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newgi

New 5 Year Fixes - How Can the Lenders Afford It?

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When I took out my first 5 year fix it was in 1999 and it was 5.39%.  A few years ago I was surprised to see how far these rates has fallen (3.64%):

https://www.ft.com/content/0c95ddae-abd0-11e0-945a-00144feabdc0

Now I see that John Charcol are offering this astonishing five year fix of just 1.59%:

https://www.charcol.co.uk/news-opinions/mortgage-property-blog/john-charcol-partners-with-new-lender-to-offer-lowest-5-year-fix-on-the-market-18354/

So even if house prices crashed very soon, which judging by recent topics seems very likely, you would have five years for the market to stabalise before you needed to worry about interest rate rises.

Aren't Bank of Cyprus concerned about the effects of Brexit?

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I can only assume that the commercial lenders feel that the CBs will be successful in repressing interest rates into the med-long term and/or they will be bailed out should things go pear shaped.

Maybe they're securitising again and are shifting the risk elsewhere (worked out so well last time......).

 

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8 minutes ago, sPinwheel said:

Ten year fixed are mind boggling.

The housing bubble is mind boggling and the criminal acts people are going to to keep it afloat even more so.

if the UK government were working for us they would have stopped the bankers in 2008, they didnt and now things are beyond insane.

I cannot see past this ending really badly for 99% of us.

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Tesco are currently offering a five year fix for 1.78% with a £995 fee, so 1.59% might be viable if the fee was set at £1,999.

Update: Yorkshire do 1.69% with a £995 fee.

Edited by Broken biscuit

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44 minutes ago, Broken biscuit said:

Tesco are currently offering a five year fix for 1.78% with a £995 fee, so 1.59% might be viable if the fee was set at £1,999.

Update: Yorkshire do 1.69% with a £995 fee.

so all i need to do is buy at 1997 prices and i`m quids in both ways.

where is doc brown and the delorean when you need them. 

 

 

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1 hour ago, Broken biscuit said:

Tesco are currently offering a five year fix for 1.78% with a £995 fee, so 1.59% might be viable if the fee was set at £1,999.

Update: Yorkshire do 1.69% with a £995 fee.

The criminality of a government that watched the banks collapse in 2007 then allow this madness, supported by our taxes, is there for all to see.

Why people are not on the streets protesting is beyond me.

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1 hour ago, Broken biscuit said:

Tesco are currently offering a five year fix for 1.78% with a £995 fee, so 1.59% might be viable if the fee was set at £1,999.

Update: Yorkshire do 1.69% with a £995 fee.

Two words. Moral hazard.

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What does it mean can't afford it?.....lowest rate 1% to 2%  plus fees and charges most will be paying more, lots on svr.....lenders are only paying ~1% on instant savings if lucky and shop around, most people getting far less than that......so there is a reasonable margin but when interest rates go up it will be better......but more defaults I would expect......money is made on volume, large growth in amount of debt assets, a falling of saving liability .;)

 

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The banks aren't lending this money out to be "nice" or because they want to give the young folks a "helping hand". Fifty times as much money is lent out on residential mortgages than in UK industry (roughly).

 Think about it. Lend out money at a certain rate (tempt prospective suckers). Make prospective borrower believe low rates will last for years. Then as soon as borrowers start defaulting, seize assets.


The banks/mortgage providers/boiler room merchants are playing the long game.

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2 minutes ago, Princekie said:

The banks aren't lending this money out to be "nice" or because they want to give the young folks a "helping hand". Fifty times as much money is lent out on residential mortgages than in UK industry (roughly).

 Think about it. Lend out money at a certain rate (tempt prospective suckers). Make prospective borrower believe low rates will last for years. Then as soon as borrowers start defaulting, seize assets.


The banks/mortgage providers/boiler room merchants are playing the long game.

That Cypriot bank, and ybs, aren't playing the long game. They just have nothing else better that they have the skills to do. They are institutionally unagile.

Edited by Si1

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These are more common than you think. I just refinanced to a comparable deal (sub 2%, 5 year fix, <60% LTV). 

21st century prices or no, my mortgage now basically costs ****** all (around an 8th of my wife and I's current net income). Currently overpaying the maximum and shovelling several hundred quid a month into a Vanguard index fund. 

 

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6 hours ago, TheCountOfNowhere said:

The housing bubble is mind boggling and the criminal acts people are going to to keep it afloat even more so.

if the UK government were working for us they would have stopped the bankers in 2008, they didnt and now things are beyond insane.

I cannot see past this ending really badly for 99% of us.

If people choose to buy a house, they don't need your permission.  It's their own life decision.   View, survey, deposit, arrange finance.. and outbid all others.

It's called a market, and you've/I've been on wrong side of it for years during HPI+++++++++.   2008-2011 (and 2004) so many thinking buyers were doing it wrong.  Go back to Bevan in 1930s and his view of mortgages being a 'gravestone around buyers necks'..... the control squad wrong.

In part because of people who think other people need their permission to buy.

99%  ?

Does that include all the outright owners worth fortunes.  With no rent to pay / no mortgage to pay?

1 in 5 homes a rental... BTLers reaping rents.   Lot of happy people out there, Count.   No debt comes into existence without borrowers, and most are willing/eager own-mind borrowers.

 

bqgvKj9.png

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4 minutes ago, Venger said:

If people choose to buy a house, they don't need your permission.  It's their own life decision.   View, survey, deposit, arrange finance.. and outbid all others.

It's called a market, and you've/I've been on wrong side of it for years during HPI+++++++++.   2008-2011 (and 2004) so many thinking buyers were doing it wrong.  Go back to Bevan in 1930s and his view of mortgages being a 'gravestone around buyers necks'..... the control squad wrong.

In part because of people who think other people need their permission to buy.

99%  ?

Does that include all the outright owners worth fortunes.  With no rent to pay / no mortgage to pay?

1 in 5 homes a rental... BTLers reaping rents.   Lot of happy people out there, Count.   No debt comes into existence without borrowers, and most are willing/eager own-mind borrowers.

 

bqgvKj9.png

I wonder what will happen when people stopped borrowing for new homes ?

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8 hours ago, newgi said:

Now I see that John Charcol are offering this astonishing five year fix of just 1.59%:

https://www.charcol.co.uk/news-opinions/mortgage-property-blog/john-charcol-partners-with-new-lender-to-offer-lowest-5-year-fix-on-the-market-18354/

So even if house prices crashed very soon, which judging by recent topics seems very likely, you would have five years for the market to stabalise before you needed to worry about interest rate rises.

Depends how much they have borrowed vs their life circumstances I suppose, and how the economy plays out in future.

Quote

 

FT: Affordability Backwards 

.....the initial interest payment on a £100,000 repayment loan at a 15 per cent interest rate is the same as that for a £300,000 loan at 2 per cent.

 

 

Quote

 

HPC Member Bear Hug: 
Becomes more interesting when capital repayments are considered. £15k wipes out 15% of 100k loan and only 2% of £300,000k. Or very roughly, doubling payments compared to interest-only will clear your debt in 6 years at 15% or 50 years at 2%!

 

 

 

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9 minutes ago, maverick73 said:

I wonder what will happen when people stopped borrowing for new homes ?

That's been my hope for quite some time, but I still hold to it.

Values are found at the margin, and it doesn't take too many sellers and buyers to accept/transact at lower prices, to impact on value of surrounding houses.  

Low-volume market... 2008/09... not many sellers/buyers but wider prices fell hard.

Not that most owners thought their own property/house had fallen, in many of the HPI++ areas.  

Their houses 'special'.  (Excl some Northern pockets).  Then all the squealing, to zirp and QE... and new HPI+++++++ in London/SE.. here in NW.   Although it can come around again..... buyers drop out of market and some sellers having to accept far less, bringing wider market values down.

Edited by Venger

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17 hours ago, TheCountOfNowhere said:

The housing bubble is mind boggling and the criminal acts people are going to to keep it afloat even more so.

if the UK government were working for us they would have stopped the bankers in 2008, they didnt and now things are beyond insane.

I cannot see past this ending really badly for 99% of us.

Its not criminal if the government does it. That's been true throughout history but notable examples of late:

Wars

Pension ponzi

Housing props

privacy erosion 

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15 hours ago, Princekie said:

 

 Think about it. Lend out money at a certain rate (tempt prospective suckers). Make prospective borrower believe low rates will last for years. Then as soon as borrowers start defaulting, seize assets.


The banks/mortgage providers/boiler room merchants are playing the long game.

Banks hate having to repossess. If they have to, it means they have got their numbers wrong. 

At best, they get the outstanding principal back - any remainder is returned to the borrower. But even in such cases, it messes with their income projections and associated hedges.

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How can lenders afford it?

Just received notification from Coventry Building Society that they're further reducing my savings account with them by another 0.2%. That's given me the excuse to move all the savings I have with them out of their BTL-funding machine.

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Lowering interest rates this low wont cause people to speculate on leverage (houses and equities)  they will spend in the economy instead and velocity will rise,right?

With savings rates just above positive,velocity at recession levels and leverage higher than at any time in history 1.5% interest on a house bought today is going to be a terrible investment.For people already in houses of course if they use the time left to de-leverage as fast as possible its ok.People will de-leverage and overpay as fast as possible wont they?

 

DFiJpqUWAAIYbYT.jpg

velocity.png

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