Owning your own home

Tell me if this is a terrible idea…

Going to be getting a new mortgage and thinking of chucking 40k of savings (which is about 2 years of payments) at our remaining amount then go interest only for 2 years.
Obs will able to save a fair amount over the next 2 years with small repayments and recoup quite a bit of that.

0.24% above BoE base rate with HSBC, that's their current rate for mortgages with LTV under 60%.

Between the base rate and QE that basically exactly what they have done... if you hold assets, right?

Essentially, yes. The BoE has kept interest rates very low and pumped money into the bond markets through QE in order to keep asset prices artifically high. The result has been to benefit those who hold assets at the expense of those who don't. It could be argued that the alternative would have been a massive financial crash, which would have left everyone considerably worse off (I assume that's the justification the BoW would give). Whether or not that's true, I suspect no-one knows, and I certainly don't.

more likely just a clusterfuck of delays

Pretty much a nailed-down certainty, I'd say. I've been doing a lot of work on the Building Safety Act 2022 recently. It's a complete fecking mess. The good news is that it's such a fecking mess, there'll be plenty of work for property lawyers arguing about it. Which is nice.

Think our offer was .25% above the base rate. Possibly with Halifax but not 100%

We spoke with a financial advisor a couple of weeks ago who said that he expected it to be 2.5% again within the next year or so - something that Economics teachers at my school have also said they've seen from what they've read.

No one seems to know really - but I think when our deal is up on Halloween we'll see how spooked the market is looking.

I'm at 62.5% LTV, now fixed for 4.49 which is just below base rate.

I expect the rate to go down, but just need the certainty and not be bothered to keep tracking the rate. Would have taken a year fixed but it's not on offer. It's fine, I can stomach the difference.

For reference, the tracker is 5.74%.

I expect it to rise and then go down in the run up to Christmas, probably about the same rate this time next year then keep falling there after.

The BoE target is supposed to be around 2.5%, that seems to form part of the belief. I'm thinking more along the lines of @Brommers, they might not have the levers to get it back down to that.

'UK homeowners and first-time buyers warned to brace for 5%-plus mortgage rates'.

Took a while to find a house we wanted to move into last year so we've got bits of paperwork all over the place with calculations. Had we managed to find and complete something in January we'd have got a ten-year fix at 1.44% but didn't eventually move until November which means we ended up with one at 3.34%.

Going to be interesting to see how this pans out, as it's surely going to have an affect on people's decision to move - we certainly wouldn't have done had we had a rate much higher and whilst we 'stress tested' ourselves with (many!) spreadsheets I'm sure there's plenty out there that are going to get a shock.

Going to be interesting to see how this pans out, as it's surely going to have an affect on people's decision to move

Isn't that the point of rate rises? To cool the economy down.

I bought my only house in 2007 a year or so later it was worth about 30% less. I think rates were 5.5% when I bought it for £125k (norwich). I Sold it 5 years ago when I thought the market had topped for about £185k. Terraces in the area are now £200 to £230k.
I've been saying the housing market is unsustainable for about 6 years but its got more and more out of control and continued to surprise me.
I think a lot of people are in for a shock over the next few years but having said that i'm in the process of trying to buy again, what could possibly go wrong! If I didn't think this one could potentially be a house for life i'd be sitting well and truly on the sidelines for a year or so.

Maybe I'm being too basic, but given that there aren't enough places for people to live how do prices come down?

Pretty simple - because people can’t afford to buy the houses that are there?

If prices can rise faster than population % increases, then there must be other factors at play - biggest one being cheap money

People might be forced to sell because of unaffordable and unsustainable mortgages.

Fewer buyers than normal for the same reasons.

50 years ago, interest were very high but houses were cheap.

Nowadays, interest are low but houses are expensive

Add to this, pay haven’t gone up in the last several decades.

Biggest one being properties as investment. Whether that be pension funds, foreign investment or just a load of people who have watched homes under the hammer.

The issue I see with this is that, assuming those investors have been in the market more than a year, they've already seen significant return on their investments that allows them to remain in the market for longer than people who have to live in them / pay a mortgage etc.

This probably means that a lot of ordinary people are going to lose their shirts in any upcoming housing crash long before the market adjusts to any point where investors need to sell which means we'll just start the same problem all over again.

Hmmm do you think?

Maybe if not mortgaged, but btr mortgages were already more expensive and are likely a second property anyway - so sell the btr to free up funds / get rid of more expensive second mortgage might be a sensible strategy for lots of people. I don't really see why those btr investor gains allow them to stay in properties more than owner occupiers - but maybe I'm missing something

I presume @Soul is talking about cash buyers.

For live-in homeowners, if there is a short to medium term fall, then as long as negative equity doesn't apply, it does mean that moving up the ladder is easier as the absolute gap between properties also falls. Every cloud and all that.

Yeah I just don't see much reason to suspect investors have more of a capital gain that can be soaked up than owner occupiers - probably less as they may have interest only mortgages, professional investors will have gearing targets, and investment horizons are probably shorter than how long it is between home moves.

I take your point on no negative equity but it's not just that - it's anything that pushes your LTV to a bad level that makes price drops a problem. You don't have to be underwater to find going from 75% ltv to 95% sucks

Agree with your investor points.

In terms of LTV meaning mortgage rate increases, I guess this is why banks stress test based on higher interest rates. Perhaps all the "I pay £1500 PM rent so why won't a bank give me a £1000 PM mortgage" people of the last few years will start to understand why.

Oh yeah completely, all the affordability tests clearly have a purpose. I only picked up on the other bit as I often hear people run the same argument you did about lower prices actually being better as the next property up is cheaper, etc but I think it always ignores that homeowners need low ltv for things to be cheap / easy - so the impact is felt more widely than just those who are in or close to negative equity

Pension funds, banks buying properties and foreign investors are largely cash markets.

Those on BTL mortgages will pass on the increased costs to renters (further fucking anyone looking to buy a house) until that market goes pop too.

We're a long way off houses shrinking to affordable rates for the masses and getting there will crash the economy / fuck normal people for years first.

I think in the last 3 years thought its become really unstainable, with high prices and the prices people are paying over the top to get it. Its wild and it will come to a head eventually with people in the ultimate shit.

Within hours of his comments, one of the UK’s biggest lenders, Nationwide, said it was increasing selected fixed and tracker rates by up to 0.45%, from Friday.

Broker mentioned this to me in advance and yeah, got it locked in before today's hike.

Still waiting to hear back on the current offers following the hike. Just curious.

I think their point is not about how large a mortgage they can get but that a deposit is seen necessary.