Where are interest rates going in the medium term?

[One percent]

Shout out to the dosbods massive here. Kids are planning on buying. Yes I know but they no longer believe me that prices are going to crash, after saying it for about 15 years.  

they have a mortgage in principal for just over 4 percent, fixed for five years. My view is that interest rates aren’t going to dip much below that and might even rise in that five year window. What say you all?  

[spygirl]

Nowhere.

I doubt they go up much.

And they wont go down much.

[Phil]

2 hours ago, One percent said:

Shout out to the dosbods massive here. Kids are planning on buying. Yes I know but they no longer believe me that prices are going to crash, after saying it for about 15 years.  

they have a mortgage in principal for just over 4 percent, fixed for five years. My view is that interest rates aren’t going to dip much below that and might even rise in that five year window. What say you all?  

Good luck to em. There’s never a right time to buy unless you have a Time Machine or a mystic Meg crystal ball. I wish em well.

[Yadda yadda yadda]

3 hours ago, One percent said:

Shout out to the dosbods massive here. Kids are planning on buying. Yes I know but they no longer believe me that prices are going to crash, after saying it for about 15 years.  

they have a mortgage in principal for just over 4 percent, fixed for five years. My view is that interest rates aren’t going to dip much below that and might even rise in that five year window. What say you all?  

That is a good rate. They may lose in the short term but long term the cash is toilet paper.

My prediction is that rates will go down slightly but then rebound. They will probably be a bit higher in five years but affordable. One thing for sure is that we don't know exactly what will happen.

Five years makes a dent in the capital and if interest rates are higher it is likely inflation will have increased their nominal salaries and they will be able to afford it. Life is risk and this is a risk worth taking.

[One percent]

17 minutes ago, Yadda yadda yadda said:

That is a good rate. They may lose in the short term but long term the cash is toilet paper.

My prediction is that rates will go down slightly but then rebound. They will probably be a bit higher in five years but affordable. One thing for sure is that we don't know exactly what will happen.

Five years makes a dent in the capital and if interest rates are higher it is likely inflation will have increased their nominal salaries and they will be able to afford it. Life is risk and this is a risk worth taking.

Mortgage repayments are less than what it would cost in rental, so from that perspective alone, it’s a no brainer.  I just wish I hadn’t passed on the advice from ToS.  

Edited March 5 by One percent
Grammar

[spunko]

Out if interest what rate do they get stress tested to? Or is it true that don't bother with that now? It used to be 8%, can they afford to pay that?

[Bobthebuilder]

2 hours ago, One percent said:

Mortgage repayments are less than what it would cost in rental, so from that perspective alone, it’s a no brainer.  I just wish I hadn’t passed on the advice from ToS.  

Just let them go for it, in the end of the day no one really knows what's going to happen.

[wherebee]

2 hours ago, One percent said:

Mortgage repayments are less than what it would cost in rental, so from that perspective alone, it’s a no brainer.  I just wish I hadn’t passed on the advice from ToS.  

the crucial conversation now is whether overpayment is rational; if we get hyperinflation and debt forgiveness, will overpayment be seen as a mistake?

[With a crooked smile]

9 hours ago, wherebee said:

the crucial conversation now is whether overpayment is rational; if we get hyperinflation and debt forgiveness, will overpayment be seen as a mistake?

I dont think debt forgiveness will be a thing but you are correct about inflation see it all the time.

The cost of renting is continually going up. I was chatting with the owner of a local chippy recently (I know his brother really well). He has a spare room and as he says any spare room is worth 1000s of pounds (where in a tourist area and he air bnb it.)

Even standard rent a room is £600 a month here. It will be more dow  south. That's a chunky bit of mortgage payed off.

[belfastchild]

10 hours ago, wherebee said:

the crucial conversation now is whether overpayment is rational; if we get hyperinflation and debt forgiveness, will overpayment be seen as a mistake?

You probably cant overpay on a fixed rate anyway. If they wanted to overpay Id get them to save it and when they come off the fixed rate, pay a lump sum off out of savings (or not).

Spunko mentioned if they can afford it and thats pretty much the answer to everything. Can they afford it? Can they afford it if payments double?

It doesnt really matter about the rate itself, its about the payments fixed and what they will owe after the end of the fixed period. If it goes up in the meantime it goes up, down it goes down etc but they will have fixed payments for that period (which is always the hardest) so they can budget for it.

10 hours ago, Bobthebuilder said:

Just let them go for it, in the end of the day no one really knows what's going to happen.

This. We are all a long time dead. If they can afford it and it makes them feel happier/secure then go for it. They can reassess in 4.5 years time but one tip I would give is that if they are comfortable paying higher in rent currently then continue to set that amount aside for the mortgage and a building fund to either pay off a lump sum in 5 years or get other stuff done around the house. Even as my payments dropped over time Id always pay the same amount off and have it come off the term rather than the amount. When I stopped paying the mortgage the money for it went into an account and every couple of years Id get something else done to the house. Only stopped that last year as Ive done as much as I want to do now.

[With a crooked smile]

2 hours ago, belfastchild said:

You probably cant overpay on a fixed rate anyway

10% overpayments allowed on all mortgages I've looked at. I assume this is some sort of mandated minimum that lenders have to allow as they all seem the same

Edit just googled and added screen shot

Edited March 6 by With a crooked smile
Add screenshot

[One percent]

10 minutes ago, With a crooked smile said:

10% overpayments allowed on all mortgages I've looked at. I assume this is some sort of mandated minimum that lenders have to allow as they all seem the same

Edit just googled and added screen shot

The kids five year fix mortgage in principle (whatever that is) sates that they can overpay by ten percent. Ten percent of what isn’t clear. The capital?  The repayments?  

[With a crooked smile]

 

3 minutes ago, One percent said:

The kids five year fix mortgage in principle (whatever that is) sates that they can overpay by ten percent. Ten percent of what isn’t clear. The capital?  The repayments?  

I asked this ages ago as yes it's not clear. Apparently and I would need to be checked its 10% of the initial mortgage amount per year.

[belfastchild]

17 minutes ago, With a crooked smile said:

10% overpayments allowed on all mortgages I've looked at. I assume this is some sort of mandated minimum that lenders have to allow as they all seem the same

Edit just googled and added screen shot

Cheers, I can remember any overpayment wasnt allowed with my fixed rates back in the day. Its why after the first two I didnt bother as there was then something like 20% of the overall total allowed per year, although it was a pain in the arse as you had to drop in with a cheque/cash as they wouldnt allow changes to dd.
That was back in the day of annual mortgage rates as well so no point paying anything off until mid december (when nobody had any money) so all set up to stop you making extra payments.
IIRC after about half it was paid off you could pay what you want when you wanted but they would always default to off the amount, not the term unless you went in to branch and specified.

I didnt pay it all off as they wanted some early exit fee so I just left it until they got pissed off taking less than a fiver a month and one day I just got a recorded delivery of my deeds.

[One percent]

1 minute ago, belfastchild said:

Cheers, I can remember any overpayment wasnt allowed with my fixed rates back in the day. Its why after the first two I didnt bother as there was then something like 20% of the overall total allowed per year, although it was a pain in the arse as you had to drop in with a cheque/cash as they wouldnt allow changes to dd.
That was back in the day of annual mortgage rates as well so no point paying anything off until mid december (when nobody had any money) so all set up to stop you making extra payments.
IIRC after about half it was paid off you could pay what you want when you wanted but they would always default to off the amount, not the term unless you went in to branch and specified.

I didnt pay it all off as they wanted some early exit fee so I just left it until they got pissed off taking less than a fiver a month and one day I just got a recorded delivery of my deeds.

I knew it wouldn’t be counted until the end of the year but I still overpaid each month. It was amazing how quickly the capital reduced with small amounts of overpayment.  

[belfastchild]

1 minute ago, One percent said:

I knew it wouldn’t be counted until the end of the year but I still overpaid each month. It was amazing how quickly the capital reduced with small amounts of overpayment.  

That was a big lesson for me. When you looked at your payments something like less than 1/3 of the payment was the capital, the rest interest in the first 4 years. Pay your full payment as an extra payment 4 times a year and thats a year off your mortgage.
My other view was that having been broke at one point after getting ill the mortgage company were the ones who were really really sound about it given the previous history. They could freeze my payments for a year and I would still be ahead. I got by with interest only for a year but then doubled up again afterwards.

[Sue Lowe]

3 hours ago, With a crooked smile said:

I asked this ages ago as yes it's not clear. Apparently and I would need to be checked its 10% of the initial mortgage amount per year.

For NW it's 10% per annum of the original loan amount without penalty, with interest etc recalculated daily. So over a 5 year fix you could choose to pay off half your mortgage (in addition to whatever your standard payments achieve).

I remember the terms being far harsher in the past, I think this is much more typical these days.

Edit: image from https://www.nationwide.co.uk/mortgages/existing-mortgage-members/overpayments/

Edited March 6 by Sue Lowe

[Red Debt Redemption]

18 hours ago, One percent said:

The kids five year fix mortgage in principle (whatever that is) sates that they can overpay by ten percent. Ten percent of what isn’t clear. The capital?  The repayments?  

The amount of outstanding for that year. So Jan 2024 150k owed = 15k overpayment that year. Jan 2025 130k owed = £13k overpayment allowed that year and so on.