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Realistbear

" Coming Off A Fixed Rate Mortgage? "

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http://uk.biz.yahoo.com/25072007/389/comin...e-mortgage.html

Coming off a fixed rate mortgage?

By Richard "Dickie" Evans

Interest rates just keep rising. The Bank of England has imposed five increases over the past year and many commentators expect at least one more jump, which would take the base rate to 6 per cent.
Borrowers who took out fixed-rate mortgages could ignore all this while their deals last; no matter what the Bank does, their rate remains the same.
But there is a sting in the tail: when the fixed-rate deal expires, they are effectively exposed to all the rises that have taken place during that term in one go
- although they do have time to prepare for this if they keep an eye on mortgage rates...../
But what can you do if none of these courses of action make your mortgage affordable? Lenders are unanimous that the vital thing is to contact them as soon as possible. "Rates are still at historically low levels and we think that even those who fixed at the bottom of the market should be able to cope. But plan ahead, and contact your lender early if there are problems," says Neil Johnson of the Building Societies Association.
"Lenders are good at managing arrears these days. Possible steps include rescheduling, reducing other borrowing and moving to interest-only."

IR shock? Fancy that. Who would have thought it.................. :lol:

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http://uk.biz.yahoo.com/25072007/389/comin...e-mortgage.html

"Lenders are good at managing arrears these days. Possible steps include rescheduling, reducing other borrowing and moving to interest-only."[/indent]

IR shock? Fancy that. Who would have thought it.................. :lol:

Indeed they'd better be. This is where they lump numbers into bits of paper in order to make it seem as if nothing is amiss. "We can help you by increasing your debt. Let us turn your house into the poorhouse."

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Guest d23
http://uk.biz.yahoo.com/25072007/389/comin...e-mortgage.html

Coming off a fixed rate mortgage?

By Richard "Dickie" Evans

Interest rates just keep rising. The Bank of England has imposed five increases over the past year and many commentators expect at least one more jump, which would take the base rate to 6 per cent.
Borrowers who took out fixed-rate mortgages could ignore all this while their deals last; no matter what the Bank does, their rate remains the same.
But there is a sting in the tail: when the fixed-rate deal expires, they are effectively exposed to all the rises that have taken place during that term in one go
- although they do have time to prepare for this if they keep an eye on mortgage rates...../
But what can you do if none of these courses of action make your mortgage affordable? Lenders are unanimous that the vital thing is to contact them as soon as possible. "Rates are still at historically low levels and we think that even those who fixed at the bottom of the market should be able to cope. But plan ahead, and contact your lender early if there are problems," says Neil Johnson of the Building Societies Association.
"Lenders are good at managing arrears these days. Possible steps include rescheduling, reducing other borrowing and moving to interest-only."

IR shock? Fancy that. Who would have thought it.................. :lol:

Accomodative IR shock? Fancy that. Who would have thought it.................. :lol:

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Accomodative IR shock? Fancy that. Who would have thought it.................. :lol:

IR alone have no affect on HPI in a miracle economy. Its really simple you know and I am surprised you still don't get it?

In a Miraculous economic environment the supply of credit is unlimited. Thus, if Mr. Lender ups the rate by 1% the sheeple simply borrow more to cover the extra mortgage payment. The more the BoE hike the more the sheeple borrow and up goes the rate of inflation.

Now, in an economy that is not miraculous and where credit is based on the ability to repay it is a very different scenario.

Let's say Dick and Jane own a cottage in Toytown. They bought the house for 400k at a nice low rate of 3.45 for the first 2 years fixed. 2 years later the IR have reset and have gone up to 6.75%. What do Dick and Jane do?

In a miracle ecnomy they take out another loan at 6.75% and borrow the extra money to cover the larger payment.

But in a normal economy where borrowing is based on the ability to repay the Mr. Lender tells Dick and Jane that money is tight and they can only borrow what they can show they can repay. Oops. Dick and Jane only earn 40k between them and the nasty Mr. Lender will only let them borrow 3 times earning or 120k.

I have tried to put this in simple terms but it seems sheeple miss the very basic point about the relationship between IR and credit tightening. d23 escpecially, but then again he has very trol... , er, "Neither" tendencies. <_<

BTW, for the benefit of d23, the miracle economies are unwinding now as credit is becoming tight and many of the banks that helped fuel the miracle are finding themselves in trouble. The supply of cheap and easy credit is known as "sub-prime" which is another word for "risky." If you had been following the news you would have seen that there has been a sea change in the financial markets. IN reality, Merv is now redundant as his accomodative IR policy (IR below the rate of real inflation) has been overtaken by events: credit tightening.

If you are an overgeared OO or a BTLer it is probably too late to get out now.

<_<

Edited by Realistbear

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Guest d23
IR alone have no affect on HPI in a miracle economy. Its really simple you know and I am surprised you still don't get it?

In a Miraculous economic environment the supply of credit is unlimited. Thus, if Mr. Lender ups the rate by 1% the sheeple simply borrow more to cover the extra mortgage payment. The more the BoE hike the more the sheeple borrow and up goes the rate of inflation.

Now, in an economy that is not miraculous and where credit is based on the ability to repay it is a very different scenario.

Let's say Dick and Jane own a cottage in Toytown. They bought the house for 400k at a nice low rate of 3.45 for the first 2 years fixed. 2 years later the IR have reset and have gone up to 6.75%. What do Dick and Jane do?

In a miracle ecnomy they take out another loan at 6.75% and borrow the extra money to cover the larger payment.

But in a normal economy where borrowing is based on the ability to repay the Mr. Lender tells Dick and Jane that money is tight and they can only borrow what they can show they can repay. Oops. Dick and Jane only earn 40k between them and the nasty Mr. Lender will only let them borrow 3 times earning or 120k.

I have tried to put this in simple terms but it seems sheeple miss the very basic point about the relationship between IR and credit tightening. d23 escpecially, but then again he has very trol... , er, "Neither" tendencies. <_<

BTW, for the benefit of d23, the miracle economies are unwinding now as credit is becoming tight and many of the banks that helped fuel the miracle are finding themselves in trouble. The supply of cheap and easy credit is known as "sub-prime" which is another word for "risky." If you had been following the news you would have seen that there has been a sea change in the financial markets. IN reality, Merv is now redundant as his accomodative IR policy (IR below the rate of real inflation) has been overtaken by events: credit tightening.

If you are an overgeared OO or a BTLer it is probably too late to get out now.

<_<

yes RB, someones mortgage going up from 3.45% to 6.75% has no effect on HPI without credit tightening

none whatsoever :rolleyes:

Where we disagree is that unlike you I don't think it'll take IR's of 8%+ to bring about a correction (with or without credit tightening, which incidentally I don't see happening to any great extent yet; rates are going up sure but there are still many thousands of people getting loans who traditionally (in a rational world) wouldn't stand a chance). I reckon 6.25 or 6.50% will be enough; Seems I'm more bearish than you with regards to IR, go figure.

Pls stop calling me a troll RB, it's getting boring; I have never, not once, lied on this forum or (unlike you) 'mistakenly' posted innacurate figures or lied on a BBC forum about being a reposessed FTB hurt by IR hikes.

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yes RB, someones mortgage going up from 3.45% to 6.75% has no effect on HPI without credit tightening

none whatsoever :rolleyes:

Where we disagree is that unlike you I don't think it'll take IR's of 8%+ to bring about a correction (with or without credit tightening, which incidentally I don't see happening to any great extent yet; rates are going up sure but there are still many thousands of people getting loans who traditionally (in a rational world) wouldn't stand a chance). I reckon 6.25 or 6.50% will be enough; Seems I'm more bearish than you with regards to IR, go figure.

Pls stop calling me a troll RB, it's getting boring; I have never, not once, lied on this forum or (unlike you) 'mistakenly' posted innacurate figures or lied on a BBC forum about being a reposessed FTB hurt by IR hikes.

awooga!

Troll alert!!

Just kidding---just a stealth bull.

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If interest rates have no effect until they hit 8%, why did HPI virtually grind to a halt with IRs of 4.75% in 2005 (until the notorious .25% cut)? What were the other factors which caused HPI to get tantalising close to a reversal?

Edited by Leodhasach

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If interest rates have no effect until they hit 8%, why did HPI virtually grind to a halt with IRs of 4.75% in 2005 (until the notorious .25% cut)? What were the other factors which caused HPI to get tantalising close to a reversal?

1. Massive injection of cheap and easy credit. Subprime comes to the UK in power.

2. Liquidity increased as Gordon began heating up the presses.

3. Suge in government jobs.

4. BoE sent a signal to the market which impacted sentiment that houses only go up in price.

5. Mass immigration policy kicked in.

6. Future promise of tax evasion through pension plans (later withdrwan by Gordon).

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1. Massive injection of cheap and easy credit. Subprime comes to the UK in power.

2. Liquidity increased as Gordon began heating up the presses.

3. Suge in government jobs.

4. BoE sent a signal to the market which impacted sentiment that houses only go up in price.

5. Mass immigration policy kicked in.

6. Future promise of tax evasion through pension plans (later withdrwan by Gordon).

Yes, that's all explaining the current ridiculous HPI. But what I asked is why HPI came close to 0% in 2005, until the 0.25% IR cut? If IR rises are so ineffectual, why do so many people point to the September(?) 2005 cut as the disastrous move that re-stoked HPI?

edit for all my usual typos....

Edited by Leodhasach

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