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Tired of Waiting

Millions Have Switched From Fixed To Variable Rates Mortgages

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Yeah a timebomb...

The BoE is having a gun held to it's head.

Mortgage holders are deciding to gamble. Mind-boggling.

Either they don't realise they are gambling, and just go for the cheapest short term option, without much thought.

Or they know they are gambling, but they don't have a choice, as they can't afford the more expensive short term option.

Well, of course there are people in both camps, I am just curious about the numbers in each camp.

EDIT: The banks are offloading the rates gamble. And I am sure they will be requiring some good equity there, for protection against default.

Edited by Tired of Waiting

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Yeah a timebomb...

The BoE is having a gun held to it's head.

yep, i noticed that and it was by far the most interesting observation, i think it will ultimately be the capitulation phase for the market im very sure that at some point in the next 24-30 months there is a currency crisis coming and rates will rocket overnight (ignoring the further declines up to that point where i can see potential of about 20% through further credit restriction) a shock interest rate hike to above 10% which is a cert in acurrency crisis from zirp would knock about 30% of prices overnight), the market is naturally forcing/enticing the majority over to the wrong side of the market as it always does,

Theres alot of talk about UK & US prices dislocating, when in currency terms they havent, i think this will be a potential reconnection because the Variable rate is predominantly a UK/Canada lovefest thing, The hig interest rates will reglue the price moving it downwards and the currency moving it upwards

Edited by Tamara De Lempicka

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Mortgage holders are deciding to gamble. Mind-boggling.

Either they don't realise they are gambling, and just go for the cheapest option, without much thought.

Or they know they are gambling, but they don't have a choice, as they can't afford the more expensive short term option.

Well, of course there are people in both camps, I am just curious about the numbers in each camp.

EDIT: The banks are offloading the rates gamble. And I am sure they will be requiring some good equity there, for protection against default.

Pfiffletwoffle ('scuse my gibberish).

Methinks people are spurning chocolate-teapot short fixes, which only serve to defer your gamble to a higher-risk time. I expect the numbers are a direct consequence of long (10year and up) fixes disappearing from the market, so not-gambling on the mortgage isn't an option.

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Isn't this just people coming off their fixed terms and moving onto the variable rates? For some people it's a reasonable gamble to be on variable rates but many have no choice - the self-certers who previous lied to get inflated loans and who now can't re-mortgage because it would expose lies on previous mortgage applications.

Dead right it's a timebomb. The only hope for a lot of people is that interest rates stay rock bottom.

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Pfiffletwoffle ('scuse my gibberish).

Methinks people are spurning chocolate-teapot short fixes, which only serve to defer your gamble to a higher-risk time. I expect the numbers are a direct consequence of long (10year and up) fixes disappearing from the market, so not-gambling on the mortgage isn't an option.

Yep, they are deferring the crash.

ratesvarvfixed.png

I could never have imagined how slow all this disaster would be.

We knew it was a bubble since... when? 2002 or 3? IIRC, I was just starting to suspect it back then, more sure about it in 2004, and totally sure about it in 2005.

We are now in 2010.

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Either they don't realise they are gambling, and just go for the cheapest short term option, without much thought.

Or they know they are gambling, but they don't have a choice, as they can't afford the more expensive short term option.

Really, who would continue on a fixed rate of say 5% when they can drop to an SVR of 2.5% ? Interest is halved, so they can make some extra capital repayments.

As soon as rates look like they're going to rise many will then go back onto a fixed rate.

Makes sense IMO

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Really, who would continue on a fixed rate of say 5% when they can drop to an SVR of 2.5% ? Interest is halved, so they can make some extra capital repayments.

As soon as rates look like they're going to rise many will then go back onto a fixed rate.

Makes sense IMO

Yes because its completely likely most people are going to be able to time the interest rate, seeing as the general publics market timing is legendarily impressive throughout history, id have thought the large majority being on fixed going into a decline to zirp would suggest what is going to happen

Edited by Tamara De Lempicka

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Really, who would continue on a fixed rate of say 5% when they can drop to an SVR of 2.5% ? Interest is halved, so they can make some extra capital repayments.

As soon as rates look like they're going to rise many will then go back onto a fixed rate.

Makes sense IMO

Indeed, two years saving 1K per month is 50K capital repayments. I know friends who are doing that, if they had followed my advice, it would have been a mistake.

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Really, who would continue on a fixed rate of say 5% when they can drop to an SVR of 2.5% ? Interest is halved, so they can make some extra capital repayments.

As soon as rates look like they're going to rise many will then go back onto a fixed rate.

Makes sense IMO

For some yes. As I said above there are lts who won't be able to remortgage. Either no equity in house or previously lied on a self-cert. It's like sitting on death row for a lot of them guys.

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Sorry. Mistaken post.

( I had posted here 6 other charts from today's Nationwide press release, but actually they are on a different topic. It is better if I start a new thread for it.)

Edited by Tired of Waiting

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Maybe (like some in my office) they are on the SVR having coming off 2/3 year fixes and are desperately scrambling around to pay down the capital so that they can remortgage before rates go up

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For some yes. As I said above there are lts who won't be able to remortgage. Either no equity in house or previously lied on a self-cert. It's like sitting on death row for a lot of them guys.

Right, but typically fixed rates are for a fixed period anyway, after which point you fall back to the SVR or negotiate another mortgage.

I'm pulling figures out of the air, but lets say the average fixed rate is for 3-5 years, do you stick on a fixed rate for those years, unable to pay off any equity in a falling market, only to end up on an SVR or unable to get a mortgage anyway, or do you go to a SVR and try to pay off as much as you're losing to maintain some equity (or at least not be in negative equity) and you're in a better position to negotiate a mortgage since you have equity.

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Mortgage holders are deciding to gamble. Mind-boggling.

Either they don't realise they are gambling, and just go for the cheapest short term option, without much thought.

Or they know they are gambling, but they don't have a choice, as they can't afford the more expensive short term option.

Well, of course there are people in both camps, I am just curious about the numbers in each camp.

EDIT: The banks are offloading the rates gamble. And I am sure they will be requiring some good equity there, for protection against default.

Not sure about gambling, more of a calculated decision I would say. People know SVR's are BOE base +xy% (always a low number).

With the economy in such a poor state the base rate is set to stay low for some time. Even when the inevitable does happen and it starts increasing it'll be in small increments. People know the BOE won't hit the detonate button especialy as more and more people take on similar mortgages.

Wise choice I'd say. Maybe 5yrs of paying an ultra low interest rate so allowing to chip away at the capital.

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Excuse my ignorance, but where do fixed trackers come into this?

On a sad-for-bears note, I think the IRs will remain rock bottom for a good while yet and bailout all the property speculators by giving them breathing room to accumulate equity.

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As soon as rates look like they're going to rise many will then go back onto a fixed rate.

But.. if it looks like rates are going to rise, won't the banks either:

a] withdraw their fixed rate offerings all together

b] offer some stupidly high fixed rate to deter people from taking it

Will the banks position themselves to be on the losing side of this bet..they seem to have played their hand pretty well so far, with massive wealth transfers from our generation and our children's, so save their a$$e$ ?

Edited by sesim

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Mortgage holders are deciding to gamble. Mind-boggling.

Either they don't realise they are gambling, and just go for the cheapest short term option, without much thought.

Or they know they are gambling, but they don't have a choice, as they can't afford the more expensive short term option.

Well, of course there are people in both camps, I am just curious about the numbers in each camp.

EDIT: The banks are offloading the rates gamble. And I am sure they will be requiring some good equity there, for protection against default.

BoE is creating 'greenspan put' type of impression for UK home owners. Can't really see why VAR rates will be a timebomb either, if the government/Boe wishes, they can keep rates low forever (and take administrative measures to sort out inflation, or worse, let inflation runs).

To control an economy the government just need to control Quantity of money (which they have more control) and Velocity of money (which it has less control but interest rate is just a tool to control this). Before I get flamed, HP will go down if the product of Quantiy of money and velocity of money goes down. Interest rate is just a side show (to affect the V).

In fact, Fixed rate can also be a time bomb if cost of living rises and economy continue to be weak. Fixed rates tend to come in with fixed term contract

with penalty as well - so, a significant cost to exist.

Edited by easybetman

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There's also the difference between SVR and a BOE tracker. With an SVR you never know if the bank might decide to increase it's margin regardless of other circumstances - at least with a BOE tracker you know you're in the same boat as a lot of other people (and other big VIs).

So: Fixed Rate, currently at least 1.5-2% higher than a decent BOE tracker for 3/5 years, followed by an SVR which is higher than the tracker rate anyway? Plus, it has a lock-in for the fixed period? Or a BOE tracker that has no lock-in, allows any overpayments and means you can switch to a fix if it all seems to be going tits up?

Bit of a no-brainer at the moment.

Edit: Unless your are stretching, in which case a fixed rate might appeal for the reduced risk. But I wouldn't buy now if that's the case; save a bigger deposit first so you aren't stretching so much. House prices aren't going up in the next 6 months at least.

Edited by efdemin

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I have to agree with Exiges comments. If you can get a decent tracker deal, with no penatlies for changing to a fixed rate further down the line, then that surely has to be the best option. One can then overpay what they would have paid for a fixed rate and actually start to repay more of the capital, putting them in a better position when they need to remortgage after 2 years or so.

I too feel low IR's are here to stay. There are far too many homeowners in trouble and raising IR's would result in carnage.

I will seriously consider trackers come January when I'm in the position to try and buy a home.

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BoE is creating 'greenspan put' type of impression for UK home owners. Can't really see why VAR rates will be a timebomb either, if the government/Boe wishes, they can keep rates low forever (and take administrative measures to sort out inflation, or worse, let inflation runs).

To control an economy the government just need to control Quantity of money (which they have more control) and Velocity of money (which it has less control but interest rate is just a tool to control this). Before I get flamed, HP will go down if the product of Quantiy of money and velocity of money goes down. Interest rate is just a side show (to affect the V).

In fact, Fixed rate can also be a time bomb if cost of living rises and economy continue to be weak. Fixed rates tend to come in with fixed term contract

with penalty as well - so, a significant cost to exist.

Do low interest rates encourage borrowing and so raise quantity of money?

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Not sure about gambling, more of a calculated decision I would say. People know SVR's are BOE base +xy% (always a low number).

With the economy in such a poor state the base rate is set to stay low for some time. Even when the inevitable does happen and it starts increasing it'll be in small increments. People know the BOE won't hit the detonate button especialy as more and more people take on similar mortgages.

Wise choice I'd say. Maybe 5yrs of paying an ultra low interest rate so allowing to chip away at the capital.

The main risk is inflation caused by the weak sterling and VAT increase. 40% of our households expenses go to goods priced (directly or indirectly) in foreign currencies, mainly Dollars and Euros, from energy to food.

I agree that, if they could use the next few years of very low rates to pay down their mortgage, that would help.

But their asset will be falling as fast, if not faster. This past month alone the average house lost 1% of its value. And the loss in relation to their equity will be much greater. If someone had, say, 20% equity they lost 5% of their equity last month alone! They should STR, if they can.

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yep, i noticed that and it was by far the most interesting observation, i think it will ultimately be the capitulation phase for the market im very sure that at some point in the next 24-30 months there is a currency crisis coming and rates will rocket overnight

30 months! That's 2013. Surely if there is a currency crisis it would have to occur before then or not at all?

Or maybe you're right and I just don't want to accept that as my patience won't stretch to 3 years.

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  • 149 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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