Case Study: Dilemma As Tracker Offer Disappears

[Once in a lifetime]

Mrs Green, a 40-year-old homeowner who works for a management consultancy

now facing the prospect of significantly higher mortgage costs. She and her husband –

like hundreds of thousands of other borrowers – are coming to the end of a cheap two-year fixed deal.

Their mortgage rate of 4.49 per cent runs out at the end of next month and they are keen to remortgage

to another deal to avoid reverting to their lender’s high standard variable rate.

“I was slightly alarmed at how much things had changed since we took out our last mortgage,” she said.

“We wanted another fixed rate but that would have meant paying a lot more.”

http://www.ft.com/cms/s/0/83f20534-f220-11...?nclick_check=1

[dances with sheeple]

Mrs Green, a 40-year-old homeowner who works for a management consultancy

now facing the prospect of significantly higher mortgage costs. She and her husband –

like hundreds of thousands of other borrowers – are coming to the end of a cheap two-year fixed deal.

Their mortgage rate of 4.49 per cent runs out at the end of next month and they are keen to remortgage

to another deal to avoid reverting to their lender’s high standard variable rate.

“I was slightly alarmed at how much things had changed since we took out our last mortgage,” she said.

“We wanted another fixed rate but that would have meant paying a lot more.”

http://www.ft.com/cms/s/0/83f20534-f220-11...?nclick_check=1

She should have thought about rates going to 10 or 12 %, and if she could still pay then. She should have been "alarmed" that houses were selling for many times the salary multiples of the last crash (to be fair I don`t know when she bought, last seven years judging by the rates?) Most people just can`t afford their mortgage, if more of them had waited and used their own brain cells, the VI`s would have been out of luck from the start, and would have had to dream up some other hair brained scheme to pluck "funny money" out of thin air.

[Slumpmonkey Returns]

She should have thought about rates going to 10 or 12 %, and if she could still pay then. She should have been "alarmed" that houses were selling for many times the salary multiples of the last crash (to be fair I don`t know when she bought, last seven years judging by the rates?) Most people just can`t afford their mortgage, if more of them had waited and used their own brain cells, the VI`s would have been out of luck from the start, and would have had to dream up some other hair brained scheme to pluck "funny money" out of thin air.

Come on - we are talking about a deliberate UK government and City policy to brainwash the masses here. As a result the UK sheeples DO NOT think!

[Sonic the Hedge Fund]

“I was slightly alarmed at how much things had changed since we took out our last mortgage,” she said.

“We wanted another fixed rate but that would have meant paying a lot more.”

How many other poor sheep have no clue of what is about to hit them? All they see is the BoE rate coming down, they have no idea of how credit has tighened in the mortgage market.

I expect to see more of these stories. No doubt we will also see stories of OOs reposesed becuase they are unable to remortgage at a rate they can pay

[EmpiricalBear]

The middle class have mortgaged themselves to the hilt. All around this country you can find 4 bed detached houses marketed at 800k.

Frankly this is completely insane given even reasonably average middle class earnings.

Still, imagine the economic impact of retrenchment as those expensive fabrics, 4x4's and school fees are gradually sacrificed on the altar of negative equity.

Those 800k houses will be selling for 500k within three years. Its going to hurt. A lot.

[Sonic the Hedge Fund]

Still, imagine the economic impact of retrenchment as those expensive fabrics, 4x4's and school fees are gradually sacrificed on the altar of negative equity.

The 4x4's are being slain already:

Link

Edit: to find a link that works!

Edited March 15, 2008 by Sonic the Hedge Fund

[salamander]

This news is hugely significant.

One of the bull myths is there can be no crash until we have a recession and people (not just city traders, but the man and woman on the street) start losing their jobs and become "forced sellers". What they really mean is while homeowners can afford their mortgage they will rather stay put than sell up "for less than it's worth"

The news marks the beginning of the "forced sellers" stage. Overleveraged homeowners reaching the end of their current cheap repayment term (like Mrs Green from the article) now face the appalling prospect of massive hikes in monthly repayments because the cheap deals are suddenly gone. Over the course of a few days. Completely vanished. Given the terrible state of the personal finances of most of the UK population, any savings they might have will be quickly eaten up and for many the only option will be to "price for a quick sale", or face repossession.

Gentlemen (and ladies), we have our "forced sellers"

If there ever was going to be a spring bounce, this will (IMO) ensure that there won't be now.

Edit: spillong

Edited March 15, 2008 by narrowescape

[eric pebble]

She should have thought about rates going to 10 or 12 %, and if she could still pay then. She should have been "alarmed" that houses were selling for many times the salary multiples of the last crash (to be fair I don`t know when she bought, last seven years judging by the rates?) Most people just can`t afford their mortgage, if more of them had waited and used their own brain cells, the VI`s would have been out of luck from the start, and would have had to dream up some other hair brained scheme to pluck "funny money" out of thin air.

EXACTLY. It never ceased to amaze me how people just ACCEPTED that a 4 bedroom house was "worth" £800,000-£1,200,000..... It just AMAZED me -- These are highly paid "intelligent" people who simply COULD NOT see the wood for the trees...... All you have to do is ask them -- "Could YOU afford that house today?" -- The answer of course is NOO -- and THAT IS THE TEST....... THEY CANNOT UNDERSTAND --- THAT IS THE TEST....

Edited March 15, 2008 by eric pebble

[IDN]

She should have thought about rates going to 10 or 12 %, and if she could still pay then.

thats asking a lot isnt it?

10/12% IR are a lot higher than the 6% average we only see these rates in extreme circumstances- if people asked themselves could they afford the house if IR were @ 12% then no one would be buying- on the other hand we have IR falling and they could go down as low as 1%- which is the other extreme

[Fairies Wear Boots]

With the BoE dropping the base rate in spite of inflation, when do you think it'll have to go up again?

People screaming like biatches, and the base rate is only 5.25. Can you imagine interest rates going up to 7 percent?

[eric pebble]

With the BoE dropping the base rate in spite of inflation, when do you think it'll have to go up again?

People screaming like biatches, and the base rate is only 5.25. Can you imagine interest rates going up to 7 percent?

they should be at about 9-10%...

[Sinking Feeling]

Mrs Green, a 40-year-old homeowner who works for a management consultancy

It doesn't say what job she actually does, but if she is a consultant, I don't think I'd want any management advice from someone who is so little prepared for what have been so far fairly minor changes.

[Bubble&Squeak]

EXACTLY. It never ceased to amaze me how people just ACCEPTED that a 4 bedroom house was "worth" £800,000-£1,200,000..... It just AMAZED me -- These are highly paid "intelligent" people who simply COULD NOT see the wood for the trees...... All you have to do is ask them -- "Could YOU afford that house today?" -- The answer of course is NOO -- and THAT IS THE TEST....... THEY CANNOT UNDERSTAND --- THAT IS THE TEST....

Agreed, although I have to echo the comments made earlier that many people just simply do not understand... they have been stuffed up like a kipper as they say around here.

Until relatively recently the UK has been saturated with VI spin, four, five or more programmes every night on TV, newspapers, local and national "news", it is hardly surprising this has happened and it is very sad that many will be completely ruined by it

[Ash4781]

The 4x4's are being slain already:

Link

Edit: to find a link that works!

cheers for the link

[beans on toast]

The middle class have mortgaged themselves to the hilt. All around this country you can find 4 bed detached houses marketed at 800k.

Frankly this is completely insane given even reasonably average middle class earnings.

Still, imagine the economic impact of retrenchment as those expensive fabrics, 4x4's and school fees are gradually sacrificed on the altar of negative equity.

Those 800k houses will be selling for 500k within three years. Its going to hurt. A lot.

You'd be lucky to get a terraced house with a 15 foot garden for 800K in Fulham. I really cant understad the appeal of that place, its riddled with council estates - you're never more than 100 metres away from a council estate and the council has tried to integrate the council tenants by putting them into houses. So you could spend 800K on a house and end up living to some refugee asylum seeker scum from Timbuktoo.

[Once in a lifetime]

Gentlemen (and ladies), we have our "forced sellers"

Took long enough, there's a lot of property near me that's been on the market over 1 yr !

Sellers with unrealistic prices.

I wonder if the 'sell to rent back' statistics filter into general renting statistics, which is why

we are hearing all these reports that renting is increasing (so get into BTL bull5hit)

http://www.ft.com/cms/s/0/b3e622ee-f206-11...?nclick_check=1

Mortgage brokers say the speed at which top mortgage rates are disappearing is creating significant problems for borrowers.

Ian Gray, senior mortgage manager at Clegg Gifford Private Clients, said: “Those coming off deals now are feeling a big shock

as there has been a huge jump in mortgage rates.” He says some clients face monthly increases of up to £400.

If they cannot afford the higher payments they might, in extreme cases, have to sell.

[StainlessSteelCat]

There's going to be a huge amount of this. My little sis has a year and a half to go on her fixed rate (100%) mortgage. She manages to save nothing each month (still the only other debt is her car so not as bad as some). I hope things are better by then as she hasn't a clue about what's going on in the wider economy.

[eric pebble]

There's going to be a huge amount of this. My little sis has a year and a half to go on her fixed rate (100%) mortgage. She manages to save nothing each month (still the only other debt is her car so not as bad as some). I hope things are better by then as she hasn't a clue about what's going on in the wider economy.

All the young today are trained to be dumb..... Only the smart realise this --- sad - but true...

[numpty]

After days of scouring the market for the best deal, Jane Green had finally settled on a remortgage offer. She had scheduled an appointment with her mortgage broker and was ready to sign up to a competitively priced two-year tracker loan with Scottish Widows Bank.

But shortly before the meeting, her broker called to say the deal they had agreed on earlier that day was no longer available. It had been withdrawn by Scottish Widows with little more than an hour’s notice.

EDITOR’S CHOICE

Doors slam on mortgage deals - Mar-14Lenders pull out of mortgage deals - Mar-14Fear of further casualties whips up new storm - Mar-14End in sight for subprime losses, says S&P - Mar-14Editorial Comment: Curbing bankers’ pay - Mar-07Bankers plan pay code to head off backlash - Mar-04Mrs Green, a 40-year-old homeowner who works for a management consultancy, is now facing the prospect of significantly higher mortgage costs. She and her husband – like hundreds of thousands of other borrowers – are coming to the end of a cheap two-year fixed deal. Their mortgage rate of 4.49 per cent runs out at the end of next month and they are keen to remortgage to another deal to avoid reverting to their lender’s high standard variable rate.

“I was slightly alarmed at how much things had changed since we took out our last mortgage,” she said. “We wanted another fixed rate but that would have meant paying a lot more.”

Mrs Green’s broker, Clegg Gifford Private Clients, had suggested the Scottish Widows tracker, priced at 5.25 per cent – in line with the base rate. “Even though this had large fees we thought we should do it as the interest rate looked good compared with other trackers.”

She did not rush to sign up to the mortgage as the bank had told her broker at the beginning of this week that it had no intention of withdrawing the rate. The rate was still available at lunchtime on Thursday but by 5pm it had been pulled.

“This left us in a real predicament as there is really nothing else like that available,” Mrs Green said.

She even thought at one stage that they might have to sell the house as the mortgage was going to be too expensive to fund.

The next-best tracker rate on the market, from Cheltenham & Gloucester, is 0.38 per cent higher. This will add about £130 ($263) to Mrs Green’s monthly mortgage payments. She said: “We knew the mortgage would go up but this is much more than we bargained for.”

I dont undestand what the problem is. If 0.38% equates to an extra £130 per month. Then the mortgage is around £410,500. Ok quite large. But presumably they have an income of around £125k+

For a couple that would give them a net income of at least 90k per annum = £7500 per month

If they are paying 4.45% and the rate rises to say 6% that would equate to extra £529 per month and this, they say, is enough to cause them to sell, are they really suggesting that no saving can be found on their expenditure.

If their repayments are say £33,000 per annum they would still have £57,000 net to live on....there must be a lot more to this story than meet the eye

[_w_]

But presumably they have an income of around £125k+

If their repayments are say £33,000 per annum they would still have £57,000 net to live on....there must be a lot more to this story than meet the eye

What do you expect, as you write, it's probably only a 400k house!

By today's standards, she's probably a single mother with 2 kids and works as a cleaner on a 12k salary for those management consultants.

[eric pebble]

What do you expect, as you write, it's probably only a 400k house!

By today's standards, she's probably a single mother with 2 kids and works as a cleaner on a 12k salary for those management consultants.

I bet that's nearer the truth ---- I reckon there are LOADS of people earning less than £30k pa who have LIAR LOANS requiring £32k just to pay the interest alone!! Honestly!! I reckon this is far more prevalent than anyone lets on....

Edited March 16, 2008 by eric pebble

[eric pebble]

What do you expect, as you write, it's probably only a 400k house!

By today's standards, she's probably a single mother with 2 kids and works as a cleaner on a 12k salary for those management consultants.

[eric pebble]

There's going to be a huge amount of this. My little sis has a year and a half to go on her fixed rate (100%) mortgage. She manages to save nothing each month (still the only other debt is her car so not as bad as some). I hope things are better by then as she hasn't a clue about what's going on in the wider economy.

The young have been totally suckered in to this worldwide scam... Sigh....

[Bloo Loo]

snip

I dont undestand what the problem is. If 0.38% equates to an extra £130 per month. Then the mortgage is around £410,500. Ok quite large. But presumably they have an income of around £125k+

Thats the point, responsible lending wold have saved the day.

The "affordability" criteria and Liars lonas have put paid to people in the above situation. They look at monthly outgo only. It was nonsense, it is nonsense and will be the end of the financial market in the foreseeable future.

[eric pebble]

Thats the point, responsible lending wold have saved the day.

The "affordability" criteria and Liars lonas have put paid to people in the above situation. They look at monthly outgo only. It was nonsense, it is nonsense and will be the end of the financial market in the foreseeable future.

TOTALLY AGREE. LIAR LOANS ARE THE ABSOLUTE KEY BEHIND THE WHOLE NIGHTMARE PROBLEMS WE NOW FACE......