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killerbee

Misery This Summer!

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Hi all,

In the Telegraph today, apparently when rates were dropped in the summer of 2005 a lot of people got a two year fix. When their fix ends in a couple of months they will face up to 40% increase in morgage payments. Estimates are that 1 in 5 morgages will be effected.

People who are already struggling will fall at this hurdle.

Killerbee

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Hi all,

In the Telegraph today, apparently when rates were dropped in the summer of 2005 a lot of people got a two year fix. When their fix ends in a couple of months they will face up to 40% increase in morgage payments. Estimates are that 1 in 5 morgages will be effected.

People who are already struggling will fall at this hurdle.

Killerbee

Yipee, more money flooding into the banks for lending out money they never had.

Edited by insidetrack

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This is a point I keep trying to make to friends/family who feel interest rates don't affect them 'cos they gotta fixed rate. The typical conversation goes:

Smug FTB: House prices only ever go up

Me: Well they might not after all the interest rate hike the BoE are talking about.

SF: Well they won't affect me, I've got a fixed rate.

Me: Really, how long you got left on that?

SF: Twelve months

Me: And how long is the loan for?

SF: 30 Years

Me: What you planning to do when it ends and the interest rates have gone up?

SF (looking at me like I'm stupid): Shop around for a good deal

Me: Good plan

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You can still find good deals if you shop around. Like HBOS, for example, has a 2 year fixed mortgae for 4.99%! Sounds great until you read the small print and find that the arrangement fee is £2000 :unsure: Still, I guess you can just stick that onto your mortage, then shop around for another one in another 2 years time.

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You can still find good deals if you shop around. Like HBOS, for example, has a 2 year fixed mortgae for 4.99%! Sounds great until you read the small print and find that the arrangement fee is £2000 :unsure: Still, I guess you can just stick that onto your mortage, then shop around for another one in another 2 years time.

Thats £83 you are paying per month just for the fee, and if you add it on to the mortgage it will cost you alot more over the term of the mortgage.

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You can still find good deals if you shop around. Like HBOS, for example, has a 2 year fixed mortgae for 4.99%! Sounds great until you read the small print and find that the arrangement fee is £2000 :unsure: Still, I guess you can just stick that onto your mortage, then shop around for another one in another 2 years time.

What will be a "good deal" once IRs are at over 8%?

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When their fix ends in a couple of months they will face up to 40% increase in morgage payments.

Any reasoning for this or just a direct quote from the article? Base rate in summer '05 was 4.75%, dropped to 4.5% in the august. Today it's 5.5% - a 22% increase. Is there really an extra 20% spread based on the 2005 thinking that rates had peaked compared to today's cycle still rising? Add in the fact that a repayment mortgage will not be affected as badly in percentage terms and it starts to look like poor journalism.

Thats £83 you are paying per month just for the fee, and if you add it on to the mortgage it will cost you alot more over the term of the mortgage.

£83 per month interest to cover the £2K fee????? that's like 50% annual interest! I think it might be £8.33 ;)

As to what I think will happen, those young enough will just extend their mortgage terms back to 20/25 years to make things more affordable in the short term. Just like that 40 yr mortgage thread at the moment. 40 yr term over 25 yr term saves £100 per month but costs an extra £100,000. It seems some people prefer to save £100pm now than £100,000 in 40 yrs. It seems FTBs hae been stretched to the limit but have the banks worked their way through all the existing homeowners yet?

Edited by daiking

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£83 per month interest to cover the £2K fee????? that's like 50% annual interest! I think it might be £8.33

I think the poster meant that a £2000 arrangement fee for a 2 year fix means that you're paying £83 per month for the fixed rate. You'd have to have a bloody huge mortgage for that to make sense (that or interest rates would have to leap massively in the next few months).

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£83 per month interest to cover the £2K fee????? that's like 50% annual interest! I think it might be £8.33 ;)

Resetting your fixed rate loan every 24 months at £2000 a go

2000 / 24 = £83.33

Plus interest as my learned friend said

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I think the poster meant that a £2000 arrangement fee for a 2 year fix means that you're paying £83 per month for the fixed rate. You'd have to have a bloody huge mortgage for that to make sense (that or interest rates would have to leap massively in the next few months).

I see, it was the talk of adding it on to the mortgage that :blink:'d me

Having shown the quality of my maths this afternoon, can someone tell me how much that is worth in mortgage taken at a lower fee fixed rate? How much do you need to spend to save compared to a mortgage at say 5.5 or 6%

Edited by daiking

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Hi all,

In the Telegraph today, apparently when rates were dropped in the summer of 2005 a lot of people got a two year fix. When their fix ends in a couple of months they will face up to 40% increase in morgage payments. Estimates are that 1 in 5 morgages will be effected.

People who are already struggling will fall at this hurdle.

Killerbee

Here's the article.

http://www.telegraph.co.uk/news/main.jhtml.../03/nmort03.xml

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From July 2005

Great News!!

MASSIVE CUTS TO HALIFAX RATES

4.29% 2 Year Fixed Rate NO UP FRONT COSTS – £599 ARRANGEMENT FEE CAN BE ADDED TO LOAN

from june 2007

Core range – rates now start from 6.19%, 2 yr fixed, 0-85% LTV, £999

That is a 44% increase to an interest only mortgage. Differing amounts for a repayment mortgage.

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From July 2005

Great News!!

MASSIVE CUTS TO HALIFAX RATES

4.29% 2 Year Fixed Rate NO UP FRONT COSTS – £599 ARRANGEMENT FEE CAN BE ADDED TO LOAN

from june 2007

Core range – rates now start from 6.19%, 2 yr fixed, 0-85% LTV, £999

That is a 44% increase to an interest only mortgage. Differing amounts for a repayment mortgage.

Well done Stevie. Nice and clear. It's going to be hard on some home'owners' this summer.

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The point I keep trying to make to the people trying to save me from "missing the boat"

There are times when "missing the boat" isn't such a bad move.

Particularly when it ends up knocking boots with an iceberg.

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I simply fail to understand the interest only mortgage concept. Why would anyone want to take one out? You might as well rent. The only reason I could see would be for capital appreciation and speculation. But if you actually want to own a house...why? :unsure:

Anyone got any idea how many people are on IO mortgages these days? They surely have to be a timebomb, either for 20-25 years down the line when they come to term, or for whenever interest rates rise / prices fall, and people wake up and simply start walking away from them.

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A guy in my office at work was saying his fixed rate deal ended soon, at the same time as

his job now pays less due to the job evaluation process we are going through.

So he has no option but to get a better paying job.

This is a good example of what working people are facing now, rising living costs and downward pressures on wages.

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A guy in my office at work was saying his fixed rate deal ended soon, at the same time as

his job now pays less due to the job evaluation process we are going through.

So he has no option but to get a better paying job.

lucky their current pay is protected for a couple of years.

Hope they got their appeal in in time

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lucky their current pay is protected for a couple of years.

Hope they got their appeal in in time

Yes, the term job evaluation gave it away a bit.

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I simply fail to understand the interest only mortgage concept. Why would anyone want to take one out? You might as well rent. The only reason I could see would be for capital appreciation and speculation. But if you actually want to own a house...why? :unsure:

Anyone got any idea how many people are on IO mortgages these days? They surely have to be a timebomb, either for 20-25 years down the line when they come to term, or for whenever interest rates rise / prices fall, and people wake up and simply start walking away from them.

I was having a drink with a friend on Friday night who can't understand why I rent, he went on to say that he is IO, I asked how he planned to pay back the oringinal £250k.... he said something along the lines of I don't need to, as long as house price continue to go up I'll be okay. So I asked how? he replied that in a year or two it'll be worth another £30k which when he sells it would allow him to pay some of the capital off, I raised the point that if his house had done that so would others so he won't have gained anything, he gave me a puzzled look as if I was the crazy one and repeated his arguement again! The guy is a Dr. so I generally credit him with having a bit more intelligence than most, guess not.

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... he gave me a puzzled look as if I was the crazy one and repeated his arguement again! The guy is a Dr. so I generally credit him with having a bit more intelligence than most, guess not.

I know people with PhDs in financial mathematics, and they tell me the same things. They also have no clue how money is generated.

If you only know a little about this stuff, you have a tremendous headstart for sorting your finances before everything goes pear shaped.

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