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76% Of New Mortgages Are 'fixed'

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There was a 'property expert' on TV this week who said that 76% of new mortgages are now fixed rate (presumably most of them fixed for just two years). He claimed this insulated the property market from falls, because it meant high interest rates would not lead to higher interest payments.

Discuss.

(PS - I think the expert was from Rightmove, speaking on Ch4 lunchtime news on Monday.)

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Two year fix is meaningless when the mortgage term is 25 years (or longer, or indded infinite a.k.a interest only).

There were times in the past where a short term fix may have had a substantial effect say when rates and income levels were rocketing anda couple of years may make a big enough change in income situation in order to make something that was not affordable in year 1 affordable in year 3, even with rising rates.

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There was a 'property expert' on TV this week who said that 76% of new mortgages are now fixed rate (presumably most of them fixed for just two years). He claimed this insulated the property market from falls, because it meant high interest rates would not lead to higher interest payments.

Discuss.

(PS - I think the expert was from Rightmove, speaking on Ch4 lunchtime news on Monday.)

The crash seems more likely to occur because credit will dry up and buyers will simply not be able to afford the inflated prices and particularly after a few interest rate rises.

Those on short term fixes will run into problems in time.

The only sensible thing at the moment seems to be to stay out of the market if at all possible.

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Two year fix is meaningless when the mortgage term is 25 years (or longer, or indded infinite a.k.a interest only).

There were times in the past where a short term fix may have had a substantial effect say when rates and income levels were rocketing anda couple of years may make a big enough change in income situation in order to make something that was not affordable in year 1 affordable in year 3, even with rising rates.

Its all depends on how long they are fix for etc...

can't see it making a massive difference..

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i nthink most that bought in the crazy prices of the last 7/8 years or so will be off there fixed rates now.

i wonder if i happens like this for struggling mortgagee's

first there fixed

then they are variable

then they switch to a intrest only

then they switch the 20 years left on there mortgage to a 25 year new mortgage

then the MEW

then they take out new credit cards while they still have good credit rating, while at same time have the house up for sale.

then when it dont sell and they cant loan anymore or sell anymore cars or items on ebay, they hand the keys in.

I reckon people do everything possible to hold onto the house, absoulutely everything before giving it up.Thus i bet for every repossesion there are another 10 people absolutely on there **** in the wings.If you look at where the main boom ends, there is no doubt a lull period where MEW ect occurs before the real repossesion's start hitting and before the forced sellers appear.This was probably about 2 years ago when prices reached the point of no return.I think we may have just gone through the point where the people in trouble have spent the last credit card they could get, mew the last 10k, sold the extra car, took the saturday job ect ect

and now many are coming to the its all over there is no more they can do stage.

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2 points:

1) if 76% of new mortgages are fixed rate then that suggests at the very least that "sheeple" are actually thinking carefully about what mortgage product to chose. Perhaps they are also thinking rather more carefully about the original purchase decision than this forum gives them credit?

2) Why the assumption that once the fixed period has finished borrowers will stay with that lenders variable rate. Plenty of evidence that people move from one lender to another cherry picking a decent rate for the next few years.

I've just had a mortgage application approved for a 5 yr fix at 4.69%. I think rates are likely to fall in the very short term but rise thereafter. No idea whether 5 yr fix will prove a good decision or a bad one but at least I can comfortably budget for the next 5 yrs and over-repay.

There's too little detailed analysis on this forum as to the types of mortgage packages now available. People shouldn't just think about a standard 25 yr repayment model. There's loads of cheaper options.

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2 points:

1) if 76% of new mortgages are fixed rate then that suggests at the very least that "sheeple" are actually thinking carefully about what mortgage product to chose. Perhaps they are also thinking rather more carefully about the original purchase decision than this forum gives them credit?

2) Why the assumption that once the fixed period has finished borrowers will stay with that lenders variable rate. Plenty of evidence that people move from one lender to another cherry picking a decent rate for the next few years.

I've just had a mortgage application approved for a 5 yr fix at 4.69%. I think rates are likely to fall in the very short term but rise thereafter. No idea whether 5 yr fix will prove a good decision or a bad one but at least I can comfortably budget for the next 5 yrs and over-repay.

There's too little detailed analysis on this forum as to the types of mortgage packages now available. People shouldn't just think about a standard 25 yr repayment model. There's loads of cheaper options.

like a intrest only one where you never pay it off till your dead?

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Also how many of them were / are on a genuine straight up fixed rate. A lot of the fixed deals around had a headline grabbing rate for two years + a number of years tie in on a crap SVR rate. Fixed alright. Fixed up like a kipper.

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like a intrest only one where you never pay it off till your dead?

If that's your level of understanding of the complex financial products available then you deserve to remain homeless.

I bet if Dr Bubb stated that he had a interest only mortgage and a financial vehicle based on mining stocks and selected commodities everyone on this site would be creaming in their pants with his wisdom.

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If that's your level of understanding of the complex financial products available then you deserve to remain homeless.

I bet if Dr Bubb stated that he had a interest only mortgage and a financial vehicle based on mining stocks and selected commodities everyone on this site would be creaming in their pants with his wisdom.

i wouldnt, i take each thing as i see it

but from you we have got used to ******** and you never fail to stick to form

your the one that mentioned 70 odd % are intrest only mortgages not me, and then went on to say there are so many ways people are using for there mortgage needs now that is sustaining the boom.

well seems to me 70 odd % are using intrest only

i wouldnt, i take each thing as i see it

but from you we have got used to ******** and you never fail to stick to form

your the one that mentioned 70 odd % are intrest only mortgages not me, and then went on to say there are so many ways people are using for there mortgage needs now that is sustaining the boom.

well seems to me 70 odd % are using intrest only

i will also add i have stated im against leveraged investments that drbubb does on many occasions.i consider them no more than spread betting.

do you think we all sit here hailing the master bubb?

many dont, but its mutually done in a polite civilised debate.

you on the otherhand are as irritating as a pile and as ignorant as they come

i guess you werent brought up right to learn some manners and respect for others

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If these news about banks having less access to cheap credit in Switzerland etc is true, then there may not be so much cheap money coming available.

Plus once you're fixed, you can still lose your job (leading to a repo, bad effect on the market) OR you have no effect on the market anyway - you're fixed. It's the market that dictates house prices, not how comfortable one person is paying off their mortgage.

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Also how many of them were / are on a genuine straight up fixed rate. A lot of the fixed deals around had a headline grabbing rate for two years + a number of years tie in on a crap SVR rate. Fixed alright. Fixed up like a kipper.

Absolutely, I kow of someone who was on 900/month and after 2years fixed paying 1600/month.

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i wouldnt, i take each thing as i see it

but from you we have got used to ******** and you never fail to stick to form

your the one that mentioned 70 odd % are intrest only mortgages not me, and then went on to say there are so many ways people are using for there mortgage needs now that is sustaining the boom.

well seems to me 70 odd % are using intrest only

i will also add i have stated im against leveraged investments that drbubb does on many occasions.i consider them no more than spread betting.

do you think we all sit here hailing the master bubb?

many dont, but its mutually done in a polite civilised debate.

you on the otherhand are as irritating as a pile and as ignorant as they come

i guess you werent brought up right to learn some manners and respect for others

You seem somewhat confused and bewildered. Are you struggling in the real world too?

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If these news about banks having less access to cheap credit in Switzerland etc is true, then there may not be so much cheap money coming available.

Plus once you're fixed, you can still lose your job (leading to a repo, bad effect on the market) OR you have no effect on the market anyway - you're fixed. It's the market that dictates house prices, not how comfortable one person is paying off their mortgage.

Even so, if I was buying in the current market (which I certainly am not, either here in Oz or in the UK), I would fix for as long a period as I could. 10 years or so.

Quite apart from my views on how the next few years will pan out (I consider increasing inflation more likely than deflation), your potential loss is much less. I remember my parents getting a 4.75% 40 year fixed mortgage in 1970. When I started work in 1979 and bought, rates were 10.5% when I settled, 11% when I made the first repayment, and 14.5% at one point in the early 1980's.

(And as an interesting aside, all my friends and I put every spare cent into paying off the home loan. There wasn't another investment at the time to touch paying off the mortgage on a risk/reward basis.

Note: Mortgage interest on a family home is not deductible in Oz, so money used to repay principal 'earns' the equivalent of the mortgage interest totally tax-free.)

Governments had to hastily pass legislation to allow the home financing system to continue at all, since pre-1970 in Australia 12% was officially defined as usury.

Edited by ajh

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If these news about banks having less access to cheap credit in Switzerland etc is true, then there may not be so much cheap money coming available.

Problems in Switzerland? Haven't heard about this. Please explain... :unsure:

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ASSUMING all those 76% of fixed mortgages are safe, that the holders have the temperament and the economic stability to ride out a crash and/or a recession, then 24% of mortgages aren't fixed. If 90% of holders of an asset class are happy to hold, come what may, but 5-10% are forced sellers, then the price of the asset will probably go down 10-20%.

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Does anyone have info on proportion of fixed rate mortgages over the last few years?

If this is a rise (without any rise in IR), then maybe this is an indication that the all important "sentiment" is changing?

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On a normal repayment mortgage, you still have owing after the fix something like:

95% after 2 years

88% after 5 years

75% after 10 years

So the fix really needs to be 10 years to buy security in low nominal (wage & net income) inflation times.

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There was a 'property expert' on TV this week who said that 76% of new mortgages are now fixed rate (presumably most of them fixed for just two years). He claimed this insulated the property market from falls, because it meant high interest rates would not lead to higher interest payments.

Discuss.

(PS - I think the expert was from Rightmove, speaking on Ch4 lunchtime news on Monday.)

i T MEANS THAT NEW BUYERS PAY AT NEW RATES.

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On a normal repayment mortgage, you still have owing after the fix something like:

95% after 2 years

88% after 5 years

75% after 10 years

So the fix really needs to be 10 years to buy security in low nominal (wage & net income) inflation times.

In the "good ol days" - the 1960s and 70s in Australia, everybody had a fixed rate that tended to be fixed for 25 years. It was low too. Something like 4 or 5 %. The banks had no choice since they were highly regulated. This was smashed in the late 70s with marvellous banking reforms that let anything goes on the basis of "consumer choice". The banks were also falling over themselves to get/force/intimidate people to jump out of the 25 year contract and move to a variable rate. Wonder why?

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I reckon a high proportion of buyer on fixed rates just means the market is less sensitive to IR rises, meaning IRs have to rise more to achieve the same effect.

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but most of these fixes are for only 5 years......In most other countries it is considered financially reckless NOt to fix for the full term of the loan....Even GB's report identified the way our reliance on variable rates means the economy's path is too dependent on interst rates compared to othe countries......

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  • 301 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
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      • up 5%



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