Tuesday, Sep 29, 2009

Two-year tracker deals issued before the collapse of Northern Rock are coming to an end

Telegraph: Goodbye to the 0% mortgage

Thousands of home owners who are currently enjoying rock-bottom mortgage rates will soon see these ultra-cheap deals come to an end. Borrowers lucky enough to have snapped up tracker deals with Halifax, Cheltenham & Gloucester (C&G) and Birmingham Midshires two years ago have been paying zero interest on their mortgage for the past six months. And many more home owners have been enjoying rates of less than 1pc – with Abbey, Alliance & Leicester, Intelligent Finance and Saffron Building Society all previously selling tracker deals that offered substantial discounts off the Bank Rate – which has stood at just 0.5pc since March. But in the next few months tracker deals will all expire, causing a sharp increase in monthly mortgage payments for many families.

Posted by drewster @ 06:49 PM (1780 views)
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1. will said...

I'm sure they will all have been saving for this moment over the last two years.

Tuesday, September 29, 2009 07:14PM Report Comment

2. paul said...

This is the UK equivalent of the US' ARM resets, isn't it?

Brace for the next downward leg - it's gonna be a biggy!

Tuesday, September 29, 2009 09:43PM Report Comment

3. mark wadsworth said...

Well, yes, we have been rubbing our hands in glee about resets for at least a year and so far it hasn't happened. The article studiously fails to mention how many mortgage borrowers will be affected by this over the next few months. A hundred thousand? A million?

So I think we'll have to defer to Jack C on this one. By the time it kicks in, this or the next government will have reintroduced MIRAS or something to keep the party going.

Tuesday, September 29, 2009 10:29PM Report Comment

4. Smiliing said...

@ 1 Will said..........I'm sure they will all have been saving for this moment over the last two years-

maybe, maybe not! But i bet they have been laughing their n*ts off!

Tuesday, September 29, 2009 11:05PM Report Comment

5. str 2007 said...

I can't believe how lucky these people were, I know 2 and neither knew base rates were heading down, in fact the consensus opinion here was that they were heading up to protect the pound. How wrong can you be.

Thing is won't they simply just go and get another mortgage and what are they re-setting to 3 or 4%, not really going to effect anyone much is it.

Tuesday, September 29, 2009 11:16PM Report Comment

6. dgj said...

str 2007

The difference of 1% and 2% is 100% and spread over a large mortgage interest soon mounts up...

Tuesday, September 29, 2009 11:46PM Report Comment

7. drewster said...

@ mark wadsworth,

The article says "thousands", so maybe it's not that big a deal. I think it'll take higher unemployment, rather than higher interest rates, to really make a difference to house prices. The forthcoming government cuts should be interesting in that regard - I expect to see many redundancies amongst both direct and indirect government employees.

Wednesday, September 30, 2009 03:27AM Report Comment

8. cyril said...

A friend of mine bought a £1m house a couple of years ago and has paid f-all for it so far, much to my annoyance. Also he's making £1000 a month profit on renting out his old one which he couldn't sell. What a crazy situation. He must owe at least £500k so if he had to pay 3% it would make a big difference. But how may people like this are there?

Wednesday, September 30, 2009 04:31AM Report Comment

9. mark wadsworth said...

@ Drewster, yes the article says "thousands" but that is pretty meaningless, of course it's "thousands", but is it twenty or five hundred? The journalist just couldn't be bothered to find out, as usual.

Wednesday, September 30, 2009 07:55AM Report Comment

10. hpwatcher said...

No doubt, some idiot bank will come alone with an equally daft product.

Wednesday, September 30, 2009 08:30AM Report Comment

11. Mnkybusiness said...

@ hpwatcher

"No doubt, some idiot bank will come alone with an equally daft product." Hmm, I'm not sure I follow how a variable rate loan with a fixed term is daft unless you believe that the provision of any form of credit is in itself daft? What would you suggest as a sensible alternative?

Wednesday, September 30, 2009 08:47AM Report Comment

12. str 2007 said...

I'm well aware of the maths, but these mortages were taken out at 4-5%, so they're not very likely to throw in the towel at 2-3% are they.
In fact the majority hof these mortgage holders will have kept their monthly repayments the same and simply cleared down a big chunk of capital.
All that will happen to those people is that the monthly repayments will stay the same and behind the scenes they will be reverting back to paying more interest and less capital as per when they originally took on the mortgage.

Hate to dissapoint but if your friend took on a 500k mortgage, he could probably afford it then. If it reverts to 3%, On an interest only basis that's only £1250 a month. The price of privately renting a modest 4 bed worth circa £350k in the South East.
And as you've alreeady said, the house is rented out covering that.

I totally agree that that he's been stupendously lucky and it's very dissapointing for those of us that have been prudent instead of reckless, but assuming he actually has a job and keeps it, it'll be a long time before your friend gets into too much difficulty.

Wednesday, September 30, 2009 09:42AM Report Comment

13. Gmariner said...

The rates may go up significantly, but they will not go as high as the rate at which the mortgage was initially agreed. Unless all of these people are now irreversibly spending more than they were a couple of years ago or have lost their jobs then this payment shock will have absolutely no impact whatsoever on house prices.

Wednesday, September 30, 2009 09:45AM Report Comment

14. growler said...


I see these types of article as a cry to Government for more medicine. We're slowing becoming dependent on hand-outs. Car scrappage, mortgage support,.... all lifelines that someone has to pay for. That someone being all of us.

I can see another drop happening when the cuts start to take effect. Until that time - HPC will all bump along the bottom - up and down, here and there.

Wednesday, September 30, 2009 10:14AM Report Comment

15. smugdog said...

I sense that many on this site feel that these lucky souls should not benefit from any more good fortune and should be thrown out to make way for the more prudent amongst us. I firmly believe that you make your own luck in this world.

Wednesday, September 30, 2009 10:43AM Report Comment

16. str 2007 said...


It would appear that God helps those who helps themselves, as my Granny would say.

However I believe it also to be true that dangerous and reckless behaviour should not be supported by those with a generally low to medium appetite for risk.

Ask the majority of property bulls why they are investing in houses and the basic respnse is that they always go up.

It is true that they have generally always gone up, but the majority of property bulls have no or little understanding as to why.

Perhaps I'm looking into it too deeply, and they may well prove to be right again.

However buying at the 'right' time can/will make a significant difference to one's own lifetime finances.

Personally I'd roill my sleeves up and build my own house if a sensibly priced plot (that was where I wanted it) existed.

Doing a rightmove search reveals approx 1 such plot within a 10 mile radius of where I currently live.

IMO there should be hundreds within that radius.

I'm just seeking a fair price for a house. Assuming build/profit and land costs were aligned as theyused to be then that makes property in my area about 50% overvalued (using build cost as the base measure).

That makes a small plot that should be about £100k, actually cost about £250k if indeed any were available. Personally I don't want to pay 150% over the odds for something that should cost £100k.

Wednesday, September 30, 2009 11:13AM Report Comment

17. growler said...

@16 STR

It only costs £250k because a chain of idiots lends money to people all the way up and down the chain that they should never have got.

I believe we are in for a real readjustment over a long period of time. The affordability curve has to meet up with the average price curve. With no real active market to broker this gap, it will take a long time. As I said somewhere else on this forum, the affordability isn't going to increase (no credit, reduced subsidies), so either average price falls quick or we all wait for YEARS for inflation to catch up. This period of waiting will allow people to invest in something with much better growth potential than property. We should take it and watch other markets.

Wednesday, September 30, 2009 11:39AM Report Comment

18. str 2007 said...

Absolutely Growler.

Question is though are those idiots going to continue to lend at those levels.

Despite alot of the 'headline' lending rates being just that a headline, I do sense that money is still more freely available than it was say 10 years ago.

Right at this moment IMO other investments (Ftse Gold etc) look quite expensive as well. Hindsights a wonderful thing.

As I've said on here before a good supply of plots in all areas would help to restore a sensible level of pricing for housing whilst also boosting all local economies with monies actually being spent on the materials and labour to build a house rather than the speculative price of land it sits on.

But don't listen to me, I just speak simple common sense, I'm not a politician.

Wednesday, September 30, 2009 12:07PM Report Comment

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