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John The Pessimist

Boe Base Rate Disregarded By Bankers!

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No surprise there then......the worst wrong is the unfairness that first time buyers rightly so pay back the principle and interest but to buy a place to rent it out only the interest of next to nothing can be paid.... ;)

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I love a good laugh.

Biggest lifetime purchase and debt seems so much better for an extra £500 help towards the DFS sofa

A Lloyds Banking Group spokesman said Halifax had minimized the impact on customers by increasing cashback by £500.

Edited by LiveinHope

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The comments in the Facebook post of this article, by the telegraph, include some 'glad we just bought' comments from worldly Jemima's with lots of selfies in eco tourist hotspots. Right-on!

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LOL

First-time buyers punished as UK's biggest lenders 'sneakily' raise mortgage rates

The biggest price increases were made yesterday by Halifax, Britain's biggest lender, which increased the interest rate on its 2 year tracker for first-time buyers with a 15 to 20pc deposit, by 0.45 percentage points from 1.59pc to 2.04pc. This adds £86 a month to the cost of a 25-year £400,000 mortgage.


That's the funny bit.
FTB needing 20% deposit on a £400k house. Cos every FTB needs a £400k house.

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I love a good laugh.

Biggest lifetime purchase and debt seems so much better for an extra £500 help towards the DFS sofa

Whats more incredible is you can pick up fantastic sofa's on Gumtree for about £150 quid and yet someone who has taken on massive housing debt has to have the new sofa.A cheap second hand van would be a better investment with the cashback.

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Whats more incredible is you can pick up fantastic sofa's on Gumtree for about £150 quid and yet someone who has taken on massive housing debt has to have the new sofa.A cheap second hand van would be a better investment with the cashback.

All my furniture has come from auctions.

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LOL

First-time buyers punished as UK's biggest lenders 'sneakily' raise mortgage rates

The biggest price increases were made yesterday by Halifax, Britain's biggest lender, which increased the interest rate on its 2 year tracker for first-time buyers with a 15 to 20pc deposit, by 0.45 percentage points from 1.59pc to 2.04pc. This adds £86 a month to the cost of a 25-year £400,000 mortgage.

That's the funny bit.

FTB needing 20% deposit on a £400k house. Cos every FTB needs a £400k house.

Well you wouldn't want them to have to live in Zone 4 or 5 would you.

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The biggest price increases were made yesterday by Halifax, Britain's biggest lender, which increased the interest rate on its 2 year tracker for first-time buyers with a 15 to 20pc deposit, by 0.45 percentage points from 1.59pc to 2.04pc. This adds £86 a month to the cost of a 25-year £400,000 mortgage.

It proves what is more or less obvious: the worst time to take a long-term commitment like mortgage is when the rates are bottomed out - the banks usually take advantage of that to rise their margins and still have to resulting rate look reasonably low, but that margin will stay with you for good and bad. On the other hand, when the rates are high, banks can afford to squeeze their margins and in fact have to do so to stay competitive.

Still, it's unusual for rates to go up when the underlying tracked index goes down. Rates usually move down too, just much less. I guess lenders are starting to price in higher risk of prices going down.

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a piece of cr@p 2bed flat in my area (zone 4) surrounded by filth, cannabis smokers and dumpster-divers will set you back £300k. I kid you not. Once my kid finishes school next year you'll find me getting the hell outta here pronto. I've just had to chase a guy OUT of a skip, after chasing someone away from the same skip last night. Its the vagrant economy..someone puts something in there for someone else to take out. Like a swopshop. Outside my front (rented) door.

all this pleasure can be yours for £300k. promise.

I'll be on the stats as "never even achieved first-time buyer status, unable to rehabilitate this gentleman, kept on ranting about how the maths doesnt stack up"

Edited by madmax2

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Will make MMR trickier to pass if cost of mortgage has gone up ....

Can't see how the market won't crash at this point

At the last minute, banks successfully lobbied to have the 25 year maximum mortgage term removed from the MMR. There is no maximum mortgage term

If the cost of the mortgage goes up the bank can just extend the term, until the initial monthly payment looks "affordable". Spreading the payment over a longer term makes it look "cheaper" but results in lots more mortgage interest being paid.

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At the last minute, banks successfully lobbied to have the 25 year maximum mortgage term removed from the MMR. There is no maximum mortgage term

If the cost of the mortgage goes up the bank can just extend the term, until the initial monthly payment looks "affordable". Spreading the payment over a longer term makes it look "cheaper" but results in lots more mortgage interest being paid.

There's a natural limit to it, however. Government can print all the money in the world to give it to the indebted so they can pass it to banks, but it cannot print extra life expectancy.

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At the last minute, banks successfully lobbied to have the 25 year maximum mortgage term removed from the MMR. There is no maximum mortgage term

If the cost of the mortgage goes up the bank can just extend the term, until the initial monthly payment looks "affordable". Spreading the payment over a longer term makes it look "cheaper" but results in lots more mortgage interest being paid.

That is definitely the case with normal interest rates, but with ultra-low interest rates it isn't nearly so important.

Eg, £100k repayment mortgage at 7%:

25 year - £707 per month repayment. £212k paid over the mortgage term.

30 year - £665 per month, £240k paid over the mortgage term.

ie, extending 5 years means you pay back £28k more, and gain £42 a month in lower payments.

But £100k repayment mortgage at 2.5%:

25 year - £449 per month repayment. £134k paid over the mortgage term.

30 year - £395 per month, £142k paid over the mortgage term.

ie, extending the term 5 years means you pay back about £8k more, and gain £56 a month in lower payments.

I'd say (given that money now is more valuable than money in the future) that the longer term loan makes sense at these very low interest rates.

The main problems being:

  • You have to buy early enough in your life to still have an income at the end of the term
  • That interest rates are actually likely to rise within the 30 year term, at which point you'll be cursing not repaying more of the debt back.
Oh, and that everyone will do it, pushing up asset prices, meaning that you have to join in to buy a house even if you think it is highly risky.

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That is definitely the case with normal interest rates, but with ultra-low interest rates it isn't nearly so important.

Eg, £100k repayment mortgage at 7%:

25 year - £707 per month repayment. £212k paid over the mortgage term.

30 year - £665 per month, £240k paid over the mortgage term.

ie, extending 5 years means you pay back £28k more, and gain £42 a month in lower payments.

But £100k repayment mortgage at 2.5%:

25 year - £449 per month repayment. £134k paid over the mortgage term.

30 year - £395 per month, £142k paid over the mortgage term.

ie, extending the term 5 years means you pay back about £8k more, and gain £56 a month in lower payments.

I'd say (given that money now is more valuable than money in the future) that the longer term loan makes sense at these very low interest rates.

The main problems being:

  • You have to buy early enough in your life to still have an income at the end of the term
  • That interest rates are actually likely to rise within the 30 year term, at which point you'll be cursing not repaying more of the debt back.
Oh, and that everyone will do it, pushing up asset prices, meaning that you have to join in to buy a house even if you think it is highly risky.

Why just 30 years? The more mortgage terms are extended it increases the chance of a buyer encountering some higher rates (well hopefully....). Eventually the BoE will decide that house prices have plateaued, with borrowers maxed out on lending multiples and length of mortgage terms. Then the way to increase the banker's rake is via an interest rate rise that takes the borrower's pay rises.

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There's a natural limit to it, however. Government can print all the money in the world to give it to the indebted so they can pass it to banks, but it cannot print extra life expectancy.

It can push the retirement age further into the distance and do schemes so people already retired, are subsidised by the taxes of younger people still working.

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It can push the retirement age further into the distance and do schemes so people already retired, are subsidised by the taxes of younger people still working.

I was thinking more about people eventually dropping dead as being a limiting factor for mortgages length. Then again, I was probably wrong, as inter-generational mortgages could become the new normal - because, quite frankly, why not? All bets are off at this point.

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