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stevie1969

The Myths Of Taking A New Low Fixed Rate This Summer

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There are several extended threads regarding fixed rates ending this summer and the options available.

I thought I would spell out the problems facing these borrowers.

There are many 2/3 year fixed rates ending this summer of around 4.5%. These borrowers do not have to go on tho the SVR as stated in a few papers. They can take a new fixed rate with their existing lender or remortgage elsewhere.

Here lies the problem.

If we assume a couple earning £20k each with ne debts took a fixed rate with the Halifax 2 years ago. They would have a fixed rate of around 4.5%. When that ends they do not have to go on to the SVR of 7.5% they can go on to the new 2 year fix of 6.19% for existing borrowers. A hike of 38%

They could move lenders, however, if we assume they borrowed the maximum Halifax would lend = £180,000 on that salary!! Let's assume their salaries have not increased and they have taken no new loans or credit card debt

Then Kent reliance will lend 3 times joint - that is £120,000. So you can't remortgage there.

Woolwich will lend 3 times joint - that is £120,000. So you can't remortgage there.

A&L will lend to you at 5.49% - an increase of only! 22%

Nationwide will lend you £170,000. So you can't remortgage there.

HSBC will lend you £161,000. So you can't remortgage there.

So if you have broken the 2.5 times joint income, which most FTB/NTB have, then you will be in for a shock. If you have stuck to 2.5 times joint, then the market is open to you.

In my experience people's salary has increased over 2 years, but so has their debt.

There are a lot of people who have taken on debt, or reduced their salary (typically with having children) and do not fit the lending criteria of any new lender.

Edited by stevie1969

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There are a lot of people who have taken on debt, or reduced their salary (typically with having children) and do not fit the lending criteria of any new lender.

Maybe, but maybe not! With no way of measuring this, the post is pointless. My wages have gone up, my mortgage has gone down. No extra debts. Assuming a repayment mortgage, that 180k wont be 180k anymore! Mine is looking to drop by 30k in the fix period, but then I accept not everyone will overpay like I have. Besides, my lender seemed more interested in affordability and didnt stick to a simple multiple rule - times have changed. Which makes sense because of course I can afford to repay more given that I dont have a car, sky, mobile contract, gym, etc, etc.

Its interesting to think about but lets be honest, we dont really know whats going to happen next. I'd like a drop in prices, I'd be happy(ish) to take a loss of equity if it meant I could get my dream detached house in the longterm. But I aint gonna believe it till I see it...

Edited by Orbital

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stevie1969,

are you suggesting that halifax intended this? Play fast and loose early during the good times and then as credit tightens you trap your customers on uncompetitive deals? That extra 0.5% dropping straight into the bottom line? withou the need for negative equity or mass repossessions?

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Maybe, but maybe not! With no way of measuring this, the post is pointless. My wages have gone up, my mortgage has gone down. No extra debts. Assuming a repayment mortgage, that 180k wont be 180k anymore! Mine is looking to drop by 30k in the fix period, but then I accept not everyone will overpay like I have. Besides, my lender seemed more interested in affordability and didnt stick to a simple multiple rule - times have changed. Which makes sense because of course I can afford to repay more given that I dont have a car, sky, mobile contract, gym, etc, etc.

Its interesting to think about but lets be honest, we dont really know whats going to happen next. I'd like a drop in prices, I'd be happy(ish) to take a loss of equity if it meant I could get my dream detached house in the longterm. But I aint gonna believe it till I see it...

Since you claimed on another thread a couple of days ago to earn "way less than (around) 60K", how are you finding the funds to overpay a mortgage at that rate over recent years? Or did I read that wrong?

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Maybe, but maybe not! With no way of measuring this, the post is pointless. My wages have gone up, my mortgage has gone down. No extra debts. Assuming a repayment mortgage, that 180k wont be 180k anymore! Mine is looking to drop by 30k in the fix period, but then I accept not everyone will overpay like I have. Besides, my lender seemed more interested in affordability and didnt stick to a simple multiple rule - times have changed. Which makes sense because of course I can afford to repay more given that I dont have a car, sky, mobile contract, gym, etc, etc.

Its interesting to think about but lets be honest, we dont really know whats going to happen next. I'd like a drop in prices, I'd be happy(ish) to take a loss of equity if it meant I could get my dream detached house in the longterm. But I aint gonna believe it till I see it...

SIGH

The post is not pointless.

The general assumption in the press is that a borrower can just hop around lenders after their deal ends to take advantage of a lower deal elsewhere.

7 years ago every lender had a lending practice of 2.5 times joint income. Now most lenders lend on affordability expressing that as a higher multiplier.

You will have seen from the very many threads on here that a significant number of borrowers are borrowing up to their maximum, on interest only to get on the housing ladder. If they are assuming that they will alwasys be able to get a new 'cheap' deal when their current one expires then they are in trouble.

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stevie1969,

are you suggesting that halifax intended this? Play fast and loose early during the good times and then as credit tightens you trap your customers on uncompetitive deals? That extra 0.5% dropping straight into the bottom line? withou the need for negative equity or mass repossessions?

10 years ago two thirds of borrowers were on their lenders SVR. This is where the lender makes the real money.

Remortgaging became common place to attract borrowers, with a set of 'existing customer' deals that were not quite as good as the market place once the remortgage deal expired.

We shall see

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