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Thread: Buying a home and mortgage interest rates

  1. #1
    Senior Member Lighttouch's Avatar
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    Buying a home and mortgage interest rates

    I was interested to hear on the news that interest rates are the lowest they've ver been

    Initial rates are starting at 1.49% - unheard of!!

    Some older members who took out mortgages in the 80s might recall high inflation, high unemployment but also sky high mortgage interest rates. Even then we were being ripped off by mortgage scams such as Low-Cost Endowment Polices that would or should pay off your mortgage on maturity!

    At this time I'd been made redundant, I was separated and had to take in two lodges to stay afloat until I could find a job!!

    Interest rates at their peak were 16%! My repayments were about £590 a month for a £52,000 mortgage. Today you would only be paying £223!
    The thing is I don't think the bank will be raising interest rates for a few years yet and inflation is still dropping. By the end of this year I think we will see 'deflation' and mortgage rates will get even cheaper

    I wonder if the mortgage rates will get so low that the banks will need to pay you each month to take out a mortgage!

  2. #2
    Quote Originally Posted by Lighttouch View Post
    I was interested to hear on the news that interest rates are the lowest they've ver been

    Initial rates are starting at 1.49% - unheard of!!

    Some older members who took out mortgages in the 80s might recall high inflation, high unemployment but also sky high mortgage interest rates. Even then we were being ripped off by mortgage scams such as Low-Cost Endowment Polices that would or should pay off your mortgage on maturity!

    At this time I'd been made redundant, I was separated and had to take in two lodges to stay afloat until I could find a job!!

    Interest rates at their peak were 16%! My repayments were about £590 a month for a £52,000 mortgage. Today you would only be paying £223!
    The thing is I don't think the bank will be raising interest rates for a few years yet and inflation is still dropping. By the end of this year I think we will see 'deflation' and mortgage rates will get even cheaper

    I wonder if the mortgage rates will get so low that the banks will need to pay you each month to take out a mortgage!
    With record numbers of people being unable to get on to the property ladder, any incentive like low interest rates are a good thing; but not so good for savers! As I suggest it will offer some comfort to some people who are lucky enough to be able to apply for and be considered for a mortgage after first finding somewhere affordable to live of course, as well as making life easier for some but not all existing mortgage payers. Problem is we as a country need to be building lots more homes in order for the housing market and associated lenders to operate in a fair, reasonable and appropriate way - to the benefit of all. Unfortunately, this will require the political will of all political parties, in particular the Conservatives who tend to have more money invested in so called bricks and mortar investment enterprises.

    I say we need radical changes in the way we go about managing our housing stock (social and private); OK, so we live in times of the free market whether we like it or not. However, if it was up to me, I'd clamp down heavily on all greedy fat cat landlords who are seemingly milking the system for what they can get in relation to owning huge numbers of houses, and getting richer by the day thanks to our Housing Benefit system. Consequently, the poor and even many people who are fairly comfortable financially are suffering through no fault of their own - they are being condemned to rely on Housing Benefit payments for life to fuel corporate greed. How many millionaires have been created over the last few decades thanks to Housing Benefit? - especially Tory millionaires. This is a national scandal - and it has to stop - NOW. This is the true face of housing in the UK, never mind low interest rates.

    Buster

  3. #3
    Quote Originally Posted by buster21 View Post
    With record numbers of people being unable to get on to the property ladder, any incentive like low interest rates are a good thing; but not so good for savers! As I suggest it will offer some comfort to some people who are lucky enough to be able to apply for and be considered for a mortgage after first finding somewhere affordable to live of course, as well as making life easier for some but not all existing mortgage payers. Problem is we as a country need to be building lots more homes in order for the housing market and associated lenders to operate in a fair, reasonable and appropriate way - to the benefit of all. Unfortunately, this will require the political will of all political parties, in particular the Conservatives who tend to have more money invested in so called bricks and mortar investment enterprises.

    I say we need radical changes in the way we go about managing our housing stock (social and private); OK, so we live in times of the free market whether we like it or not. However, if it was up to me, I'd clamp down heavily on all greedy fat cat landlords who are seemingly milking the system for what they can get in relation to owning huge numbers of houses, and getting richer by the day thanks to our Housing Benefit system. Consequently, the poor and even many people who are fairly comfortable financially are suffering through no fault of their own - they are being condemned to rely on Housing Benefit payments for life to fuel corporate greed. How many millionaires have been created over the last few decades thanks to Housing Benefit? - especially Tory millionaires. This is a national scandal - and it has to stop - NOW. This is the true face of housing in the UK, never mind low interest rates.

    Buster
    I partially agree, however a simple solution would be to build more social housing. That would solve the housing stock and lower the Housing Benefit bill. The current government must build more homes, as demand is outstripping supply, until that is rectified, house prices will continue to rise, an example is the recent fall in oil is due to the lack of demand from China, India and other developing countries. When they start to demand oil in the future, oil prices will shoot up before you even blink your eyes.

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    We are on a variable mortgage, we took it out just before the world went bust in 2008 and so got a fairly good rate of Base Rate + 0.89%
    At the time that meant 6.89% and a payment of £960 on a mortgage of £122,000
    As the interest rates plummeted, our mortgage also reduced and we have been paying the grand some of £540 a month at 1.39% since.

    That's still a lot for us, but something we can afford even now my wife has taken reduced (child at school friendly) hours.

    If we took your example LT, you wouldn't be looking at a repayment on a £52k mortgage you'd more than likely looking at a 5 or even 10 fold increase depending on where you live and the house price increases in the last 30 years, so more likely a £250k mortgage - £1,070 per month at 1.49%
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  5. #5
    Senior Member Lighttouch's Avatar
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    Well Paul, if I was interested in buying my place today I couldn't afford it. You've got an exceptional rate of interest today. I'd get it fixed before the end of this year if possible.

    Luckily, well mainly by design, I paid off my mortgage 4 or 5 years ago through over payments. It cost 90K 20 odd years ago - it was a gamble that happened to work.

    I can manage on my small pension and DLA. Having said that I did think about getting some extra income through letting out a room. Tomorrow a solicitor is visiting as she's sofa surfacing at friends houses. Sounds like she is looking for a short term stay due to her office relocating her role. I'm interested to know what her story is.

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    Retirement? I've got at least another 32 years but I'm sure it will change by then.
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  7. #7
    Senior Member Lighttouch's Avatar
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    Quote Originally Posted by Paul View Post
    Retirement? I've got at least another 32 years but I'm sure it will change by then.
    It's amazing that I eventually paid the mortgage off after divorce, redundancy, no out of work benefit, high interest rates, low cost endowment policies that failed to pay off that share of the mortgage. And now - still 9 years before a State Pension.

  8. #8
    It's all a con. They've lowered their rates to try and sucker people into taking on big mortgages. If they didn't offer these super rates, demand for mortgages would gradually decrease and house prices would come tumbling down. By taking up their offer, people help to prop the prices up.

    A house price crash will happen eventually and the government have been trying their utmost best to stop it, examples include the funding for lending scheme (where they lend money at cheap rates to banks to lend out to us (and where I imagine a lot of these cheap rates are coming from) + help to buy and help to buy 2.

    Such schemes though can't last forever. All it'll take is some economic turmoil to embroil other states, messing up out imports and exports and whoop.

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    Housing demand is driving house prices much more than cheap money, which whilst cheap is actually more difficult to secure.

    Increasing population and an increase in people living alone are driving demand in both the rental sector and private purchase. Additionally we are seeing an increase in overseas money buying property, mostly at the high end of the market, as a secure investment.

    The market may implode at some point, but this won't help anybody. Better to build more housing, across all price ranges and types, implement more controls on the buy to let market, and consider rent controls. We need a long term plan. Unfortunately long term in politics is never very long!!
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