Mortgage interest payments set to rise 36% within the next 5 years

[Mapatasy]

The Office for Budget Responsibility, which provides the forecasts on which Philip Hammond makes his decisions, is predicting an intimidating 36 per cent increase in mortgage interest payments over the next five years as interest rates rise...

http://www.cityam.com/283257/can-you-afford-36-mortgage-hike-and-why-renters-may-once

 

[hurlerontheditch]

I like this bit...

 

Quote

Homeowners’ finances are set to come under pressure and their entire windfall of the past five years is forecast to be eliminated. The risks to consumer spending cannot be ignored as this tailwind turns into a headwind.

 

[Si1]

Oh the humanity

[hayder]

will be a signal for the government to

"step in"

and

"do something"

to

"protect"

the

"hard working families"

who are

"homeowners". 

 

Edited April 4, 2018 by hayder

[Social Justice League]

Looks like most mortgage holders are going to go bankrupt then.

Liar loans and manufactured IR's are all coming home to roost.

[Andy T]

I can't see raises in the next 5 years having too much impact, they just won't allow it.

The ones most affected will be the young, those at the beginning of a mortgage, those on longer term mortgages, higher rates etc.

The lucky ones in the last 10 years of a mortgage will be paying more capital off than interest so far less affected.

[iamnumerate]

Is this a rise to 36% or a rise of 36% on what you are paying at the moment.

The first no way, the second easily.

I assume the second.

[Save me from the madness!]

So many times over the last 15 years I've heard this. I know eventually one of these predictions will come true, but after 15 years I feel I've heard this all before and what will happen is a reduction in interest rates and more Government support, "Step to Buy" anyone for those moving to their second home?

Edited April 4, 2018 by Save me from the madness!
typos

[Mapatasy]

5 minutes ago, Save me from the madness! said:

So many times over the last 15 years I've heard this. I know eventually one of these predictions will come true, but after 15 years I feel I've heard this all before and what will happen is a reduction in interest rates and more Government support, "Step to Buy" anyone for those moving to their second home?

Things are very different now.

[iamnumerate]

7 minutes ago, TonyJ said:

This could be too rosy a forecast given the “scale of vulnerabilities that had built up” since the crisis.

That really annoys me, we should have used low interest rates to reduce them not make them worse!

[winkie]

18 minutes ago, TonyJ said:

This in the Telegraph just now. It leaves me feeling moire hopeful rates will be going up on May 10th:

Mark Carney walks 
a tightrope on future interest rate decisions

Not many businesses openly call their customers “time-wasters” with “expectations that are so out of this world”. Yet that is exactly what Lee James Pendleton has said in a highly unusual rant about homeowners trying to sell their properties through his estate agency.

“The property market, particularly in London, is being hobbled by time-wasters who refuse to accept good advice,” he says.

“These sellers have no realistic prospect of finding a buyer because their expectations are so out of this world. They have done very well out of the housing market but they haven’t earned that money, they’ve just lived in those homes and watched the magic money tree grow. Now they think prices can only go up.”

To those outside London – and outside the property industry – this might sound like the frustrated moaning of a man who has been accustomed to raking in easy money in a booming market. But price changes in the capital tend to ripple out to the rest of the country a year or two down the line, so it may well have implications for everyone in the near future.

It also causes serious worries at the Bank of England. It is remarkable that a market driven by debt can appear to be wobbling when interest rates are so low. And it is one of several conundrums that the Bank must tackle when working out how to raise interest rates from what are still emergency levels – a remarkable problem 10 years on from the financial crisis that caused rates to be slashed to historic lows of 0.5pc.

<Snip>

Greed.

[cnick]

Anyone remember a time when Evan Davis used to bang on about the 'overheating economy' ....... When did that term cease to be used? 2006-7?......it was almost as if there had been some sort of diktat, from on high, forbidding it. .....

[happyguy]

1 hour ago, Save me from the madness! said:

So many times over the last 15 years I've heard this. I know eventually one of these predictions will come true, but after 15 years I feel I've heard this all before and what will happen is a reduction in interest rates and more Government support, "Step to Buy" anyone for those moving to their second home?

Yea yet another thread forecasting doom and hpc - just heard it all before.  

[dropbear]

Guys it only means a move from the current 3.7% to 5% APR. Still below the historic average, and it's entirely achievable. That's probably only 2 or 3 rises from the BOE in the 5 years.

It will be tough for the extremely over-leveraged, but I think most people could hold on to their mortgages at 5% APR. Certainly, if people didn't do their repayment calculations expecting rates at 5%, then they're just silly.

[Parkwell]

I hope their forecast is off because that increase is no where near fast enough to make a pleasing impact. Unlike the joyous house price increases we've seen in the past.

 

 

[Mancunian284]

2 hours ago, iamnumerate said:

Is this a rise to 36% or a rise of 36% on what you are paying at the moment.

The first no way, the second easily.

I assume the second.

On a 2.2% interest mortgage an increase of 36% gets it to 2.92%.  So monthly payments would go up from £436.92 to £474.30 - based on a mortgage of £100k over 25 years.

[Si1]

7 minutes ago, Mancunian284 said:

On a 2.2% interest mortgage an increase of 36% gets it to 2.92%.  So monthly payments would go up from £436.92 to £474.30 - based on a mortgage of £100k over 25 years.

Add that to MMR, s24, money laundering regs

[Si1]

The obr also predicts that house prices will go up 14%, keeping pace with pay rises. However the obr also has a poor prediction record.

[Si1]

Interestingly, the obr's house price model takes no account of foreign speculation or bonkers leveraged landlords. But it does consider that mortgagees will take maximum advantage of low interest rates, which is indeed what we see happening, absent the above exogenous effects.

 

http://obr.uk/forecasts-in-depth/the-economy-forecast/housing-market/

[Harry Sacks]

" For a change, they may get to feel smug at dinner parties. "

Are people really this crass or is it that wankers huddle together or something?

[CanAffordWontPay]

1 hour ago, Mancunian284 said:

On a 2.2% interest mortgage an increase of 36% gets it to 2.92%.  So monthly payments would go up from £436.92 to £474.30 - based on a mortgage of £100k over 25 years.

1

I don't think it's going to be people with £100k mortgages worrying too much about that kind of increase. Round my neck of the woods though, it's going to be a different story. 

[adarmo]

2 hours ago, dropbear said:

Guys it only means a move from the current 3.7% to 5% APR. Still below the historic average, and it's entirely achievable. That's probably only 2 or 3 rises from the BOE in the 5 years.

It will be tough for the extremely over-leveraged, but I think most people could hold on to their mortgages at 5% APR. Certainly, if people didn't do their repayment calculations expecting rates at 5%, then they're just silly.

 So over 5 years our mortgage interest payments will increase by. ....  less than £150/month.

Not great but somehow i think we'll cope. 

[Beaker]

I decided to jump in a while back, but like to think I've done it with my eyes open. 

 

The thing that interested/bothered me on the mortgge was that they only needed 10% spare at the end of the month after bills and repayments. I felt it scary enough commtting to this mortgage and total  outgoings only come to about 50% of income! 

 

Anyone buying with only  10% left is well and truly shafted, just seems odd that the lenders are  still doing this

[blackhole]

Given we are living in some strange times to say the least (state props all over the place, unbelievable amounts of QE, populism to name a few), how can the OBR's forecasting be taken seriously? 

How can many forecasts be taken seriously for that matter.

Edited April 4, 2018 by blackhole

[Si1]

51 minutes ago, blackhole said:

Given we are living in some strange times to say the least (state props all over the place, unbelievable amounts of QE, populism to name a few), how can the OBR's forecasting be taken seriously? 

How can many forecasts be taken seriously for that matter.

This.

Potential black swans abound more then ever. I don't think they deny this, it's just that by their very nature external events are unsimulable.