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Interest Rate Increases Won't Cause A Crash

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Slightly off topic but if you had a £100k 25 year repayment mortgage fixed for 5 years at say 5.5% does anyone know how much of the original £100k you actually pay off in that 5 years?

Remaining balance after 5 years is 89,271 (monthly payments of 614).

Reset to 7 % and keep the remaining term of 20 years and the payments go up to 690.

There's a good calculator here:


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I've been reading this weeks Estates Gazette which is a property trade magazine.

Theres an interesting article called Home Truths which states that the main PLC housebuilders are not concern about the recent interest rate rises as it will have a significantly reduced impact on the housing because:

A) The department of Communties and Local Government (DCLG) estimates that only 77% of all residential purchases require a mortgage, with the other 23% requiring no mortgage at all. The Council of Mortgage Lenders estimates that about 85% of buyers of homes valued at £200k or less require a mortgage but only 60% of those buying homes over £200k need to borrow

B) 85% of FTB and 70% of existing mortgage owners who moved home took out fixed rate mortgages - the highest figures on record.

Interesting stuff

This perhaps would explain why we haven't seen a slow down in the market recently.

Any thoughts?

Its not those that are taking on fixed rates now that they can cope with.

Its the estimated 200,000 a month that are remortgaging at the end of their fixed rate deals at todayinterest rates.

another 200,000 next month

etc etc.. to these people you can only hope that they can cope... its a good rise

4.1% was attainable 2 years ago.

Now fixed rate deals have been pulled and can be 2% higher.

So, on an Interest Only mortage it is possible that people can see their repayents go up by almost 50%

200,000 loan at 4.1 % is: £683 a month

200,000 loan at 6.1 % is: £1016 a month

Would this hurt?

fixed rates are taken out on average over 2 years, if they are not at 6.1% yet they may be very soon.

also, £200,000 is about what a FTB needs over a lot of the country..

£1316.19 a month as a repayment mortgage.

You see a weird thing happened, over the last few years it slipped peoples mind that £200,000 was a lot of money.

People look at what their house is wth as a piggy bank.

they loved the huge percentage rises. 20%, 30%.. etc..

this seemed like a lot of money..

weird that a mere 2% rise in Interest Rates would cause the the cost to them to rise by an amount that makes HPI look tame.

Its in the details.

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The article was about how the large PLC housebuilding companies were not expecting a slow down in the market, in the immediate future; so i think it is relavent to the market now. The article suggested that the large levels of equity which people have was the key reason and that fixed mortgages were secondary.

You've changed you status to bear. Well done! :D

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My previous point is was not made very well.

200,000 fixed rates end each month, people come away from their fixed term and onto a variable rate.

It will be the same next month, and the month after and the month after.

Fixed rates protect the individual, they do not protect the market

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Are you saying the WON'T be coming off their fixed rates and going onto much higher rates? Most will likely face a 30% increase...

Nope. I'm saying that lots of pople have come out of fixed rates taken in '05 but I've not heard any stories about any spike in arrears.

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Guest xeouialp
If everyone fixes rates all of the time, then there will also equally be a time when fixed rate deals end all of the time, a roll on- roll off system.

I call it the spirit of free enterprise

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  • 317 Brexit, House prices and Summer 2020

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