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Nov 2020: High LTV mortgage rates still shooting up


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I do love your posts and kudos to you for getting a lot of the threads going on here.

On this my feeling is that the rates are rolling over the top. Month on month there's very limited increase compared to the year on year. Those 'safer' (let's say) LTVs are actually falling month on month though are up year on year. 

I do think that those higher rates were simply to throttle demand in a system that struggled to supply that demand. I think applications were at their highest since 2008 or 2007 which would be tricky at best but with the interrupted work patterns we have right now possible made things much harder.

My view is that mortgage demand tails off even with an extension of the SDLT holiday and rates will fall back. I'm not going to take that for granted though and I'm ensuring I can remortgage at 65% (curiously not on here but you do seem to get another reduction at that point) to get a lower rate than my last remortgage...... just in case. This is one of the things I can mostly control (short of prices tanking) so I worry about it. I don't worry about the bits I cannot control. If I can't get to the next reduction threshold I'll just upgrade the car and catch up on my missed holidays :)

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i should be able to hit 60% LTV on my next remortgage even with not taking into account any HPI (which takes me there already).

Look like that rates will keep going down for those not highly leveraged and up for the leveraged. 

Think banks are seeing low leverage as improving their books so fight over those customers as a low risk 'gold' mortgage to have on their books

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The Times had a wringing hands piece of 90% LTV rates being over 5%.

IIRC bad ole days was the headline.

And thats just rates. I have a feeling a only having a 10% deposit will make getting the mortgage an uphill struggle.

The market for mortgages is getting smaller n smaller ,requiring high earning people with 20%+ deposit, who must be under ~60.

Found this today:

https://www.fca.org.uk/data/product-sales-data/mortgage-product-sales-data-geographic-area

Just see how few mortgages are being sold by region.

~21k mortgages sold in entire NE region in 2019.

 

 

 

 

 

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Where are the sub 50% LTV.  I've always had a fantasy of buying a house outright.  Dream on one moan say... 

No real market for them.

60% is the lowest theyll price. Basically, 40% down and an MMR income test makes 60% mortgage pretty much risk free as far as banks are concerned.

 

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Already under way 60% LTV, was under 60% when we took out our mortgage in 2016. nothing to see here, move along, 0.09% rise is nothing to fear. 

My daughter just remortgaged got my wife off the mortgage plenty of equity think it was around that - seemed to me a tick box exercise for them went through quick considering bit of extra paperwork getting my wife off

As you say they will lend easily and at good rates if you have a lot of equity 

 

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i wonder what the absolute cheapest mortgage is once you get past the 60% LTV mark.

fix rate? tracker? 

how low can it get? 

Banks are banned from paying divis.

BoE forcing them to recapitalise , so they have to keep the money and either face  putting in v low yielding Gilts.

Or lending it at slightly less  low rates - but only for people with v low risk.

https://www.bloomberg.com/news/articles/2020-11-21/boe-expected-to-take-case-by-case-approach-to-dividend-decision

Once they start paying divis, all that flush cash will go, and the low rates with them

 

 

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I remortgaged just over a year ago. Currently 0.68% tracker. Won’t see that again for a while.

wow that's pretty impressive, and makes me feel a bit sick that i have three more years on my 5 year fix!.

wonder if we will finally get negative interest rates by the BOE and drive it down even further. 

shows how important it is to make sure you get past that 40% equity mark. 

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wow that's pretty impressive, and makes me feel a bit sick that i have three more years on my 5 year fix!.

wonder if we will finally get negative interest rates by the BOE and drive it down even further. 

shows how important it is to make sure you get past that 40% equity mark. 

My aim from day one was to get to a comfy LTV and then relax. Might even go interest only and let inflation carry it. Live it up to retirement age and then downsize. If i do the extension and development then I'd be quite happy in something worth half this house... whatever that number is I'm using this house as a unit of one currency :).

I borrowed a bit from my folks to get in under the 85% LTV as that was probably the biggest win. IIRDC borrowing £20k from my folks (at an interest rate would you believe it!) saved me about £4k per year. No brainer. 

Next year I'm hoping for 75% LTV but I'm not really in too much of a rush to get those overpayments in tbh. A friend of mine is almost mortgage free but he doesn't really understand that inflation would pay off this lump and he's better chucking everything up to £40k into a pension and taking the tax free lump  to clear the mortgage. 

Obviously I'll be kicking myself for not putting everything on bitcoin in 20 years as I'd have been able to buy a small continent if I had. Ah well. 

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That's a very impressive rate. I like to pay let's pretend that on an IO mortgage and imagine the car and holidays I could enjoy if I was not such a tight git.

I’m as tight as you 😄 

Just took a gamble that base rates would fall, and they did. Now that banks are prepped for zirp I doubt they’ll allow lower. 

 

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My aim from day one was to get to a comfy LTV and then relax. Might even go interest only and let inflation carry it. Live it up to retirement age and then downsize. If i do the extension and development then I'd be quite happy in something worth half this house... whatever that number is I'm using this house as a unit of one currency :).

I borrowed a bit from my folks to get in under the 85% LTV as that was probably the biggest win. IIRDC borrowing £20k from my folks (at an interest rate would you believe it!) saved me about £4k per year. No brainer. 

Next year I'm hoping for 75% LTV but I'm not really in too much of a rush to get those overpayments in tbh. A friend of mine is almost mortgage free but he doesn't really understand that inflation would pay off this lump and he's better chucking everything up to £40k into a pension and taking the tax free lump  to clear the mortgage. 

Obviously I'll be kicking myself for not putting everything on bitcoin in 20 years as I'd have been able to buy a small continent if I had. Ah well. 

(Price) Inflation doesnt pay the mortgage, wage inflation does.

Theres been little wage inflation for most of he UK for ~15 years.

 

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(Price) Inflation doesnt pay the mortgage, wage inflation does.

Theres been little wage inflation for most of he UK for ~15 years.

You're wrong and for a few reasons:

  1. 2005 average full time wage was £22,888, 2020 £31,461 an increase of 37.5% over that period https://www.statista.com/statistics/1002964/average-full-time-annual-earnings-in-the-uk/
  2. I don't care about average wages and neither does anyone else. What really matters is how much you're earning and in the last 15 years my salary has increased more than ten fold (part time uni job to today full time chartered accountant) . Even if average salary was static (and they ain't) you'd find paying off a mortgage taken out 25 years ago (with the interest paid so not accumulating) far easier to. You might even be able to get it cleared in a very very short period. 
  3. If you taken an IO mortgage on a big fancy house and it doubles or trebles or even quadruples (hello boomers) over 25 years the equity in your big fancy house can be exchanged for a normal house, or a nicer than normal house, or a house worth 80% of your big fancy house. 
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You're wrong and for a few reasons:

  1. 2005 average full time wage was £22,888, 2020 £31,461 an increase of 37.5% over that period https://www.statista.com/statistics/1002964/average-full-time-annual-earnings-in-the-uk/
  2. I don't care about average wages and neither does anyone else. What really matters is how much you're earning and in the last 15 years my salary has increased more than ten fold (part time uni job to today full time chartered accountant) . Even if average salary was static (and they ain't) you'd find paying off a mortgage taken out 25 years ago (with the interest paid so not accumulating) far easier to. You might even be able to get it cleared in a very very short period. 
  3. If you taken an IO mortgage on a big fancy house and it doubles or trebles or even quadruples (hello boomers) over 25 years the equity in your big fancy house can be exchanged for a normal house, or a nicer than normal house, or a house worth 80% of your big fancy house. 

I thjink youll find those wages have barely kept place with prices.

 

You wont get an IO mortgage. Noone will.

https://www.ukfinance.org.uk/data-and-research/data/mortgages/interest-only-mortgages

There were 1,023,000 pure interest-only homeowner mortgages outstanding at the end of 2019, 8.9 per cent fewer than in 2018.

In addition there were 318,000 partial interest-only (part and part) homeowner mortgages outstanding at the end of 2019, 11.7 per cent fewer than in 2018.

The total interest-only mortgage stock (including part and part) has reduced by 58 per cent in number and 47 per cent in value since 2012 (when these data were first collected).

In particular, the number of interest-only loans at higher (over 75 per cent) loan-to-values (LTV) fell by 26.0 per cent in 2019. Loans at these higher LTVs now make up 11 per cent of the total, compared to 13 per cent in 2018 and 36 per cent in 2012.

Additionally, the number of interest-only loans set to mature by 2020 shrank by 72,000 in 2019 to just 54,000 loans, a fall of 57.1 per cent.

 

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I thjink youll find those wages have barely kept place with prices.

 

You wont get an IO mortgage. Noone will.

https://www.ukfinance.org.uk/data-and-research/data/mortgages/interest-only-mortgages

There were 1,023,000 pure interest-only homeowner mortgages outstanding at the end of 2019, 8.9 per cent fewer than in 2018.

In addition there were 318,000 partial interest-only (part and part) homeowner mortgages outstanding at the end of 2019, 11.7 per cent fewer than in 2018.

The total interest-only mortgage stock (including part and part) has reduced by 58 per cent in number and 47 per cent in value since 2012 (when these data were first collected).

In particular, the number of interest-only loans at higher (over 75 per cent) loan-to-values (LTV) fell by 26.0 per cent in 2019. Loans at these higher LTVs now make up 11 per cent of the total, compared to 13 per cent in 2018 and 36 per cent in 2012.

Additionally, the number of interest-only loans set to mature by 2020 shrank by 72,000 in 2019 to just 54,000 loans, a fall of 57.1 per cent.

 

I think you'll find your point was that that wasn't the point!? What matters isn't prices and wages but inflation and the fixed nominal value of debt. 

You state that inflation of prices isn't what matters and that it's the inflation of wages. Wage inflation is the rate of increase in nominal wages over time. then you seek to debunk that by comparing it to the value of goods and state that they're level in real terms as set against prices. If the two are so closely linked your first point was pointless anyway? The debt is flat in nominal terms provided the interest payments are met so inflation does erode the real value of the debt and since wages are growing in proportion to that debt it's valid to say that inflation (wage inflation or otherwise since you state they're basically the same) will erode the debt value. 

Thanks for the cut and paste but this tells me very little. What I can see is that people are able to get new interest only mortgages and that they are around 9% of the total number of outstanding mortgages in the UK. 

If you're going to be earning mega bucks in your left few years at work why slum it and do without when you're younger and more likely to be able to enjoy it?

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Used to be a popular opinion on here that the interest only "timebomb" was going to decimate the market.  I always thought that the interest only borrowers were likely to be pretty savvy and understood that the house they bought needed to be paid for in 25 years.  Average house price in 1995 was £50k, its now £225k.  Anyway, the point is that we seem to be managing to pay them off or re-mortgage without too much difficulty - lets face it, they should be about 50 years of age at the 25 year point so getting a re-mortgage of £45k ought not to be a problem (could likely get an interest only too).

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No real market for them.

60% is the lowest theyll price. Basically, 40% down and an MMR income test makes 60% mortgage pretty much risk free as far as banks are concerned.

 

Thanks for this.  Was hoping for some specialist type mortgage hiding somewhere.  Is there no chance of negotiating a rate?  That's what I wanna do.  I'll be putting down a heft deposit if we do buy.

 

My daughter just remortgaged got my wife off the mortgage plenty of equity think it was around that - seemed to me a tick box exercise for them went through quick considering bit of extra paperwork getting my wife off

As you say they will lend easily and at good rates if you have a lot of equity 

 

Equity's the name of the game.

 

i wonder what the absolute cheapest mortgage is once you get past the 60% LTV mark.

fix rate? tracker? 

how low can it get? 

I'm minded to stick with a fix rate but a tracker is tempting or even an offset...

 

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Used to be a popular opinion on here that the interest only "timebomb" was going to decimate the market.  I always thought that the interest only borrowers were likely to be pretty savvy and understood that the house they bought needed to be paid for in 25 years.  Average house price in 1995 was £50k, its now £225k.  Anyway, the point is that we seem to be managing to pay them off or re-mortgage without too much difficulty - lets face it, they should be about 50 years of age at the 25 year point so getting a re-mortgage of £45k ought not to be a problem (could likely get an interest only too).

IO mortgages is a massive issue for London/Se, where most mortgages written 2002-2010ish were IO.

London also has a problem is prices had been falling for at least 4-5 years. Covid is having a massive effect as most London business has been shut for almost 12months. A lot of those jobs are not coming back.

The BoE has spent the last ~5 years trying to beat down IO mortgages - forcing young people to get a repayment, forcing old people with equity into RIOs

https://www.ukfinance.org.uk/data-and-research/data/mortgages/interest-only-mortgages

chart-1%2024%206%2020.png

chart-2%2024%206%2020.png

 

IO mortgages are no longer mass market products.

Here's HSBC, one of the few banks to offer resi IO mortgages

  • sole applicants must have a minimum income of £100,000 per annum excluding bonus, commission, overtime and rental income
  • for joint applications, at least one applicant must have an individual income of £100,000 per annum excluding bonus, commission, overtime and rental income

 

 

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My goodness, why would they put that in????  😁😁😁

Yeah .. almost like they dont want to lend IO mortgages....

There are only a few 1000 people earning more than 100k in the UK.

IO mortgages have gone back to what they were before - a very niche product for  very few people.

Joe LessThan150k is not going to get an IO mortgage.

Thinking youll be able to get an IO mortgage, take a housing position for 15-20 years, then cash up and buy a smaller house is pure 2004 fantasy.

 

 

 

 

 

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