Cheap mortgages have ended.

[Wayward]

8 hours ago, SE10 said:

Or hold sterling? It's a damn annoying choice.

 

😕

Yes..and why have we been put into this awful position? Because the gov and TPTB manipulate the market and inflate prices..shifting wealth from the young and poor to the old and wealthy.  It is a crime..one for the history books.  Given the misery created and problems for the future their memory will be cursed.

[spyguy]

12 hours ago, Flat Bear said:

Maybe people are looking at this in the wrong way.

Banks can borrow money extremely cheaply thanks to Q.E. and can therefore lend at a very low rate. This is likely to continue until the end of the year. As long as the risk is extremely low and minimal the banks cannot lose. Banks are making record profits at this time especially the US banking giants.

The mortgagor with a very hefty deposit are the ones taking all the risk as if asset prices (property) does fall it will be their proportion of the value of the property that will be lost, the banks lose absolutely nothing unless nominal property prices crash over 60%, and even then they are liable for a very small proportion which even in the most bearish scenario is extremely unlikely to occur especially with the spectre of looming high inflation.

So even if you can fix at a rate of say 0.7% on a 40% loan to value you are taking on a massive gamble. It could be better to take on the same loan with a 90% loan to value at say 5% as you could just walk away losing just your 10% deposit.

So, when mortgage rates rise next year, it is not necessarily a good thing to have a very cheap mortgage on a very expensive depreciating asset.

Just a thought for those property investors.

Unlike th us, the UK does not have no resource lending.

The bank will repo the house and chase you for any shortfall, putting you into bankruptcy if ness.

For a buyer, it does not matter if the deposit is large or not, they still face the same risk - falling house prices.

Its different for banks. A larger mortgage makes the loan less risky for them

 

 

 

 

[spyguy]

11 hours ago, Si1 said:

I don't buy this. Market timing is generally impossible. We just don't know if prices will fall next year.

Someone on a long fix with a big deposit at least won't face a margin call in a weak market if prices do fall. And if they don't fall they're quids in with a dirt cheap mortgage.

In the North - or at least my North areas- ZIRP has been a good chance for someone with a a large deposit to fix at a very low rate.

Buy below 4x,5 year fix at sub 2%, overpay ~2%-5% a year for the fixed period.

Mortgage debt well n truly hammered in 10 years.

The problem with this is if you cannot put a large deposit down - most FTBs. Or cant buy at below 4x.

 

 

 

[spyguy]

Is it time for the Bank of England to start tightening monetary policy?

Ending quantitative easing would show that it is serious about inflation risks

https://www.ft.com/content/f5f4c04d-fc42-4680-99c7-cd6ce4ec94c6

Giving evidence to the Treasury select committee earlier this month, Andrew Bailey, the Bank of England governor, revealed that at the start of August, the Monetary Policy Committee was evenly split on an important economic issue. Half of the interest rate-setting committee thought the minimum conditions for tightening monetary policy had been met.

The other half disagreed. There was no need for Bailey to keep the precise split on the committee secret for five weeks because the MPC’s assessment was always more important.

What his comments did show was that a little over a month ago, reasonable people could disagree whether there was “clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2 per cent inflation target sustainably”.

No longer. After this week’s labour market and inflation data, the nine MPC members should be able to easily agree that this hurdle has been cleared. The time has come to ask whether the bank should start gently tightening monetary policy.

[Si1]

16 minutes ago, spyguy said:

Is it time for the Bank of England to start tightening monetary policy?

Ending quantitative easing would show that it is serious about inflation risks

https://www.ft.com/content/f5f4c04d-fc42-4680-99c7-cd6ce4ec94c6

Giving evidence to the Treasury select committee earlier this month, Andrew Bailey, the Bank of England governor, revealed that at the start of August, the Monetary Policy Committee was evenly split on an important economic issue. Half of the interest rate-setting committee thought the minimum conditions for tightening monetary policy had been met.

The other half disagreed. There was no need for Bailey to keep the precise split on the committee secret for five weeks because the MPC’s assessment was always more important.

What his comments did show was that a little over a month ago, reasonable people could disagree whether there was “clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2 per cent inflation target sustainably”.

No longer. After this week’s labour market and inflation data, the nine MPC members should be able to easily agree that this hurdle has been cleared. The time has come to ask whether the bank should start gently tightening monetary policy.

They aren't going to raise rates. More likely to lower them:

- new covid surge

- higher tax burden

- falling house prices 

 

All deflationary

 

 

Edited September 16, 2021 by Si1

[spyguy]

5 minutes ago, Si1 said:

They aren't going to raise rates. More likely to lower them:

- new covid surge

- higher tax burden

- falling house prices 

 

All deflationary

 

 

Nope.

 BoE, FED, ECB. At least 24 months too late.

[Si1]

8 hours ago, spyguy said:

Nope.

 BoE, FED, ECB. At least 24 months too late.

You're 3 years too early. They'll drive the economy off a cliff but the party ain't over just yet.

 

 

[Bluestone59]

On 06/08/2021 at 07:04, spyguy said:

Unlike th us, the UK does not have no resource lending.

The bank will repo the house and chase you for any shortfall, putting you into bankruptcy if ness.

For a buyer, it does not matter if the deposit is large or not, they still face the same risk - falling house prices.

Its different for banks. A larger mortgage makes the loan less risky for them

 

 

 

 

Don't think banks do much chasing after the earlier stages of the repo.

Most have policy of selling the post mortgage debt to Paragon, or similar. 

If you are a business owner you are more likely to be threatened with bankruptcy. They think these are the sort who can spirit the cash away.

The ordinary PAYE Joe can end up paying a few ££ indefinitely. Or until he inherits and cuts a deal with the creditor.

I 

 

[spyguy]

All MPC members ready to raise UK rates this year if needed, says Bailey

BoE governor says the bank would act to prevent higher inflation becoming persistent

https://www.ft.com/content/b3e403a3-a408-4d84-b71e-8857b677bbea

Hes needs to get his skates on and get ahead of the FED.

[spyguy]

Lenders raise UK mortgage rates as inflation fears take hold

Era of ultra-low deals disappearing fast as markets brace for BoE increase in cost of borrowing

https://www.ft.com/content/b7495f49-bc6d-44be-af9c-35a9c982bb9d

HSBC and NatWest raised rates on fixed-rate deals on Thursday, with Barclays due to follow suit on Friday. There have been similar moves over the past two weeks by Halifax, Nationwide and Santander.

Mortgage rates 'could DOUBLE by next year' while five-year loans under 1% will vanish within days as lenders pull best deals over fears Bank of England is poised by hike base rate of interest by next week

https://www.dailymail.co.uk/news/article-10144007/Inflation-fears-mortgage-lenders-hike-prices.html

This biggy idntt going to be ending of sub 2% mortgages. Its recent borrowers finding themselves moving to SVR,going from sub 2% 2-5year deal to a 5-6% SVR.

[shlomo]

1 hour ago, spyguy said:

Lenders raise UK mortgage rates as inflation fears take hold

Era of ultra-low deals disappearing fast as markets brace for BoE increase in cost of borrowing

https://www.ft.com/content/b7495f49-bc6d-44be-af9c-35a9c982bb9d

HSBC and NatWest raised rates on fixed-rate deals on Thursday, with Barclays due to follow suit on Friday. There have been similar moves over the past two weeks by Halifax, Nationwide and Santander.

Mortgage rates 'could DOUBLE by next year' while five-year loans under 1% will vanish within days as lenders pull best deals over fears Bank of England is poised by hike base rate of interest by next week

https://www.dailymail.co.uk/news/article-10144007/Inflation-fears-mortgage-lenders-hike-prices.html

This biggy idntt going to be ending of sub 2% mortgages. Its recent borrowers finding themselves moving to SVR,going from sub 2% 2-5year deal to a 5-6% SVR.

You think interest rates could hit 6% within 12 months 

[spyguy]

23 minutes ago, shlomo said:

You think interest rates could hit 6% within 12 months 

I think SVRs will be much higher.

[shlomo]

8 minutes ago, spyguy said:

I think SVRs will be much higher.

That would crash certain parts of the economy 

[spyguy]

2 hours ago, shlomo said:

That would crash certain parts of the economy 

No it wont.

Theres just not that much mortgaged property.

 

[shlomo]

9 minutes ago, spyguy said:

No it wont.

Theres just not that much mortgaged property.

 

I believe in the relationship of what people think they can afford, they have not been looking at the price of property, they have been looking at what they can afford to pay, if interest rates go up a lot people will stop buying as they cannot pay the much higher number 

[A.steve]

11 hours ago, shlomo said:

...what people think they can afford...

This is the fundamental and crucial idea.  However, it is not a simple one.

There are several interpretations:

1. Immediate nominal cash-flow projection.  (Relationship between revenue; existing/expected obligations [including tax] and projections of regular nominal costs arising from the transaction.)
2. Projection of anticipated change in personal revenue over medium/longer term.
3. Projection of anticipated change in obligations over medium/longer term.
4. Projected longer term requirements - and their relationship to capital assets owned and expected to be acquired.

A lot of weight is placed behind item 1.  However, I think, items 2-4 are far more relevant.  Items 2-4, however, are likely riddled with uncertainty.  How could anyone (unless they are a pensioner on a 'defined benefits' scheme) in an economic climate like the one today, make a confident prediction of their nominal revenues over the next couple of decades?  With property, there's also the question about liquidity... What if the property is in the wrong location - and one only learns this in, say, 2 years time?  What if selling a property - to back out of a position - takes years rather than weeks? 

More important than what people (think) they can afford... is how confident they feel about their futures.  If they are confident and optimistic (for some definition of optimism) they'll be willing to pay more - if they and uncertain or pessimistic... they won't.  This question of confidence also cuts both ways... not only is confidence required to make a substantial purchase - but it is also required to make a substantial sale... a fear of rising prices will prevent many from offering property for sale... because they have a big risk if the markets (in general) move against them after they areee to sell.

 

[shlomo]

4 minutes ago, A.steve said:

This is the fundamental and crucial idea.  However, it is not a simple one.

There are several interpretations:

1. Immediate nominal cash-flow projection.  (Relationship between revenue; existing/expected obligations [including tax] and projections of regular nominal costs arising from the transaction.)
2. Projection of anticipated change in personal revenue over medium/longer term.
3. Projection of anticipated change in obligations over medium/longer term.
4. Projected longer term requirements - and their relationship to capital assets owned and expected to be acquired.

A lot of weight is placed behind item 1.  However, I think, items 2-4 are far more relevant.  Items 2-4, however, are likely riddled with uncertainty.  How could anyone (unless they are a pensioner on a 'defined benefits' scheme) in an economic climate like the one today, make a confident prediction of their nominal revenues over the next couple of decades?  With property, there's also the question about liquidity... What if the property is in the wrong location - and one only learns this in, say, 2 years time?  What if selling a property - to back out of a position - takes years rather than weeks? 

More important than what people (think) they can afford... is how confident they feel about their futures.  If they are confident and optimistic (for some definition of optimism) they'll be willing to pay more - if they and uncertain or pessimistic... they won't.  This question of confidence also cuts both ways... not only is confidence required to make a substantial purchase - but it is also required to make a substantial sale... a fear of rising prices will prevent many from offering property for sale... because they have a big risk if the markets (in general) move against them after they areee to sell.

 

You are overthinking, for the past living memory say about 20 years property is a one way bet, and their is that idiotic slogan ‘rent is dead money’

You are so risk perverse I am surprised you get out of bed every morning, day you choke on your cornflakes or the cat scratches you 

[winkie]

20 minutes ago, shlomo said:

You are overthinking, for the past living memory say about 20 years property is a one way bet, and their is that idiotic slogan ‘rent is dead money’

You are so risk perverse I am surprised you get out of bed every morning, day you choke on your cornflakes or the cat scratches you 

I don't agree, agree with Steve it is a good thing to look forward medium term.......be cautious not reckless....life is not all about working to pay a mortgage and bills, over stretching to buy something that becomes a heavy chain where no longer enjoy living in it just because it had a brand new chip kitchen and bathroom that cost an extra arm and a leg plus interest.....if things turn out well can have a surplus to spend on enjoying life not living confined in four walls.

[A.steve]

38 minutes ago, shlomo said:

You are overthinking, for the past living memory say about 20 years property is a one way bet, and their is that idiotic slogan ‘rent is dead money’

You are so risk perverse I am surprised you get out of bed every morning, day you choke on your cornflakes or the cat scratches you 

🙂 If I didn't have a great name already, 'risk-perverse' would be my choice.

Overthinking... perhaps... or, maybe, I'm just the sort of person who likes to make considered decisions?  What I don't think you appreciated is that my post this morning does not draw any conclusions about what is, or is not, affordable... it just states that the most important factors are not the ones that are easily measured.   Can anyone have any clear understanding of either future nominal income, or nominal obligations - in even 5 years time?  I definitely don't... and, I strongly suspect, anyone who confidently tells you they do... is spectacularly deceiving themselves.

What I think you overlook is that I'm not saying that uncertainty means one should not commit and buy a seemingly stupidly overpriced property. An equally good argument suggests - faced with uncertainty - that this is exactly what one "should" do - especially if one doesn't have one already.

P.S. I don't and won't have a cat (I bricked up the cat-flaps in the house I bought).  I don't have cornflakes either... they're emotionally unrewarding and become unpleasantly soggy if one puts milk on them. I don't need another house - but I am actively looking for other investments that take a sensible perspective on risk.  It is proving much harder than it sounds... at least in part because I feel visceral revulsion to the notion of gambling - and I don't really want to be a landlord.  I can't tell if my biases are my blessing, or a curse... but they are mine.  I can easily appreciate why so many (after having acquired a home) can't fathom how to go about making any other sort of investment.  I don't think I'm excessively risk adverse... but I am very picky about the risks I'm willing to take.

P.P.S.  This raspberry is for the first person who mentions any cryptocurrency or precious metal.

Edited October 30, 2021 by A.steve

[Will!]

21 hours ago, spyguy said:

Lenders raise UK mortgage rates as inflation fears take hold

Era of ultra-low deals disappearing fast as markets brace for BoE increase in cost of borrowing

https://www.ft.com/content/b7495f49-bc6d-44be-af9c-35a9c982bb9d

HSBC and NatWest raised rates on fixed-rate deals on Thursday, with Barclays due to follow suit on Friday. There have been similar moves over the past two weeks by Halifax, Nationwide and Santander.

Disappointingly no rise in stress rates at The Mortgage Works yet.

https://www.themortgageworks.co.uk/lending-criteria/income

[Confusion of VIs]

15 hours ago, A.steve said:

🙂 If I didn't have a great name already, 'risk-perverse' would be my choice.

Overthinking... perhaps... or, maybe, I'm just the sort of person who likes to make considered decisions?  What I don't think you appreciated is that my post this morning does not draw any conclusions about what is, or is not, affordable... it just states that the most important factors are not the ones that are easily measured.   Can anyone have any clear understanding of either future nominal income, or nominal obligations - in even 5 years time?  I definitely don't... and, I strongly suspect, anyone who confidently tells you they do... is spectacularly deceiving themselves.

What I think you overlook is that I'm not saying that uncertainty means one should not commit and buy a seemingly stupidly overpriced property. An equally good argument suggests - faced with uncertainty - that this is exactly what one "should" do - especially if one doesn't have one already.

P.S. I don't and won't have a cat (I bricked up the cat-flaps in the house I bought).  I don't have cornflakes either... they're emotionally unrewarding and become unpleasantly soggy if one puts milk on them. I don't need another house - but I am actively looking for other investments that take a sensible perspective on risk.  It is proving much harder than it sounds... at least in part because I feel visceral revulsion to the notion of gambling - and I don't really want to be a landlord.  I can't tell if my biases are my blessing, or a curse... but they are mine.  I can easily appreciate why so many (after having acquired a home) can't fathom how to go about making any other sort of investment.  I don't think I'm excessively risk adverse... but I am very picky about the risks I'm willing to take.

P.P.S.  This raspberry is for the first person who mentions any cryptocurrency or precious metal.

Tesla?

For me National Grid has been a reliable dividend payer over the last 10 yrs averaging 5%,  although not huge  capital growth over the period. 

 

[A.steve]

 

18 hours ago, Confusion of VIs said:

Tesla?

For me National Grid has been a reliable dividend payer over the last 10 yrs averaging 5%,  although not huge  capital growth over the period.

I can't bring myself to back Musk... I think Tesla have some good ideas - and I can't argue that there is brand loyalty from some demographics... but, for me, it feels as if there's something "not quite right" about it all... and that keeps me from jumping on this particular bandwagon.

The National Grid is a very interesting idea.  I think I'd want to understand, properly, what the exact relationship is between the National Grid and various power stations.  I recently saw a very long train... emblazoned with a massive advert for Drax - which I thought was odd.  I couldn't fathom who the target audience was - but, I suppose, it could have been investors -couldn't it? 

It feels as if I'd want to properly understand what these companies with substantial valuations actually own - before I decide if I think the share-price represents value.  I'm aware that some don't think this analysis is strictly necessary -but I wouldn't want to have been an investor in Nikola.

P.S.  This prompted me to look at the National Grid website... and I was distracted.  Is it only me - or is it obvious to everyone else that this 'green lighting' outside 10 Downing Street is rather weird?  Part of me wonders if it is about Halloween - and part of me still can't fathom why someone, who probably needs to look competent, would agree to be bathed in putrid-looking green light.  It reminds me of somewhere an unpleasant monster from Dr Who might live.  I wonder if that had been intended?

 

[Confusion of VIs]

On 31/10/2021 at 19:54, A.steve said:

 

I can't bring myself to back Musk... I think Tesla have some good ideas - and I can't argue that there is brand loyalty from some demographics... but, for me, it feels as if there's something "not quite right" about it all... and that keeps me from jumping on this particular bandwagon.

The National Grid is a very interesting idea.  I think I'd want to understand, properly, what the exact relationship is between the National Grid and various power stations.  I recently saw a very long train... emblazoned with a massive advert for Drax - which I thought was odd.  I couldn't fathom who the target audience was - but, I suppose, it could have been investors -couldn't it? 

It feels as if I'd want to properly understand what these companies with substantial valuations actually own - before I decide if I think the share-price represents value.  I'm aware that some don't think this analysis is strictly necessary -but I wouldn't want to have been an investor in Nikola.

P.S.  This prompted me to look at the National Grid website... and I was distracted.  Is it only me - or is it obvious to everyone else that this 'green lighting' outside 10 Downing Street is rather weird?  Part of me wonders if it is about Halloween - and part of me still can't fathom why someone, who probably needs to look competent, would agree to be bathed in putrid-looking green light.  It reminds me of somewhere an unpleasant monster from Dr Who might live.  I wonder if that had been intended?

 

In the UK National Grid is only responsible for the electricity and gas distribution networks, a very low risk business as it effectively operates on a cost plus basis. The main risk here is political interference with the allowable rate of return on investment but given the huge investment needed in the grid over the next couple of decades I doubt the government will want to do anything that would deter this investment.   

 

[A.steve]

11 hours ago, Confusion of VIs said:

In the UK National Grid is only responsible for the electricity and gas distribution networks, a very low risk business as it effectively operates on a cost plus basis. The main risk here is political interference with the allowable rate of return on investment but given the huge investment needed in the grid over the next couple of decades I doubt the government will want to do anything that would deter this investment.  

I had a brief look into the National Grid.  I noticed that there were subsidiaries that were not regulated - and that there was also a group of subsidiary companies operating in the USA.

https://www.nationalgrid.com/investors/debt-investors/group-structure

While what you say seems obvious - I feel that there may be more to the National Grid than that...  (More research required on my part... before I could say anything more interesting.)

 

Edited November 2, 2021 by A.steve

[Confusion of VIs]

1 hour ago, A.steve said:

I had a brief look into the National Grid.  I noticed that there were subsidiaries that were not regulated - and that there was also a group of subsidiary companies operating in the USA.

https://www.nationalgrid.com/investors/debt-investors/group-structure

While what you say seems obvious - I feel that there may be more to the National Grid than that...  (More research required on my part... before I could say anything more interesting.)

 

The US operation carries more risk than the UK and has had a fair amount of recent controversy but also has more potential for capital gain than in the UK. My overall take on it was that even if the US operation performs badly, over the longer term the 5% dividend should more than make up for any capital loss.