh1te when base rates are at feck all and their idea of a high interest savings account is 2.5%. Heads should be getting cracked. Fu*king filth.

6.49% + 10%. Get stuffed.

[abharrisson]

The full article is here:http://www.guardian.co.uk/money/blog/2009/...ty-house-prices

Quite right and yet equally with mortgage rates ( SVR's or existing deals) for existing mortgage holders very very low there is also less pressure to sell than there might be..... as an example for the last months my mortgage (interest only) which used to be £1,000 has been as near to zero as I could imagine and equally when it changes in four months time (with rates where they are) it'll still only be £300. Unless interest rates considerably then pressure to sell will not enhance a collapse .... high rates for new borrowers, and low rates for existing ones might well effectively put price changes in the doldrums (neither up nor down) for several months.

[abharrisson]

It's a joke country run by bankrupt banks. WTF are they doing giving us this sh1te when base rates are at feck all and their idea of a high interest savings account is 2.5%. Heads should be getting cracked. Fu*king filth.

6.49% + 10%. Get stuffed.

I'd agree with little competition all they are really doing is profiteering..... and of course the govt cannot step in and force them so we all have to live with it... taxes are propping up the banks, borrowers are also paying for the bankers mistakes on top of their taxes and when everything has been re-floated there will be some huge bonuses to the guys at the top.

The only thing that will generate lower rates for new borrowers is more competition in the marketplace and that doesn't look likely anytime soon.

[stuckmojo]

base rate 0.5%, Mortgage rate at 6.49%. Pure piss take.

I wonder what will happen when the base rate goes up.

[Aidan Ap Word]

As a person having chosen prudence ... what did I (along with so many others) do to deserve get so royally shafted?

*sigh*

Aidanapword

[Guest_FaFa!_*]

But, but, but.......affordability has never been better!

I don't blame the banks - they need to recapitalise. It is a shame this is happening at the current expense of the FTB such as myself, but I am reasonably sanguine. The high rates will prevent FTBs entering, pushing house prices down further as chains break. My low savings interest is acceptable to me personally as my savings are basically my future deposit which should go up as a proportion of the purchase as house prices come down.

That's assuming it isn't all inflated away............

[Brave New World]

But, but, but.......affordability has never been better!

I don't blame the banks - they need to recapitalise. It is a shame this is happening at the current expense of the FTB such as myself, but I am reasonably sanguine. The high rates will prevent FTBs entering, pushing house prices down further as chains break. My low savings interest is acceptable to me personally as my savings are basically my future deposit which should go up as a proportion of the purchase as house prices come down.

That's assuming it isn't all inflated away............

+1

As much as they are profiteering the silent majority – of which whose greed got us part way to this situation – deserve to be taken for being so bloody naïve about the whole housing market situation.

It is a blatant piss take by the banks but if it is helping drive down prices in the long run then so what. It is the BOE base rate that is out of kilter with reality not these rates.

Us savers are paying a price so why shouldn’t other folk?

The whole housing market and general economy is a house of mirrors just waiting to be shattered by reality over the next 12 months. When folk realise that the media and Zanulabia have been spouting crap the real capitulation will begin.

[the flying pig]

i really take issue with the ridiculous line,

...the deposit required is huge

... 10% is clearly not "huge" by any sensible benchmark, if anything it's inadequate.

he's clearly right that 6.5% is, in polite terms, a mickey take, but we're only reaping what we sowed...

[jonboy]

i really take issue with the ridiculous line, ... 10% is clearly not "huge" by any sensible benchmark, if anything it's inadequate.

he's clearly right that 6.5% is, in polite terms, a mickey take, but we're only reaping what we sowed...

So for an over-valued "asset", an FTB pays an arrangement fee plus 10%, and then 6.++? They know this is prohibitive but they know that house prices need further correction.

If the equity is there then the risk isn't and the new deals and SVR reflect that. They can meet govt targets for lending and mortgage availability in this population without the risk of FTB.

The correction in HP can happen over several years and only in real terms. Banks' balance sheets are OK and there's plenty of public money for retail (even in the relative absence of MEW) with low IRs making large differences to people's disposable income and allowing the over-stretched plenty of breathing space.

Meanwhile FTB getting further and further behind as deposit rqts getting larger, unemployment and real wage deeflation, and already high interest rates threatening to get higher next fix around. Borrow any multiple you can afford mind.

Nice.

[ader]

Well to be fair 6.49% is actually still low by modern day standards.

When the boe base rate is 2% and the banks mortgage rate is 8% we will be around average for borrowers.

Your father, his father and his father before him would have been very sensible to accept such a low rate of interest on their loans.

Of course this further highlights how far out of kilter we are with normality when even bears on here think 6.5% is a high rate. But of course our forebears didn't have to borrow 6 times their income for a poxy flat. They could get a house for 2x their salary like my father did around 1960.

[Joey Buttafueco Jr]

A few questions

1. Does the article need to be more explicit to say mortgages currently being agreed, becuase the vast majority of people I know are on a very low rate/.

2. Does the lender representative of the UK as a whole?

3. The 6.49% may be most popular, but what is the distribution of rates?

Edited September 14, 2009 by Charlotte Anne Hunter

[stu2006]

Can ask a question please. All the QE that has been happening where has the money gone? Has the banks just kept it to cover there losses? And what was the idea behind it, was it not to lend back out again? If this is the case why has no one done anything about it?

[uptherebels]

base rate 0.5%, Mortgage rate at 6.49%. Pure piss take.

interestrateripoff

[The Realist]

base rate 0.5%, Mortgage rate at 6.49%. Pure piss take.

I wonder what will happen when the base rate goes up.

The rate just reflects the risk of lending to buyers with low deposits when house prices may go down.

When the base rates go up the difference between the mortgage rate and the base rate may become less.

Article in Guardian says that this is 'the most popular mortgage' (more correctly most frequently taken out, I think) so many must be satisfied with it.

[Bob Loblaw]

The rate just reflects the risk of lending to buyers with low deposits when house prices may go down.

When the base rates go up the difference between the mortgage rate and the base rate may become less.

Article in Guardian says that this is 'the most popular mortgage' (more correctly most frequently taken out, I think) so many must be satisfied with it.

I would guess most people only can get their hands on 5% deposit so are forced to choose this one. I would imagine if you had a 40% deposit you would not choose this one so its a choice made through circumstance.

[ChumpusRex]

base rate 0.5%, Mortgage rate at 6.49%. Pure piss take.

I wonder what will happen when the base rate goes up.

To be fair, that is a 5 year fix at 90% LTV (Well, I think it's a 5 year fix, the closest match I can find on countrywide's website is 7.19%, 90% lTV, 5 year fix).

The 5 year swap rate (in effect the base rate for a long term fix) is 3.4% - meaning a margin of only about 3%. Considering that the employment picture is looking less rosy, there is a high risk of house price falls and loss of equity with such a high LTV, this is an extremely generous deal.

[Prof]

So, we currently have rates around 6.49% + 10% deposit for FTB`ers.

Thank heavens the banks aren`t "playing fair", otherwise mortgage rates would be around 2%(?).

Imagine what that would do for HPI.

[campervanman]

To be fair, that is a 5 year fix at 90% LTV (Well, I think it's a 5 year fix, the closest match I can find on countrywide's website is 7.19%, 90% lTV, 5 year fix).

The 5 year swap rate (in effect the base rate for a long term fix) is 3.4% - meaning a margin of only about 3%. Considering that the employment picture is looking less rosy, there is a high risk of house price falls and loss of equity with such a high LTV, this is an extremely generous deal.

Look , everyone with at least half a brain knows house prices have around 30-40% still to fall. That includes government and banks. What you are seeing now is re-captalising of banks through QE and mortgage payers being given the opportunity to pay down debt. All this is in preparation for what lies ahead. In less than a year you will see banks repossessing big time from the idiots who are spending the mortgage windfall rather than paing down debt. This is a transition period, it will soon be over.

[Meerkat]

To be fair, that is a 5 year fix at 90% LTV (Well, I think it's a 5 year fix, the closest match I can find on countrywide's website is 7.19%, 90% lTV, 5 year fix).

The 5 year swap rate (in effect the base rate for a long term fix) is 3.4% - meaning a margin of only about 3%. Considering that the employment picture is looking less rosy, there is a high risk of house price falls and loss of equity with such a high LTV, this is an extremely generous deal.

Exactly.

[The Realist]

I would guess most people only can get their hands on 5% deposit so are forced to choose this one. I would imagine if you had a 40% deposit you would not choose this one so its a choice made through circumstance.

Agreed. But are not all (financial) choices dictated by circumstances. You can only chose from the range of options open to you.

[The Realist]

Look , everyone with at least half a brain knows house prices have around 30-40% still to fall. That includes government and banks. What you are seeing now is re-captalising of banks through QE and mortgage payers being given the opportunity to pay down debt. All this is in preparation for what lies ahead. In less than a year you will see banks repossessing big time from the idiots who are spending the mortgage windfall rather than paing down debt. This is a transition period, it will soon be over.

Why would a bank lend 90% of a house value if it knew it would be going to decrease by 30 to 40% soon?

[Joey Buttafueco Jr]

it knew it would be going to decrease by 30 to 40% soon?

?

[GordonBrownSpentMyFuture]

Why would a bank lend 90% of a house value if it knew it would be going to decrease by 30 to 40% soon?

Because the state-owned banks have been ordered to by the government. They are attempting to prop up the housing market - the basis of our economy over the last 8 years - to improve public sentiment/confidence, increase consumption and create the impression of an economic recovery.

There is, of course, no recovery; just a record low base rate and an eye-watering amount of money printing courtesy of future British tax payers.

New Labour are doing whatever they deem necessary to create short-term optimism and "confidence" so they have at least some chance of winning the next election. At the moment that is all it's about and they hope that the majority of suckers will be conned into believing it so they can count on their vote next May/June.

Repossessing someone's home and/or thousands upon thousands of pounds of negative equity aren't really crowd-pleasing vote winners. If Labour get into power again (perish the thought!), the suckers will soon see the real state of the economy and housing market.

So a 90% LTV is all part of the short-term illusion. The banks will get to keep the 10% deposit AND the property when it's repossessed and the poor unfortunate will still have to repay the outstanding debt. It's win-win for the banks and the government are hoping it'll be a win for them too.

Anyone who buys a house between now and shortly after the election - especially a first time buyer - is either very rich, very brave or something else.