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Ash4781

Interests Rates Over The Mortgage Term

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Over the course of a 25year mortgage term starting today we would expect interest rates to rise. Yet many are already stretched at their maximum affordability. If many are expecting wage growth to improve their finances I would expect generally this would be followed by a rise in the interest rate. It would be interesting to see lenders stress tests for mortgages over the full term.

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That's what SMI is for and why the level was raised from £100,000 to £200,000 ie 10ish X the median wage. Anyway most people only think about the next 3 years and Carney has sorted that and by then the debt will have inflated away.

Pay-As-You-Go. ;)

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Over the course of a 25year mortgage term starting today we would expect interest rates to rise. Yet many are already stretched at their maximum affordability. If many are expecting wage growth to improve their finances I would expect generally this would be followed by a rise in the interest rate. It would be interesting to see lenders stress tests for mortgages over the full term.

I agree, interest rates will probably rise.

But not by much and not soon.

It's been a generation since we saw anything sustained that even approached double digit rates. In fact looking back it seems that it was the high interest rates of the 70's and 80's that were the historical aberration, not today.

The real routes to lower house prices are increased house building and a change to the current landlord friendly legislation in favour of the tenant. A sudden hike in interest rates causing mass distress selling isn't even remotely in prospect.

Edited by silver surfer

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A sudden hike in interest rates causing mass distress selling isn't even remotely in prospect.

+1 First sensible thing I've read on here in weeks

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Snip A sudden hike in interest rates causing mass distress selling isn't even remotely in prospect.

Whilst I agree with the sentiment, it assumes that the lenders have control over the interest rates.

They only maintain control whilst the Central Bank devalues the currency by printing, taking silly collateral, or no collateral at all.

It is the assumption that this will continue for the next 25 years that is the mistake in my opinion. With the likely hood of more war in the near future, borrowing costs are going to go up no matter what the central bank does.

Edited by Bloo Loo

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Median mortgage is 75K. Even if rates surged the vast majority will still manage though there would probably be a significant minority who would go bust. Most people buying or re-mortgaging right now will be on 5 year fixes, too. They'd be mad not to with rates like 2.5% on offer. By the time higher rates are hitting them they will be better placed to cope.

http://www.theguardian.com/news/datablog/2013/may/13/mortgages-property-debt-uk-trends

If rates rose significantly (which I now think is unlikely like posters above) I think the biggest shock to the housing market would be the effect on BTL. It barely adds up now, a rise in mortgage (and savings) rates would convince a lot of people to steer clear or sell up.

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+1 First sensible thing I've read on here in weeks

It doesn't need to be a sudden 'hike' just a slight move back towards long term averages will put a lot of debt in to distress - certainly ceasing up new lending.

All the indicators are that people are expecting this in 2015/16. It's very possible we'll see some event before then that requires the bank to move rates up a little.

But as you see with the taper announcement - just indicating you are thinking about something is enough for events to start to get out of control.

The whole Soros/ERM debacle demonstrated that a central bank is weak when it announces a long term position that requires defending - the BOE look like a duck to me (calm above the water) right now.

House prices can't go up a lot from where they are with current salaries - the government are throwing the book at keeping them at current levels until next election. After that I suspect they'll withdraw support - but at the same time lower income taxes to generate some alternative 'wealth effect'. Blame the subsequent correction on EU or China and hope it recovers by 2020.

The question for me is can they keep all the plates spinning for 18 more months - I'm not sure they can - to do it they'll need more than H2B - maybe bringing back 110% IO for good credit 'hard working families' or getting pension funds to move more funds in to BTL.

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Houses can still rise even if wages do not rise. Mortgages are getting cheaper and cheaper plus there are interest free deposits from the taxpayer and more guarantees from the tax payer. SMI in cases you get into problems. All the current policies FLS, HtB etc are designed to raise property prices. Expensive London property is an ideal place for foreign money to be stored. And Carney has committed to low interest rates and will keep them even if it wrecks the economy. If HtB needs a bigger interest free deposit or bigger guarantee to 'help' people then George will supply it.

+1

Loads of scope for the PTB yet, 50 year terms 100% government guarantee etc.

Going to take a long time for all the boomer money to be flashed out, only last night I was talking to a late 60 year old who has just downsized

has'nt sold his own yet bought the downsize place cash 150k.

Keep banging the drum boys and girls but IMHO we have at least another 10 years to go.

A

p.s oh and he retired at 55. But then had a little job for 10 years or so just to keep him occupied ;)

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+1 First sensible thing I've read on here in weeks

Wishful thinking?

Its not base rates you need to worry about its the cost of borrowing. Other economies have had their asset price bubble correction and are in their growth phase. The UK stupidly threw everything at the bubble to keep it inflated just a little while longer for the short term gain of vested interests. Now that we are out of step other economies will have a higher cost of borrowing sooner than we can sustain, and since the money markets are international the cost of borrowing here will increase as well.

The rising tide will lift all ships but in the UK we've been bailing the water out instead of repairing the holes, we will be swamped by the rising tide and will be underwater sinking to the bottom as other economies catch a tail wind and accelerate off into a brighter future.

It is a silly time to be taking on an onerous debt and crossing your fingers in the hope that the rest of the world will care about not sinking blighty.

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