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US Mortgage Rates Going Up...


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Someone drew my attention to this chart:

https://ycharts.com/indicators/30_year_mortgage_rate

Since end 2016, rates have gone up 1.1% on a 30-year mortgage (or over a third!).

So you're an investor with a lot of money. Where does your money go? To that risky 1.5% 2-year fixed UK mortgage loan in a declining market, or this one, which yields nearly double (albeit for 30 years)? Does this help explain why the market is cratering in London?

Edited by the_duke_of_hazzard
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1 minute ago, rantnrave said:

Really?? Can you be more specific?

Last week I had notice of yet another decrease in a long-term saving account.

Paragon Bank and Charter Savings Bank have just released 1.66% and 1.67% for 120 day and 95 day notice accounts, respectively. Previously, only Secure Trust Bank offered 1.65% for a 6 month notice account, although that has now been withdrawn (but I expect Secure Trust will soon come back with rates that beat Paragon and Charter - either a shorter notice period or a higher interest rate).

I don't like to be locked in for too long, especially now that saving rates are going up. I suspect all the recent 1 year+ fixed rates have been trying to lure people to fix at a low rate.

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1 hour ago, the_duke_of_hazzard said:

Someone drew my attention to this chart:

https://ycharts.com/indicators/30_year_mortgage_rate

Since end 2016, rates have gone up 1.1% on a 30-year mortgage (or over a third!).

So you're an investor with a lot of money. Where does your money go? To that risky 1.5% 2-year fixed UK mortgage loan in a declining market, or this one, which yields nearly double (albeit for 30 years)? Does this help explain why the market is cratering in London?

Dont forget the sterling currency risk.

As I keep repeat - the BoE has freedom to set IRs higher than the FED.

 

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1 hour ago, Majorpain said:

Check the country :)

Fed is tightening so the obvious is happening as your charts show.

BOE isn't so things are still relatively calm £ rate wise IMO.

Nope. BoE has to follow the FEd otherwise UK will be anything but calm.

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16 hours ago, FabulousSophie said:

Paragon Bank and Charter Savings Bank have just released 1.66% and 1.67% for 120 day and 95 day notice accounts, respectively. Previously, only Secure Trust Bank offered 1.65% for a 6 month notice account, although that has now been withdrawn (but I expect Secure Trust will soon come back with rates that beat Paragon and Charter - either a shorter notice period or a higher interest rate).

I don't like to be locked in for too long, especially now that saving rates are going up. I suspect all the recent 1 year+ fixed rates have been trying to lure people to fix at a low rate.

Hey, @FabulousSophie, welcome to the forum :)

Always great to find engaging new posters offering their opinions.

The name Paragon rang a bell with me. It appears that they are the go-to lender for portfolio landlords who have been turfed out of the so-called 'vanilla' buy-to-let market in the wake of the Prudential Regulation Authority bringing in a recent supervisory statement on buy-to-let credit underwriting (link).

There may be some related information that you might enjoy reading at the link in this tweet:

Personally, I am very open minded about the introduction of over £200bn of interest-only lending to people who treat homes as a chance to gamble with borrowed money but I realise that not everybody is as fair-minded as I am.

If you have any misgivings about having your savings employed funding buy-to-let mortgages granted to portfolio landlords then you might want to reconsider depositing your savings with Paragon. Of course, if, like me, you are just a totally reasonable person who takes the world as they find it then it's a no brainer! Paragon are offering a good rate of interest on savings so give them all your money. After all, we can't be expected to consider the impacts of our investment choices as we set about looking after Number One!

I have a note on the wall in the kitchen - it's my favourite quote (I think it's from a chap called John Donne) - "Each man is an island, therefore send not to know for whom the bell tolls because who cares - if you can hear it tolling it's totes not you, and that's fab!"

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6 hours ago, Beary McBearface said:

Hey, @FabulousSophie, welcome to the forum :)

Always great to find engaging new posters offering their opinions.

The name Paragon rang a bell with me. It appears that they are the go-to lender for portfolio landlords who have been turfed out of the so-called 'vanilla' buy-to-let market in the wake of the Prudential Regulation Authority bringing in a recent supervisory statement on buy-to-let credit underwriting (link).

There may be some related information that you might enjoy reading at the link in this tweet:

Personally, I am very open minded about the introduction of over £200bn of interest-only lending to people who treat homes as a chance to gamble with borrowed money but I realise that not everybody is as fair-minded as I am.

If you have any misgivings about having your savings employed funding buy-to-let mortgages granted to portfolio landlords then you might want to reconsider depositing your savings with Paragon. Of course, if, like me, you are just a totally reasonable person who takes the world as they find it then it's a no brainer! Paragon are offering a good rate of interest on savings so give them all your money. After all, we can't be expected to consider the impacts of our investment choices as we set about looking after Number One!

I have a note on the wall in the kitchen - it's my favourite quote (I think it's from a chap called John Donne) - "Each man is an island, therefore send not to know for whom the bell tolls because who cares - if you can hear it tolling it's totes not you, and that's fab!"

IO and BTL lending is all being shifted over to the weird and wonderful and expensive 'finance companies'

'The lender’s specialist residential mortgage advances'

'Within buy to let there has been a marked shift to more professional investors'

'The proportion of Paragon’s advances to corporate and complex landlords over the six months was 72%, up from 60% last year.'

'There was also a significant increase in borrowers opting for buy-to-let mortgages on a fixed-rate period of five years, making up 72% of advances – double the level recorded in 2017 – according to the lender.'

Looks like Paragon is shifting a lot of bonds. Hope BTL  taxation doesnt change in the next 5 years ......

Paragon fascinate me as a company. It has cockroach-like survival instinct. Id bet on Paragon being here in 10 years time. Id not be so confident betting on its borrowers....

'At the same time, customer retention levels at the lender were boosted by Paragon’s online switch and further advance service launched in early 2018.'

Or .. theyve nowhere else to go. The roach motel of BTL mortgages ....

 

Here's another thats cranking up its  business:

https://togethermoney.com/

Another finance company.

Theyre like banks, arnt they ....

 

 

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Not sure if anything’s changed over the past couple of years, but when I glanced at their financials both Paragon and Aldermore do seem to charge closer to what I’d regard as a proper rate of interest for their mortgages than a lot of the so called challenger banks. God knows what their due diligence procedures are. However I’d expect them to have a better chance of surviving than the likes of Virgin Money.

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1 hour ago, Castlevania said:

Not sure if anything’s changed over the past couple of years, but when I glanced at their financials both Paragon and Aldermore do seem to charge closer to what I’d regard as a proper rate of interest for their mortgages than a lot of the so called challenger banks. God knows what their due diligence procedures are. However I’d expect them to have a better chance of surviving than the likes of Virgin Money.

Paragon currently charging portfolio investors 3.40% on a 2-year fixed rate 75% LTV mortgage on a "single self-contained unit", i.e. not an HMO (140% ICR assessed at a 5.5% stress rate, Paragon's reversion rate is 5.35% - link). Equivalent 'mainstream' product from BM Solutions presently offered 2.44% (link).

96 basis points might not sound like much but there are about 30,000 BTL Masters of the Universe with, on average, about 20 mortgages. Reasonable to assume that these guys have about £2m worth of debt so to them being forced to mortgage with Paragon rather than just borrow from Lloyds bank would equate to an extra £20,000 on the annual mortgage interest bill.

If we compare the Paragon produce with a 1% fee (2.99%) to the top of the 'best buy' tables for mainstream (1.73%, £2k completion fee) its 126 basis points and £25k/year on the interest bill. As a landlord like that is paying tax at a higher rate they've also got to pick up an effective cost of 10% of the £25k because section 24 is 50% tapered in this year.

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That’s interesting Beary. I’m assuming a lot of those portfolio landlords are only just about washing their faces at a time of record low interest rates.

 

Going back to Aldermore, pre TFS (so roughly two years ago) if I recall correctly they were charging ~7% on 95% LTV mortgages plus arrangement fees. I’m guessing only someone with a patchy credit record would take up that offer, but I’d assume that if they made all their payments they could then move to a more mainstream lender at roughly half the cost. They seem to have a lot of churn in their owner occupier mortgage book, which suggests that many do remortgage elsewhere. So chances are a lot of the more questionable borrowers are now on a challenger bank’s books at an interest rate that doesn’t factor the risk. 

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14 hours ago, spyguy said:

When the FED rates go up. Or ensure the BoE rates are always higher than the FED.

 

??

FED rates are already up, we haven't raised ours. So, when? Because these sort of predictions are a bit pointless if you timeframe is 20 years.

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4 minutes ago, dugsbody said:

??

FED rates are already up, we haven't raised ours. So, when? Because these sort of predictions are a bit pointless if you timeframe is 20 years.

Us have gone up.

Uks havent.

So pound us falling. And gilt auctions will start failing.

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11 minutes ago, spyguy said:

Us have gone up.

Uks havent.

So pound us falling. And gilt auctions will start failing.

10 year from 1.52 to 1.32 in a matter of days.

Almost as good as your prediction Basel 3 was going to crash the property market, when in reality it saw bank share prices rise the day it was signed off.

https://www.telegraph.co.uk/business/2017/12/08/uk-bank-shares-soar-regulation-update-proves-softer-investors/

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2 minutes ago, TJHooker said:

10 year from 1.52 to 1.32 in a matter of days.

Almost as good as your prediction Basel 3 was going to crash the property market, when in reality it saw bank share prices rise the day it was signed off.

https://www.telegraph.co.uk/business/2017/12/08/uk-bank-shares-soar-regulation-update-proves-softer-investors/

Yields flop around.

Basel3 has crashed the market. The market has not caught up.

Like section 24 killed io btl in 2015. Its only now that the penny is dropping.

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46 minutes ago, Dreamcasting said:

Everyone is an expert. (on the Internet)

Emotional Experts.

If anyone has a look at LIBOR... the 12 month rate is on an incline based on US Interest rates.

With Sterling being dumped, Testing situations in southern Europe (Spanish & Italian debts). Increase costs in lending is occurring regardless. The choices are to have a clear out crash the system and reset it or enter stagnation. Zero growth over the next 50 years, while advertising / marketing props are used to hold the economy in a sideway channel until its considered normal.

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