Jump to content
House Price Crash Forum
Sign in to follow this  
Cinzano Bianco

Home Owners Struggle To Reduce Size Of Mortgages

Recommended Posts

Torygraph

When the Bank of England cut interest rates to 0.5 per cent more than a year ago, it was thought the move would allow home owners to use the spare cash from lower mortgage payments to make overpayments on their loans.

But a report from Capital Economics suggested lower rates have failed to help households to reduce their loans by as much as expected.

Roger Bootle, an economist at Capital Economics, said: “Claims that households have begun to step up the rate at which they are paying back their mortgages do not look well founded.

“Rather, over the past year or so, repayments of mortgage principal have been far lower than we would have expected given the cuts in interest rates.

“One implication is that the recent improvement in mortgage arrears may mask a highly fragile underlying picture, in which many households remain very vulnerable to any further shocks.”

It comes as the Council of Mortgage Lenders warned that the housing market will remained “subdued” for the rest of the year despite a slight upturn in mortgage lending.

Mortgage lending rose 7 per cent during May, but remained well below the levels seen at the end of last year, it said.

A total of £11.3 billion was advanced during the month, up from £10.5 billion in April, but well below the £13.6 billion approved in December.

Releasing the figures, the CML said in a statement: “The market remains subdued and, while more buoyant than a year ago, turnover is a little below that seen towards the end of 2009.”

The housing market is expected to be hit by measures announced in next week’s emergency budget, putting further pressure on household budgets.

Paul Samter, economist at CML, added: “The ground has been cleared for next week's Budget to be the start of an austerity drive to get the public finances onto a more sustainable footing. We do not expect it to include housing and mortgage specific direct tax measures. But the market will inevitably be affected by how policy impacts on the wider economy - particularly on household finances and confidence.”

* A review of the voluntary Lending Code, which covers personal loans, credit cards and overdrafts, has been launched last year to ensure it still offers consumers up-to-date protection. It has not been reviewed since 2007.

Share this post


Link to post
Share on other sites

When the IR was cut the BoE should have enforced over repayment to repair the capital base of the banks.

But hey why do that when you've got the taxpayer to underwrite the entire system.

Plus I thought the cuts weren't to help in over repayment but to get people spending money in the economy on tat they didn't need?

Share this post


Link to post
Share on other sites

Although a lot of people may have spent the wind fall. speaking for myself I have been saving it. A few hundred pounds off your mortgage each month only adds up to a few thousand saved. when you owe tens of thousands it's hardly worth talking about.

I don't think this article gives any light on what is really going on.

Edited by gf3

Share this post


Link to post
Share on other sites

We benefitted slightly from the lower interest rates, we split the saving by overpaying half and saving the rest.

The theory being if we got made redundant or needed the extra cash then it was there

Share this post


Link to post
Share on other sites

Although a lot of people may have spent the wind fall. speaking for myself I have been saving it. A few hundred pounds off your mortgage each month only adds up to a few thousand saved. when you owe tens of thousands it's hardly worth talking about.

When you compound the interest on those few thousands, it is worth talking about!

Share this post


Link to post
Share on other sites

When the IR was cut the BoE should have enforced over repayment to repair the capital base of the banks.

But hey why do that when you've got the taxpayer to underwrite the entire system.

Plus I thought the cuts weren't to help in over repayment but to get people spending money in the economy on tat they didn't need?

+1

Many people have a pay-cheque to pay-cheque mentality.

There is no hope for the human race.

None.

Share this post


Link to post
Share on other sites
Guest BetterOffOnBenefits
When the Bank of England cut interest rates to 0.5 per cent more than a year ago, it was thought the move would allow home owners to use the spare cash from lower mortgage payments to make overpayments on their loans

Well thanks very much BoE. Can someone remind me what your remit is?

Stealing every last drop of interest off savers so that homeowners can overpay their mortgages?

What the hell is going on?

Share this post


Link to post
Share on other sites

Well thanks very much BoE. Can someone remind me what your remit is?

Stealing every last drop of interest off savers so that homeowners can overpay their mortgages?

What the hell is going on?

Simple comment, but so so so so relevant! This is the crux of present and future disgust to any sane and considerate citizen. Gawd knows where it will lead this mess of a society we live in.

Share this post


Link to post
Share on other sites

+1

Many people have a pay-cheque to pay-cheque mentality.

There is no hope for the human race.

None.

Thats quite profound really - and pretty much sums up my POV. Surely the main thing that separates us from other animals is foresight and planning. Our ancestors made tools in advance to help with hunter/gathering, this evolved into farming. Thats why we don't starve in winter. Thats why squirrels bury their nuts FFS. But 8000 years of money and 50 years of TV soaps later what do I hear at this time of month on a daily basis????

" I cant to this, I cant go there, its not payday yet."

Hand to mouth

Even a Phucking squirrel knows to put some nuts aside during the good times, something nulab keynesians and 99% of the population seem to have forgotten.

A squirrels brain is about the same size as the nuts it buries !!!

Share this post


Link to post
Share on other sites

Even a Phucking squirrel knows to put some nuts aside during the good times, something nulab keynesians and 99% of the population seem to have forgotten.

A squirrels brain is about the same size as the nuts it buries !!!

I think that point should be raised in PMQ when NuLabour start whinging about the upcoming cuts - which are clearly their own fault but most are too dumb to realise it.

Honestly - it is the sort of comment that would get noticed and be in the papers the next day.

Share this post


Link to post
Share on other sites

Many people have a pay-cheque to pay-cheque mentality.

There is no hope for the human race.

None.

But then perhaps the attitude "take as much as I can, all for me, as fast as I can" is what meant your ancestors survived while others perished ;)

Not until you know who has the last laugh can you tell what the right strategy was - and by then it is too late

Share this post


Link to post
Share on other sites

But then perhaps the attitude "take as much as I can, all for me, as fast as I can" is what meant your ancestors survived while others perished ;)

Not until you know who has the last laugh can you tell what the right strategy was - and by then it is too late

but we're looking backward so we know who won - given the fact that farming is widespread - countries that don't do it very well, starve. and those that are busy shooting each other for personal gain - don't tend to do very well either. Looking forward, I think the hand to mouth thing only works temporarily in the endgame anyway - a bit of a pyrrhic victory because you end up conusming everything you feed off - a bit like the public sector really.

Share this post


Link to post
Share on other sites

Thats quite profound really - and pretty much sums up my POV. Surely the main thing that separates us from other animals is foresight and planning. Our ancestors made tools in advance to help with hunter/gathering, this evolved into farming. Thats why we don't starve in winter. Thats why squirrels bury their nuts FFS. But 8000 years of money and 50 years of TV soaps later what do I hear at this time of month on a daily basis????

" I cant to this, I cant go there, its not payday yet."

Hand to mouth

Even a Phucking squirrel knows to put some nuts aside during the good times, something nulab keynesians and 99% of the population seem to have forgotten.

A squirrels brain is about the same size as the nuts it buries !!!

Have you ever read Earth Abides, by George Stewart?

He writes about how most of a group of survivors from a plague that wipes out humanity don't actually have any forethought, and fail to plan or prepare for the future until it is too late and their taken-for-granted utilities (like the water supply) disappear. When the protagonist brings up the need to consider the future, they just think it's his party piece and basically ignore him for years and years until it is too late. Because of this, the community ends up as superstitious, illiterate hunter-gatherers with no medical knowledge in about three generations.

It's the curse of modern civilisation really. People become isolated from the systems and structures that lay behind their lives and survival because someone else has always done it and they have no exposure to it.

Anecdotally, Mr DJ has a work colleague that, last year, went out and leased a brand new Range Rover when her mortgage halved. Apparently, she told him a few weeks ago that they were struggling so much, they were applying for a mortgage holiday.

Share this post


Link to post
Share on other sites

Have you ever read Earth Abides, by George Stewart?

He writes about how most of a group of survivors from a plague that wipes out humanity don't actually have any forethought, and fail to plan or prepare for the future until it is too late and their taken-for-granted utilities (like the water supply) disappear. When the protagonist brings up the need to consider the future, they just think it's his party piece and basically ignore him for years and years until it is too late. Because of this, the community ends up as superstitious, illiterate hunter-gatherers with no medical knowledge in about three generations.

It's the curse of modern civilisation really. People become isolated from the systems and structures that lay behind their lives and survival because someone else has always done it and they have no exposure to it.

sounds like the basis for Grodn Brown's world view

Share this post


Link to post
Share on other sites

sounds like the basis for Grodn Brown's world view

I haven't read it, but more to the point did Gordon hire it from Kirkaldy Library 40 years ago? And had there been an book sleeve mix up with "Successful economic leadership for dummies"?

Share this post


Link to post
Share on other sites

Perhaps many people who find themselves with extra cash after paying their mortgage at the low interest rate prefer to keep it available as savings to help tide them over should they take a drop in income over the next few years. Obviously there will be those who just decide to spend it on tat & more tat, but others will save (at least part of it). Once it's been paid off the mortgage it's not easy getting access to the money again.

Also, don't forget that lots of mortgage products actually penalise you for having the cheek to pay off capital ahead of your agreed repayment plan!

Then there's the effect on the actual payments. If your lucky enough to have a mortgage at 0.5%, then paying off £1,000 will save approx. £5 over the next year. Yes a whole crisp fiver, thats about 42p a month.

Even at a more realistic 4%, £1,000 off the capital will only save £40 over the next year, or abot £3.33 a month. OK, there is the effect of compound interest to consider.

Finally, it will almost certainly be financially more worthwhile to pay off other debt first, such as credit cards and other loans.

Share this post


Link to post
Share on other sites
Perhaps many people who find themselves with extra cash after paying their mortgage at the low interest rate prefer to keep it available as savings to help tide them over should they take a drop in income over the next few years. Obviously there will be those who just decide to spend it on tat & more tat, but others will save (at least part of it). Once it's been paid off the mortgage it's not easy getting access to the money again.

So you could split savings in two, half to pay extra off the mortgage, half to save in a high interest tax free saving account....many don't pay their mortgage off completely they keep a small amount outstanding just in case they need extra in the future.

Also, don't forget that lots of mortgage products actually penalise you for having the cheek to pay off capital ahead of your agreed repayment plan!

Not so much nowadays, most let you overpay something without penalty.....one good way of doing this is to reduce the term of the mortgage.

Then there's the effect on the actual payments. If your lucky enough to have a mortgage at 0.5%, then paying off £1,000 will save approx. £5 over the next year. Yes a whole crisp fiver, thats about 42p a month.

Even at a more realistic 4%, £1,000 off the capital will only save £40 over the next year, or abot £3.33 a month. OK, there is the effect of compound interest to consider.

Many when they take out loans, home or other types never think of the debt they have taken on or the interest rate they pay, all they think about is whether they can afford the monthly payments.....some home loans are so big now the prospect of repayment and being debt free whilst living there is completely out of the question for some...therefore no incentive to overpay.

Finally, it will almost certainly be financially more worthwhile to pay off other debt first, such as credit cards and other loans.

Agreed.

Share this post


Link to post
Share on other sites

Perhaps many people who find themselves with extra cash after paying their mortgage at the low interest rate prefer to keep it available as savings

This is much more complicated that it appears at 1st sight.

A further twist is that stealthily withdrawing a fair bit in cash also means that you have funds that the govt., banks, 'friends' and foolish relatives don't know about.

OK you are also 'poorer' if you make capital repayments but that doesn't give you a secret war chest that is also invisible to means tested benefits ;) .

So ironic that while people on here are spending a lot of time thinking about various strategies, the people who do buy all the tat on the back of low interest rates just seem completely oblivious and will hit the buffers at full tilt.

Completely baffling lack of awareness/engagement/responsibility.

I wonder if at the end of earlier empires there were small groups of bewildered people planning for survival and scratching their heads at the majority partying on regardless.

romanempirecrash.waxtablet

egyptianoldkingdomfall.papyrus

Share this post


Link to post
Share on other sites

+1

Many people have a pay-cheque to pay-cheque mentality.

There is no hope for the human race.

None.

If the people I meet are anything to go by most have a pay-cheque to middle of the month/credit card mentality

Share this post


Link to post
Share on other sites

If the people I meet are anything to go by most have a pay-cheque to middle of the month/credit card mentality

Indeed. I deal with heavily indebted individuals daily, and borrowed money is part of many people's long term monthly budgeting.

I get refunds for people on credit cards, and if given the option of being paid on their card or in cash, 99% of people take the cash, despite being warned that they'll give it all back in interest. To use the phrase 'financial illiteracy' would be to understate their lack of understanding. It is simply astonishing. Even more scary is just how little they seem to care about it.

Share this post


Link to post
Share on other sites

Indeed. I deal with heavily indebted individuals daily, and borrowed money is part of many people's long term monthly budgeting.

I get refunds for people on credit cards, and if given the option of being paid on their card or in cash, 99% of people take the cash, despite being warned that they'll give it all back in interest. To use the phrase 'financial illiteracy' would be to understate their lack of understanding. It is simply astonishing. Even more scary is just how little they seem to care about it.

A) Most banks didn't pass on all the cuts unless contracted to.

B) Banks at the same time removed 0% interest Credit cards and free balance transfers and introduced transfer charges.

C) Banks extended loans to people as well as mortgages at higher rates.

Given low mortgage rates, seems sensible to be paying of the loan/credit card first before starting on your mortgage capital...

and people are worried about their jobs, they are quite happily leaving the scheduled mortgage payments as is, and putting the surplus into savings for that rainy day the press keep quoting.

Same news paper reported a big spike in payments into pension funds....

Question is... what happens when those grey clouds pass, and people decided to re-leverage....

Share this post


Link to post
Share on other sites

If the people I meet are anything to go by most have a pay-cheque to middle of the month/credit card mentality

so, so true and heres the tickler.......

i work in finance.

Share this post


Link to post
Share on other sites

Indeed. I deal with heavily indebted individuals daily, and borrowed money is part of many people's long term monthly budgeting.

I get refunds for people on credit cards, and if given the option of being paid on their card or in cash, 99% of people take the cash, despite being warned that they'll give it all back in interest. To use the phrase 'financial illiteracy' would be to understate their lack of understanding. It is simply astonishing. Even more scary is just how little they seem to care about it.

The debt is a means to an end....as long as they can pay the minimum monthly repayments....a credit card limit is theirs to spend, they must be good for it or they wouldn't have been given it, getting hold of the cash is all that matters, credit has been topping up the wages of many for too long...the banks and the FSA have allowed the economy to be propped up on borrowed money, they knew what was happening but chose to 'turn a blind eye'....now we have pay back time or will it be write off time. ;)

Edited by winkie

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.