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Ash4781

How High Can Rates Go?

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Some rough maths gives at around 6.4% annual mortgage rate for every pound borrowed a pound in interest must be repaid. With the large loans much higher rates creates real problems. At 9.2% I make it 1.5 pounds in interest per pound borrowed. So how high can rates go without the system collapsing?

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I'd love to see rates at 15% just so we can see how many so called "homeowners" can actually afford their property.

Not many I would guess.

Edited by Wait & See

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I'd love to see rates at 15% just so we can see how many so called "homeowners" can actually afford their property.

Not many I would guess.

That's evil

But I like it

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I'd love to see rates at 15% just so we can see how many so called "homeowners" can actually afford their property.

Not many I would guess.

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Well, they have been 12ish for fairly long periods in the not too distant past. If I were going to borrow I would be doing my sums on the basis of having to pay that much for sustained periods.

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Well, they have been 12ish for fairly long periods in the not too distant past.

Yes, but that was when people had been borrowing 3.5x earnings on a repayment mortgage.

Now people are on 7x on a IO mortgage.

I don't see the BoE/banks ever allowing rates to get that high. There would be carnage.

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Well, they have been 12ish for fairly long periods in the not too distant past. If I were going to borrow I would be doing my sums on the basis of having to pay that much for sustained periods.

Roguht maths, I always use 10% for a bad (not worst) case mortgage.

Even if BoE rates do not go that high - say 6%, I think we are going to see quite a spread over funding - say 2 or 3%.

Remember there is s*d all competition in the mortgage market. Mainly because 70% of it has gone bust, basically by grossly mispricing credit ( margins too low) and risk (BTL + Wilsons anyone?)

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I'd love to see rates at 15% just so we can see how many so called "homeowners" can actually afford their property.

Not many I would guess.

At 15% many of those on here who rent will also be out on the street.

The banks will own many empty properties.

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Yes, but that was when people had been borrowing 3.5x earnings on a repayment mortgage.

Now people are on 7x on a IO mortgage.

I don't see the BoE/banks ever allowing rates to get that high. There would be carnage.

If they do go to the sort of rates that they should be when you take inflation into account it won't be a case of the BOE allowing it, rather than a case of the markets forcing it. At the moment all currencies are trying to sort of 'discretely devalue' but as soon as one major currency stops and raises its rates the rest will have to follow. Otherwise a crash rather than a gradual devaluation for the others.

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Even if BoE rates do not go that high - say 6%, I think we are going to see quite a spread over funding - say 2 or 3%.

But what is going to push rates that high ? At least in the short-mid term (5yrs)

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Yes, but that was when people had been borrowing 3.5x earnings on a repayment mortgage.

Now people are on 7x on a IO mortgage.

I don't see the BoE/banks ever allowing rates to get that high. There would be carnage.

Yep.

I've been doing affordability calculations based on sustained mortgage rates of 9%, I can't see it getting much higher than that for precisely the reasons you mention.

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Some rough maths gives at around 6.4% annual mortgage rate for every pound borrowed a pound in interest must be repaid. With the large loans much higher rates creates real problems. At 9.2% I make it 1.5 pounds in interest per pound borrowed. So how high can rates go without the system collapsing?

I've just pulled out an old mortgage statement from years ago. My rate at that point was 6.29% and it says amount repaid for every £ borrowed over 25years was £2.84... that was interest only.... so it could be even higher for some if thats correct (after all it was with Lloyds so the figures might be a bit ...... well how can I put this...... fudged)

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Sovereign default or inflation.

Default can't happen when we print our own money right ?

Inflation yep, well we have lots of that anyway, how high would it have to be before rates budge ?

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At 15% many of those on here who rent will also be out on the street.

The banks will own many empty properties.

At 15% everyone will stay in their homes as there would be mass default. The system would be overwhelmed - there wouldn't be enough baliffs in the country to kick everyone out.

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At 15% everyone will stay in their homes as there would be mass default. The system would be overwhelmed - there wouldn't be enough baliffs in the country to kick everyone out.

Good career move? At least bailiffs can't be outsourced.

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Yes, but that was when people had been borrowing 3.5x earnings on a repayment mortgage.

Now people are on 7x on a IO mortgage.

I don't see the BoE/banks ever allowing rates to get that high. There would be carnage.

Yes. Everyone would be in trouble at 15%. Even people who borrowed sensibly. Someone on £50k borrowing 3X salary on a repayment mortgage would be in to over £2k per month at 15%, leaving less than £1k of their take home pay to pay for everything else.

People who have borrowed irresponsibly would be well under water. There are loads of people in my area who have got recently bought £600k+ houses with single breadwinners who are unlikely to be on much more than £80k. I know there is inheritance, redundancy etc, but I suspect a lot of these guys have got £300k+ mortgages. At 15%, they might just about have enough to pay the interest and their council tax every month, but food is going to be a problem.

The only people that would be safe are those who bough 7-8+ year ago and have been sensible about paying down the mortgage.

As mentioned above, the banks would be able to repossess at 15% anyway, there would be too many and the values would be so low as to make it not worth doing.

Even 5% will be a bloodbath.

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Inflation yep, well we have lots of that anyway, how high would it have to be before rates budge ?

There is a country run by a bloke called Bob.... south of here. Thats how bad it'll get

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At 15% everyone will stay in their homes as there would be mass default. The system would be overwhelmed - there wouldn't be enough baliffs in the country to kick everyone out.

It will be the people who played by the rules, worked hard, provided deposits, never missed a payment and never claimed a penny from the state that will be hit the hardest.

Many people factor in high interest rates, maybe 6-8% as a worse case scenario but 15% :o

The system will be overwhelmed I agree. As much as I would like to target the spiv speculating BTL scumlords in some way, 15% will cause way to much collateral damage.

Yep that bomb will wipe out the true enemy but take out half the good guys as well.

Not something to wish for IMO.. Chaos. Saying all that, we might just be heading that way.

Feck my first TFH post :lol:

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At 15% everyone will stay in their homes as there would be mass default. The system would be overwhelmed - there wouldn't be enough baliffs in the country to kick everyone out.

Unless they do what I propose i.e. to repeal the bankruptcy escape route.

I feel it terrifically unfair people can just walk away from their obligations like that with zero repercussions and be in a position to do it again in 12 months time. Bankruptcy should be for life and then some.

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Yep that bomb will wipe out the true enemy but take out half the good guys as well.

Not something to wish for IMO.. Chaos. Saying all that, we might just be heading that way.

Feck my first TFH post :lol:

Gotta break some eggs to make some omlettes. And we need an 84 egg sandwich

We're Muscles Glasses btw, the one who feasts on the corpses of others who were foolish enough to over stretch.

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  • 284 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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