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1 hour ago, Sausage said:

Are there any good resources for monitoring changes in uk mortgage rates? The 15 year fix I was looking at as increased from 2.45% to 2.75% overnight. Eeek.

It’s not a big increase though?  I only ever used comparison sites to check the rates.   It a good rate for a 15 year fix.  Make sure you check the early repayment charge. 

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15 year fixed is very long for the uk and well depend on the markets view of the future. The less certain that view the more expensive it is for them to take that risk. 

Have you considered a shorter fixed term?

I only look at 2 or 3 years fixed. You are rewarded for accepting that risk..... and we're basically Japan now....

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5 hours ago, adarmo said:

15 year fixed is very long for the uk and well depend on the markets view of the future. The less certain that view the more expensive it is for them to take that risk. 

Have you considered a shorter fixed term?

I only look at 2 or 3 years fixed. You are rewarded for accepting that risk..... and we're basically Japan now....

I'm trying to balance certainty of repayments, against likelihood of rates falling or dropping. So you think 15 or 10 year fix at ultra low rates is bad? That would imply you think rates could drop further? or you think longer fixes are poor value?

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4 minutes ago, Sausage said:

I'm trying to balance certainty of repayments, against likelihood of rates falling or dropping. So you think 15 or 10 year fix at ultra low rates is bad? That would imply you think rates could drop further? or you think longer fixes are poor value?

I definitely do, i panicked in 2018 and went on to a 5 year fix, i wish i was still on my tracker. 

It will get me past the uncertainty of brexit and any second wave i suppose, but i dont see rates moving for a long time and i think im outside of NE territory now. 

Could have been worse i almost signed up for a 10 year with tsb, luckily they were useless

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26 minutes ago, Sausage said:

I'm trying to balance certainty of repayments, against likelihood of rates falling or dropping. So you think 15 or 10 year fix at ultra low rates is bad? That would imply you think rates could drop further? or you think longer fixes are poor value?

Its not quite if rates rise or not. To make your 15 year fix worthwhile rates dont just have to rise they have to rise enough to increase past your premium rate and in a timeframe that makes it cheaper overall. 

E.g if your 15 year fix is 2.5% a 2 year fix is 1.5%.if rates rise after 2 years to 2% you are still down. If rates rise to 3% but only after 14 years you are also losing out as you have been paying a premium for 14 years and saved for 1.

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7 minutes ago, captainb said:

Its not quite if rates rise or not. To make your 15 year fix worthwhile rates dont just have to rise they have to rise enough to increase past your premium rate and in a timeframe that makes it cheaper overall. 

E.g if your 15 year fix is 2.5% a 2 year fix is 1.5%.if rates rise after 2 years to 2% you are still down. If rates rise to 3% but only after 14 years you are also losing out as you have been paying a premium for 14 years and saved for 1.

hmm good point. ive been staring at a spreadsheet for 2 hrs. lol

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21 minutes ago, captainb said:

Its not quite if rates rise or not. To make your 15 year fix worthwhile rates dont just have to rise they have to rise enough to increase past your premium rate and in a timeframe that makes it cheaper overall. 

E.g if your 15 year fix is 2.5% a 2 year fix is 1.5%.if rates rise after 2 years to 2% you are still down. If rates rise to 3% but only after 14 years you are also losing out as you have been paying a premium for 14 years and saved for 1.

That's not completely true. A fixed rate borrowing is an insurance policy and means you can take more risks elsewhere.

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I would recommend fixing as long as possible. I think that folks coming off fixes in the next three or four years are going to be horrified at what they find waiting for them.

I also recommend reducing the term by as much as possible so that you pay off large chunks of capital very quickly. That'll give you another level of protection against negative equity should/when prices fall.

Ideal world would be a 15/20 year fix over a 15/20 year repayment period. I'm assuming that a 10 year repayment would be too tight but it's your finances.

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45 minutes ago, micawber said:

I would recommend fixing as long as possible. I think that folks coming off fixes in the next three or four years are going to be horrified at what they find waiting for them.

I also recommend reducing the term by as much as possible so that you pay off large chunks of capital very quickly. That'll give you another level of protection against negative equity should/when prices fall.

Ideal world would be a 15/20 year fix over a 15/20 year repayment period. I'm assuming that a 10 year repayment would be too tight but it's your finances.

LTV needs to be taken into account.

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2 hours ago, micawber said:

I would recommend fixing as long as possible. I think that folks coming off fixes in the next three or four years are going to be horrified at what they find waiting for them.

I also recommend reducing the term by as much as possible so that you pay off large chunks of capital very quickly. That'll give you another level of protection against negative equity should/when prices fall.

Ideal world would be a 15/20 year fix over a 15/20 year repayment period. I'm assuming that a 10 year repayment would be too tight but it's your finances.

what will make IRs rise? money printing & inflation?

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3 hours ago, Sausage said:

I'm trying to balance certainty of repayments, against likelihood of rates falling or dropping. So you think 15 or 10 year fix at ultra low rates is bad? That would imply you think rates could drop further? or you think longer fixes are poor value?

I think you get rewarded for accepting the risk that rates move against you so if you take a shorter fixed term you don't need to pay so much for the lender to accept that risk. 

I'm on the fence about lower rates but i think there is a chance we see negative rates in 2020 though that would feed into short and long term mortgage rates too.

You can always remortgage after the fixed period ends and the other advantage is there's an opportunity to make greater than the standard 10% overpayments. Depends how comfortable you are taking that risk. 

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There has been a definite trend of increasing rates over the last few months. Though I wonder if a lot of that is simple demand management. If loads of people are currently trying to take out mortgages, why not charge more. In a high demand market, mortgages are for the more financially stable and more expensive.

The whole thing is bonkers, absolutely bonkers, nothing makes sense, just get drunk.

I hope Nationwide will me increasing their savings rates to match.🤣

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4 hours ago, Sausage said:

what will make IRs rise? money printing & inflation?

I am not sure if (mortgage or savings) IRs will rise... but, if they do, I think I know how/why they will.

If thse IRs will rise, this will be because monetary policy has been changed to facilitiate this.  Traditionally, sovereign debt has been treated just like other debt - all be it with an assumed high quality.  Sovereign debt, however, is different in nature.  There is no bankruptable legal entity that owes a sovereign debt... and a sovereign with adequate control of the central bank for its currency will never be bankrupted.  My take is that sovereign debt has been a key reason that IRs have needed to be low... as sovereign debt has risen since the end of WWII, the burden of servicing that debt has become more and more significant - motivating governments to pursue policies of low interest rates.

It strikes me that sovereign debt could be treated differently to private sector debt... (for example, it could all be put on the balance sheet of a state-owned bank that funds itself)... and, if that were to happen... commercial interest rates could de-couple from sovereign bond yeilds.

If this were to happen, I could imaging sovereign debt increasing year on year (both in nominal terms and relative to GDP) without constratint... while private sector debt could become much more expensive.

I'm exactly 50-50 on whether or not I think this is a likely outcome.

 

Edited by A.steve
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The thing with fixing longer is that you will generally pay a higher rate, and that may reduce the chance to over pay etc. 

One thing to also remember is that in a repayment mortgage, over time you get protection against higher rates as the outstanding loan reduces.

I’ve got 4 years left on a 5 year fix at 1.72% from my last remortgage - the outstanding mortgage is now only 65% of what it was when it was first taken out 11 years ago, so the sensitivity to rate increases is reduced. Of course I’m fixed for 4 more years, but who knows what rates will be in 2024. 
 

The other thing is that as the mortgage ages, and the LTV improves (assuming repayment and some capital gain - unless we get an HPC) then you’ll get access to better rates anyway.

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6 minutes ago, Mikhail Liebenstein said:

The thing with fixing longer is that you will generally pay a higher rate, and that may reduce the chance to over pay etc. 

One thing to also remember is that in a repayment mortgage, over time you get protection against higher rates as the outstanding loan reduces.

I’ve got 4 years left on a 5 year fix at 1.72% from my last remortgage - the outstanding mortgage is now only 65% of what it was when it was first taken out 11 years ago, so the sensitivity to rate increases is reduced. Of course I’m fixed for 4 more years, but who knows what rates will be in 2024. 
 

The other thing is that as the mortgage ages, and the LTV improves (assuming repayment and some capital gain - unless we get an HPC) then you’ll get access to better rates anyway.

Hmmm its tricky. This will be the start of a new 23 year mortgage, so some time before the LTV reduces significantly. My main concern is that after the fix IRs have rocketed and our repayments rocket too. On current IRs repayments will be 33% of our take home, and I don't expect our income to rise between now and retirement. 

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45 minutes ago, Sausage said:

Hmmm its tricky. This will be the start of a new 23 year mortgage, so some time before the LTV reduces significantly. My main concern is that after the fix IRs have rocketed and our repayments rocket too. On current IRs repayments will be 33% of our take home, and I don't expect our income to rise between now and retirement. 

Ah ok, quite a long run then.

For every 1% higher though that is £1000 per year interest per £100k of loan. So it probably comes down to whether you think the potential  interest saving and possible overpayment to reduce the outstanding is worth it relative to the risk.of higher rates.

The only thing I would say is that I can’t see rates going higher unless something catastrophic happens on the bond/currency markets. The main risk being Dollar driven inflation.

Edited by Mikhail Liebenstein
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12 hours ago, Sausage said:

what will make IRs rise? money printing & inflation?

Simplistically yes. I'm no economic expert but it feels as though we are fitting the pattern described by Dalio as the end of the long term debt cycle - too much debt and asset bubbles; productivity and incomes not rising fast enough to pay it back. Governments need central banks to print and borrow money to provide stimulus and pay unemployment benefits. That has to be paid for somehow.

There used to be a topic on here run by Durhamborn about credit deflation. It's worth looking that up.

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2 year mortgages are fine but don’t forget that banks make £ from the high loan fees. Spending up to £1500 every two years adds up. On a 10 year fix you’d have saved 5x the fees and the time finding and comparing etc.

 

 

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8 hours ago, A.steve said:

a sovereign with adequate control of the central bank for its currency will never be bankrupted

Weimar, Zimbabwe and Venezuela would have a word...if they still could.

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2 hours ago, Sausage said:

Hmmm its tricky. This will be the start of a new 23 year mortgage, so some time before the LTV reduces significantly. My main concern is that after the fix IRs have rocketed and our repayments rocket too. On current IRs repayments will be 33% of our take home, and I don't expect our income to rise between now and retirement. 

Can you afford the 15 year fix? Sounds like yes.

Could you afford it if you take a 3 year fix and interest rates go to 15%? That is completely within the realm of possibility.

Personally, I would not be taking a mortgage right now, but if I were, I would fix for as long as I possibly could.

 

I would much rather, in general, have a mortgage half the size at twice the interest rate.

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41 minutes ago, PeanutButter said:

2 year mortgages are fine but don’t forget that banks make £ from the high loan fees. Spending up to £1500 every two years adds up. On a 10 year fix you’d have saved 5x the fees and the time finding and comparing etc.

 

 

This, the fees taken every two years add up......some will add the fees onto the loan paying compounded interest on fees till the end of the debt.......😉

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in addition to the 2.22% deal from Danske Bank. The Melton Building society also has a term discounted mortgage of 1.99% for 25 years (its not fixed, its a discount). There are no mortgage fees and you only need to pay the survey costs once for the lifetime of the mortgage. This is, in my opinion a better deal than the silly 2 year fixes with continuous remortgages.

Of course every "mortgage broker" wants you to buy the silly 2 year fixes so they get a regular recurring income stream.

Edited by hayder
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  • 415 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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