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Swansea Estate Agent

46% Of Mortgages At Risk

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There was mention of somebody knowing somebody that was at risk if the base rate rised, so I thought I would post this article:

Almost half (46 per cent) of mortgage holders said they would be worried about their finances if their mortgage repayments increased as a consequence of base rate rises. While 7 per cent of borrowers say outright that they won’t be able to meet their required repayments if interest rates go up.

Three quarters of mortgage holders (74 per cent) are anticipating interest rates to rise in the next 12 months. Of those, 59 per cent are anticipating a rate rise of up to 2.5 per cent, and 15 per cent are expecting rates to rise by more than 2.5 per cent. Mortgage holders are more likely to expect a rate rise than the wider public, of whom 63 per cent think the next 12 months will see rates increase.

Chris Taylor, CEO of MarketGuard, commented: “This research underlines the extent of exposure the British public has to interest rate risk. It is clear that we face a major problem if rates start to move dramatically upwards in response to inflationary pressure. Nearly half of the UK’s mortgage holders would feel the squeeze heavily and there can be little doubt that defaults and repossessions would increase.

“There are millions of mortgage holders in the UK who are unable to find a suitable fixed rate deal, and so remain at the mercy of financial markets. Fixed rate deals are popular because people want to know their repayments won’t go through the roof if rates rise, MarketGuard offers this same assurance to those who are unable to find a fixed rate deal.

The policyholder takes out insurance at between 1 per cent and 4 per cent above BOE (or Libor) interest rate at time of taking out the policy.

Taylor said: “You insure the contents of your home, not because you believe you will be burgled, but because you couldn’t afford it if you were. Interest rate insurance should be thought of in the same way – rates may not go through the roof, but do you really want to gamble with your mortgage?”

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Hmm. Interesting to know what proportion of mortgage holders, having to sell-up, would be needed to engineer a 'tip' in house prices.

It's a bit like the analogy of traffic in school holidays. A 10% reduction in traffic (due to teachers and others not working) mean the roads are clear. It only takes a certain, small percentage change, to trigger a difference. If interest rates rise and mortgage interest rates go up accordingly, there will be a 'tipping' point where it translates into a decent in house prices again.

The trouble is, I think the government know this, and are not in a position to increase interest rates any time soon. In fact, I don't know when the government will risk increasing interest rates at all, unless (unfortunately) there has been a significant rise in house prices that people can withstand a later drop. The only thing that would set this off would be a significant rise in inflation.

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Hmm. Interesting to know what proportion of mortgage holders, having to sell-up, would be needed to engineer a 'tip' in house prices.

It's a bit like the analogy of traffic in school holidays. A 10% reduction in traffic (due to teachers and others not working) mean the roads are clear. It only takes a certain, small percentage change, to trigger a difference. If interest rates rise and mortgage interest rates go up accordingly, there will be a 'tipping' point where it translates into a decent in house prices again.

The trouble is, I think the government know this, and are not in a position to increase interest rates any time soon. In fact, I don't know when the government will risk increasing interest rates at all, unless (unfortunately) there has been a significant rise in house prices that people can withstand a later drop. The only thing that would set this off would be a significant rise in inflation.

The figures may not be correct nation wide, but I assume they are not far off.

The previous government knew what would happen if they increased rates due to lenders throwing money at everybody. The global financial problems are the reason that all this is coming to light which is a good thing because we would be in a right mess if everything continued to go un-noticed. I personally doubt that this government will hold back in raising rates. When has a Tory government ever held back from taxing people?

This emergency budget next week will be interesting. I predict it is time to dig in and put on your tin helmets :huh:

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This emergency budget next week will be interesting. I predict it is time to dig in and put on your tin helmets :huh:

+1

Yes, next week will be interesting.

It is clear however that Brown and King wanted to keep rates at 0% because they know how many mortgages would default if rates rose... and defaulting mortgages mean falling house prices which means the banks have to downgrade how much they themselves are worth. A massive default in mortgages in the past 18 months would have brought the banks down - again.

So I think they will try and keep rates low for years hence why the stock markets are rising and some are piling into property... but if Spain goes the way off Greece then, overnight, we could see IRs shoot up several points and then it will be all bets off about economic collapse in housing.

The other thing to bear in mind locally is the coming public sector cull. I am hearing of lots of senior managers in the DVLA, the Council and the NHS Trust putting their houses on the market - they know what is coming and, so I have been told, are trying to downsize ASAP.

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+1

Yes, next week will be interesting.

It is clear however that Brown and King wanted to keep rates at 0% because they know how many mortgages would default if rates rose... and defaulting mortgages mean falling house prices which means the banks have to downgrade how much they themselves are worth. A massive default in mortgages in the past 18 months would have brought the banks down - again.

So I think they will try and keep rates low for years hence why the stock markets are rising and some are piling into property... but if Spain goes the way off Greece then, overnight, we could see IRs shoot up several points and then it will be all bets off about economic collapse in housing.

The other thing to bear in mind locally is the coming public sector cull. I am hearing of lots of senior managers in the DVLA, the Council and the NHS Trust putting their houses on the market - they know what is coming and, so I have been told, are trying to downsize ASAP.

The senior managers in the "Know" have already left ! The expendables remain ... this is not going to be pretty ...

If the emergency budget next week doesn`t make people realise what level of kak we are actually in .. then god help this country ... I meam how stupid are people - when was the last time any government had to have an "emergency" budget .. the clue is in the phrase ...

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The senior managers in the "Know" have already left ! The expendables remain ... this is not going to be pretty ...

If the emergency budget next week doesn`t make people realise what level of kak we are actually in .. then god help this country ... I meam how stupid are people - when was the last time any government had to have an "emergency" budget .. the clue is in the phrase ...

LOL - yes, it kinda gives it away... but most do not seem to get it...

The good thing is that after Tuesday we will know whether there will be a crash or not in houses. I suspect that the WAG will stupidly then do everything they can to avoid job cuts.

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  • 153 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%



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