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jonjo

Mortgage Resets In August

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I keep reading on here that there is a sizeable number of mortgage low rate deals coming to an end at the end of the month. Why? Don't mortgages just run with 2 or 3 years discount from the time you take them out? Or am I missing something?

Also, if you took a mortgage out 3 years ago for £200k and your discount runs out today - what sort of price differential will you be looking at on your mortgage tomorrow?

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I keep reading on here that there is a sizeable number of mortgage low rate deals coming to an end at the end of the month. Why? Don't mortgages just run with 2 or 3 years discount from the time you take them out? Or am I missing something?

Also, if you took a mortgage out 3 years ago for £200k and your discount runs out today - what sort of price differential will you be looking at on your mortgage tomorrow?

If you took out a 3-year discount IO mortgage in 2004...you could get these for about 4%....and it was about to re-set.The standard SVR now is about 6.75%...so you could be talking about a 60% jump in your repayments.

...say avg houseprice in 2004 was £100k....on IO basis in 2004(discount rate),would have been about £450pcm.....after the re-set more like £700.

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You're not missing anything. The loans were taken out when interest rates were lower than they are now, at one point, 3.5% - and now they're at 5.75% and set to rise to 6% or maybe 6.25% by the end of the year.

6% is fairly low for the UK so you wouldn't imagine there's a problem. Rates hit 12% back in the early 90s (15% for one day IIRC) and we're nowhere near that.

However the total amount of mortgage debt is now so much higher than it was back then - even after inflation - that even the tiniest little 0.25% rise has an effect on borrowers in a way that it has not done in recent years. That's why when the BBC report this, it's like someone has died.

Add to that the rising cost of living and it doesn't leave too much left over for some people, hence the rise in reposessions.

People who bought their homes in say 2000 should be fine. It's the first time buyers who bought say 2004 - 2006 that might hit trouble as a: they might have thought that rates of 4% are "normal" - they're not, b: they were only thinking months ahead not years and c: the rising cost of living (transport, food etc) eats further into what they can afford.

In other words: as rates rise, affordability drops. Someone who bought at say 4% may now face some fairly hefty increases in their monthly payments they weren't bargaining on when they look for their next mortgage fix.

Roger Bootle basically says this in his comment in this thread: http://www.housepricecrash.co.uk/forum/ind...showtopic=52539

"If you bought your house some time ago, you are well within your affordability constraints, why should you be bothered by this? I think a large number of people simply will carry on regardless," he said.

Indeed they will. It's the people who bought up to their limits - and importantly potential new buyers - that will be affected.

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If you took out a 3-year discount IO mortgage in 2004...you could get these for about 4%....and it was about to re-set.The standard SVR now is about 6.75%...so you could be talking about a 60% jump in your repayments.

...say avg houseprice in 2004 was £100k....on IO basis in 2004(discount rate),would have been about £450pcm.....after the re-set more like £700.

A lot will be in August because that is when BoE cut rates in 2005 to reignite the flagginf market, so a fair amount of people got 2, 3 and 5 year fixes. The 2 year fixes will be expiring shortly.

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