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7% Interest Rates With 10% Equity (And Rising)

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Low equity? Stand by for seven per cent interest rates

By Neil Simpson

Last updated at 9:15 PM on 10th January 2011

Get ready for seven in 2011 - because experts say seven per cent interest rates could be a reality for thousands of borrowers this year, even if the Bank of England base rate barely changes.

Major lenders, including C&G, NatWest and Yorkshire Bank, are already charging almost seven per cent on some low-deposit and low-equity fixed-rate deals, while standard variable interest rates at building societies such as Newcastle and Nottingham are not far behind.

Banks are trying to keep these high-cost deals under the radar by focusing on the super-cheap rates they offer to borrowers with plenty of equity in their homes.

But if you bought with a low deposit in the past five years, withdrew equity from your home in the boom times, or if your home is worth less than it was then you could be in for an expensive shock when you remortgage.

Brokers say customers are stunned how quickly mortgage rates rise if you can’t tick all the right boxes on a bank’s application forms.

If you want to switch to a five year fix with NatWest, you will pay just 3.75 per cent until 2016 provided you have 50 per cent equity in your home.

The rate edges up to 4.19 per cent with 40 per cent, shoots up to 5.29 per cent for 25 per cent equity, hits 5.99 per cent at 20 per cent and reaches 6.89 per cent at ten per cent equity.

The best advice is to prepare for the worst now. The CBI predicts that the first rate rise in two years will come ‘earlier rather than later’ in 2011.

Brokers say that if the Bank of England raises rates by 0.5 per cent then many lenders may increase their standard variable rates by 0.75 per cent to help balance their books.

They will continue to be tough on people with low equity in their homes – so anything you can do to increase the value of your home or reduce the size of your mortgage will help keep you out of the dreaded seven per cent club.

More please.

So it's 7% now for a 10% deposit which I wasn't aware of; and with prices remaining insanely high even a 10% deposit is a huge struggle for the wannabe FTBs I know.

Well the good news is that this will make prices fall faster and harder as it cuts away the first time buyer prop, and when they fall far enough that the FTBs can put up the deposit and pay the higher rate they won't be saddling themselves with a lifetime of debt.

Happy days all round, unless you're a BTLer or your "house is your pension".

Higher!

article-1103405-00569F7C00000258-682_468x387.jpg

Edit:

Linky: Low equity? Stand by for seven per cent interest rates

And another nice story on the front page:

House prices could drop 10% in a year after average sale costs fell in 2010

Edited by Frank Hovis

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Similar to the direction the market took after the credit crunch in late 2008. I struggled to get a 5.79% fix with 25% equity against a background of falling nominal prices.

That time, of course, the base rate crashed to relieve the pressure. What can/will they do this time? Tax relief for FTBs?

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Of course charging higher rates for lower equity is another form of tax on the young.

fck em, they should have had the foresight to have been born earlier, thats the whole problem with younguns today they lack forward planning

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Similar to the direction the market took after the credit crunch in late 2008. I struggled to get a 5.79% fix with 25% equity against a background of falling nominal prices.

That time, of course, the base rate crashed to relieve the pressure. What can/will they do this time? Tax relief for FTBs?

Don't be surprised to see a "FTB Grant" of 20k to enable "hard working families" to "get on the ladder".

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Of course charging higher rates for lower equity is another form of tax on the young.

only if they choose to play at the currently stupid high price levels.

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More please.

So it's 7% now for a 10% deposit which I wasn't aware of; and with prices remaining insanely high even a 10% deposit is a huge struggle for the wannabe FTBs I know.

Well the good news is that this will make prices fall faster and harder as it cuts away the first time buyer prop, and when they fall far enough that the FTBs can put up the deposit and pay the higher rate they won't be saddling themselves with a lifetime of debt.

Happy days all round, unless you're a BTLer or your "house is your pension".

Aaah... The picture becomes clearer.

A dual rate mortgage market.

This is how we can have long term typical rates without crippling the economy.

Low rate for FTBs with a big deposit and high equity existing borrowers.

High rates for FTBs with a small deposit and the feckless MEWed out.

(In Mr Burns voice) ..Excellent..

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Aaah... The picture becomes clearer.

A dual rate mortgage market.

This is how we can have long term typical rates without crippling the economy.

Low rate for FTBs with a big deposit and high equity existing borrowers.

High rates for FTBs with a small deposit and the feckless MEWed out.

(In Mr Burns voice) ..Excellent..

better in the Dark Lord of the Sith voice...I propose.

These are not the extortionate rates you are looking for (waves bonus award right in your face)

Edited by Bloo Loo

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Don't be surprised to see a "FTB Grant" of 20k to enable "hard working families" to "get on the ladder".

now you're scaring the shit out of me. It would be nigh-on impossible to avoid a huge conflict with the oh if this happens.

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now you're scaring the shit out of me. It would be nigh-on impossible to avoid a huge conflict with the oh if this happens.

surely all a 20k grant would do is put prices up by more than 20k

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More please. (...)

I think this quote is the most important, as it should generate forced sales: "But if you bought with a low deposit in the past five years, withdrew equity from your home in the boom times, or if your home is worth less than it was then you could be in for an expensive shock when you remortgage."

So, everybody re-mortgaging with less than 10% equity will probably face a big increase in their monthly payment.

With 2011 average prices back to 2003-4(?) levels, that should include millions of people who bought in the past 5-6 years - with low or no deposits, and/or MEWed, and/or IOnly.

I guess people who bought with some deposit, on a repayment mortgage, and didn't MEW, may be OKish - just.

At least some partial fairness will start to return to the market.

.

Edited by Tired of Waiting

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surely all a 20k grant would do is put prices up by more than 20k

See the Aussie thread for details on how that works - or doesn't as the case may. The first-time-seller's grant as it is known.

This is the same sort of pish that even Nigel Lawson had the good sense to get rid of.

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  • 312 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%
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