Interest rates

[Amarillo]

Am I reading the last few dozen posts wrongly or is it littered with old gits, in comfortable houses that have a damn sight more equity than their repayments have ever earned them?

…..Having zero compassion for their children and grandchildren that have paid through the nose for small houses on many many multiples of their earnings.

Hopeful that they can afford the massive percentage of their tiny salaries, that haven’t risen in real terms for twenty years.

Banking on the fact that interest rates, that have not really moved since 2010 at 0% don’t do anything too silly?

Many of these same people complaining about the effect these changes are having on their tenancies. All because they had 15% rates on their houses that they bought for £18,000

Or have I read them wrong?

You read me wrong.

I had a £17,000 deposit for a flat that cost me £57,000, and the initial mortgage rate was 15.75% on a £40,000 loan.

I currently have an £85,000 mortgage on the same flat, now worth ~£375,000 and produces a gross income of £15,000 per year.

The mortgage interest is likely to rise from £155 per month now to £406 per month in November, but still less than the £525 per month I was paying in 1990.

 

[Perfectos]

15% interest rate on mortgaged property that was in today’s terms dirt cheap !
so was everything in those days compared to today - wages too
if you were suffering (read: suffering 15% interest rate) on a sh#t income you had some very tough choices to make.
you ain’t seen nothing yet at 5%

#disingenuous & insulting

edit: I’m not an old git !

 

[Amarillo]

We now have to pay 3 ‘large’ monthly bills.
Our mortgage. Our pensions. And save for a very large deposit for our 2 children who are currently 10 and 13yrs. They’re going to need it. I can’t imagine having 3 or 4 children.

I’m a relatively old dad (42 yrs older than my son) but if I live to my optimistic 90 then my son would be 48 when I die. And I read a statistic the other day that 1 in 5 women will live to 95yrs, which would make him 58 when my wife dies and he inherits half our worldly goods. They can’t wait until then so will need maybe £50k each minimum for deposits. Yikes.

We stuff £9,000 per year into each of our sons’ Junior ISAs. Growth to date has averaged 8.5% per annum. By my calculations they will each have about £324,000 by age 18 *if* we continue with £9,000 per year *and* growth continues at 8.5%.

If you are an old dad, I’m a very old dad. I was 47 when my first son was born and 48 when my second son was born.

 

[Amarillo]

15% interest rate on mortgaged property that was in today’s terms dirt cheap !
so was everything in those days compared to today - wages too
if you were suffering (read: suffering 15% interest rate) on a sh#t income you had some very tough choices to make.
you ain’t seen nothing yet at 5%

#disingenuous & insulting

edit: I’m not an old git !

My mortgage interest was £525 per month plus £27 into a low start endowment policy. I think my basic salary was £8,700pa plus about £2,500pa bonus. Any thought of a car was out of the question. No meals out, no cappuccino + 10. My bicycle was an 18th birthday present and my main form of transport. I rented the second room to a lodger for £200 per month (which I didn’t declare for tax - but later became tax exempt anyway).

I’m sure there are young people who get on the property ladder at the age of 24 in a similar way to me, but, like me, they would need a guarantor.

 

[Corradobrit]

My mortgage interest was £525 per month plus £27 into a low start endowment policy. I think my basic salary was £8,700pa plus about £2,500pa bonus. Any thought of a car was out of the question. No meals out, no cappuccino + 10. My bicycle was an 18th birthday present and my main form of transport. I rented the second room to a lodger for £200 per month (which I didn’t declare for tax - but later became tax exempt anyway).

I’m sure there are young people who get on the property ladder at the age of 24 in a similar way to me, but, like me, they would need a guarantor.

Thank goodness avocado toast hadn't been invented.

 

[Perfectos]

My mortgage interest was £525 per month plus £27 into a low start endowment policy. I think my basic salary was £8,700pa plus about £2,500pa bonus. Any thought of a car was out of the question. No meals out, no cappuccino + 10. My bicycle was an 18th birthday present and my main form of transport. I rented the second room to a lodger for £200 per month (which I didn’t declare for tax - but later became tax exempt anyway).

I’m sure there are young people who get on the property ladder at the age of 24 in a similar way to me, but, like me, they would need a guarantor.

That is my point exactly @Amarillo choices had to be made, those choices weren’t, “shall I put my next purchase on cheap tick !”

 

[Amarillo]

Thank goodness avocado toast hadn't been invented.

Avocado vinaigrette as a posh cold starter had only just been invented.

Gastro pubs sold chicken-in-a-basket.

 

[The Tall Luthier]

That all seems a bit garbled to me so I’ll work through it paragraph by paragraph.

1. I am 70 so yes an old git, a boomer in the the modern parlance. Comfortable house ? Normal 4 bed in Mansfield. I suppose we should downsize and free it up for a young family but you know what, we like it here and we can‘t be bothered moving.
More equity than we deserve ? Well yes I suppose. House prices kept going up. I suppose we were born at a good time, couldn’t help it.

2. Zero compassion for our children. Resent that, we love our children like most parents.

3. They are not on tiny salaries. One is a GP, certainly as a junior doctor she was poorly paid but now it’s ok. Her brother is an accountant and his partner is a schoolteacher so yeah, doing ok. No grandchildren, we live in hope.

4. They both have mortgages and fully understand that 0% interest rates could only go one way.

5. I don’t have any tenancies. I have a house and I live in it.

Now can I turn the table and ask you :

Do you own several properties ?

Are the interest rate rises getting to you ?

Thanks for your reply. I didn’t really mean children literally although o can see why that was taken as such.

I just meant that successive generations are really suffering, really struggling with debts they thought manageable that really aren’t any more. Many of this thread have alluded to an idea that “they’ve never had it so good” , “more fool them“. You should see Turkey, my first house was a one floor bathtub. It’s like everyone started reading the Daily Mail and decided that the lived experience of others is trivial. I won’t state the posts but they’re in the last pages

The other half of the over 30s are all "generation rent". House prices exclude them completely despite having good stable jobs.

In terms of my experience. I am in the top 0.1% I retired at 40, outside world affairs don’t affect me. Thankfully they don’t affect my tenants either.

My daughter, a professional, has just started work on the same salary I had in 2004, house prices are at least doubled. She will be well looked after but all her uni friends are starting 50m behind in the 100m race of life, even with a degree.

The fact is the economy has been mismanaged by successive governments who legislated for short term nonsense over long term prosperity.

 

[The Tall Luthier]

You read me wrong.

I had a £17,000 deposit for a flat that cost me £57,000, and the initial mortgage rate was 15.75% on a £40,000 loan.

I currently have an £85,000 mortgage on the same flat, now worth ~£375,000 and produces a gross income of £15,000 per year.

The mortgage interest is likely to rise from £155 per month now to £406 per month in November, but still less than the £525 per month I was paying in 1990.

I don't think I read you wrong Amarillo. I don't, for one minute, think that I was referring to your posts.

 

[Amarillo]

Thanks for your reply. I didn’t really mean children literally although o can see why that was taken as such.

I just meant that successive generations are really suffering, really struggling with debts they thought manageable that really aren’t any more. Many of this thread have alluded to an idea that “they’ve never had it so good” , “more fool them“. You should see Turkey, my first house was a one floor bathtub. It’s like everyone started reading the Daily Mail and decided that the lived experience of others is trivial. I won’t state the posts but they’re in the last pages

The other half of the over 30s are all "generation rent". House prices exclude them completely despite having good stable jobs.

In terms of my experience. I am in the top 0.1% I retired at 40, outside world affairs don’t affect me. Thankfully they don’t affect my tenants either.

My daughter, a professional, has just started work on the same salary I had in 2004, house prices are at least doubled. She will be well looked after but all her uni friends are starting 50m behind in the 100m race of life, even with a degree.

The fact is the economy has been mismanaged by successive governments who legislated for short term nonsense over long term prosperity.

I think that the fundamental problem is that the older generations are more likely to vote than the younger generations. Hence the older generations who benefitted from free university tuition and maintenance grants are now enjoying final salary pensions paid for by the younger generations who leave university with a mortgage sized debt pile.

 

[Mansfieldman750]

Oh dear, it’s successive governments‘ fault, it’s the baby boomers fault.
No.
If someone makes an informed decision to leverage up in the housing market when Interest Rates are close to zero and then gets a bit of a shock when IRs return to normality, it’s their fault, no one else’s

 

[larrylamb]

That’s why he’s a builder and not a banker.

He's clever, loves his job and minted Lets not be judgemental.
It's a bit like the Cali price crash thread, if you want to sell quickly then you have to be priced accordingly but house and Cali prices will not be falling through the floor. The trend is always going to be upwards for property if you zoom out.

 

[The Tall Luthier]

I think that the fundamental problem is that the older generations are more likely to vote than the younger generations. Hence the older generations who benefitted from free university tuition and maintenance grants are now enjoying final salary pensions paid for by the younger generations who leave university with a mortgage sized debt pile.

I’m not too sure. These issues are always multi factoral.
Was it Liz Truss’s fault? No, but she didn’t help
Brexit? No but it didn’t help
Bankers greed selling toxic mortgages? Certainly didn’t help
Short term policy making? No but it didn’t help.

The one thing we do know is that it’s not the people’s fault. We are virtually powerless and can only make the best decisions for ourselves at the time.

My generation, 50s, and some older ones have done very well out of housing. We can thank the 1998-2008 house price boom and huge bust for that, it wasn’t our doing.

My point was always that, hard working younger people have very little power, they can only do what feels best for them and their families at the time.

Let’s not bash them on this thread, they don’t give a toss that their forebears had to go to work houses, east turnips and share a Bath with the rest of coronation street, they’re struggling now.

 

[vmaxkiddy]

Hmmm, there may be a few millennials having second thoughts about that leased Tesla

I deliver newly leased vehicles and I’m turning down work, I get offered 7 or 8 cars a week, not been this busy since covid when people got bored during lockdown and bought anything and everything on line.

 

[Georgeo]

Yeah that’s also the plan to be fair, we’ll move on our current family car early next year if we can get by using the Ocean. Though I do know insurers aren’t great fans of a Cali being the only car in the household…

Had no problem about being the only car. They have never asked that question..

 

[SamSara]

I think that the fundamental problem is that the older generations are more likely to vote than the younger generations. Hence the older generations who benefitted from free university tuition and maintenance grants are now enjoying final salary pensions paid for by the younger generations who leave university with a mortgage sized debt pile.

And they were not disadvantaged by well thought out voting ID legislation

 

[The Tall Luthier]

And they were not disadvantaged by well thought out voting ID legislation

Sometimes sarcasm is hard to detect. In this case the phrase “well thought out” and uk govt , gave it away.

 

[Amarillo]

 

[RockinNRollin]

Although a stat on the BBC earlier said 85% of BTL mortgages are interest only, a figure which makes sense but surprised me slightly.

 

[Amarillo]

Although a stat on the BBC earlier said 85% of BTL mortgages are interest only, a figure which makes sense but surprised me slightly.

The lending criteria is different for a BTL. The lender wants to see likely rental income to cover between 125% and 145% of the mortgage interest. They also accept “sale of property” as a strategy to repay the loan at the end of the term, so regular loan repayment is not required.

If you can borrow at 2% and get a yield of 6% why would you repay and not further invest?

The problem many BTL landlords now face is that interest rates are ~6% and yields are around ~6%, so they are relying on any equity they have in the property to make a profit.

 

[Elmo3]

The lending criteria is different for a BTL. The lender wants to see likely rental income to cover between 125% and 145% of the mortgage interest. They also accept “sale of property” as a strategy to repay the loan at the end of the term, so regular loan repayment is not required.

If you can borrow at 2% and get a yield of 6% why would you repay and not further invest?

The problem many BTL landlords now face is that interest rates are ~6% and yields are around ~6%, so they are relying on any equity they have in the property to make a profit.

They‘re also the folks who’ve used them as a ’free’ cash machines. Extracting equity on the way up at ultra low rates to fund lifestyles. Bank valuations at remortgage time will be fun for many. I can easily see 10% SVR’s being commonplace.

 

[Amarillo]

They‘re also the folks who’ve used them as a ’free’ cash machines. Extracting equity on the way up at ultra low rates to fund lifestyles. Bank valuations at remortgage time will be fun for many. I can easily see 10% SVR’s being commonplace.

Extracting equity to fund lifestyle would be very dangerous. Extracting equity to invest, then using the investment return to fund lifestyle less risky.

I think the very rich reduce their income tax bill by extracting equity from their businesses and using that for their extravagant lifestyles.

 

[Elmo3]

Extracting equity to fund lifestyle would be very dangerous. Extracting equity to invest, then using the investment return to fund lifestyle less risky.

I think the very rich reduce their income tax bill by extracting equity from their businesses and using that for their extravagant lifestyles.

All fine until the music stops. The govt seem pretty clear on this, no more bail outs. Price discovery is something more will become familiar with.

 

[Mansfieldman750]

The problem many BTL landlords now face is that interest rates are ~6% and yields are around ~6%, so they are relying on any equity they have in the property to make a profit.

Is that a recognition that BTL doesn’t work with IRs at 6% and rising ?
I could be wrong but I think you already know that you have to get out of that game.
Look on the bright side, no broken down boilers to replace, no new environmental regulations to follow.
And let’s face it, you’ve had a good run over the last 10 years or so.
Yes you will have CGT to pay. Death and taxes, only certainties in life.
Anyway thats my advice for what it’s worth and my only other advice is don’t take financial advice from someone on a Campervan forum.

 

[Amarillo]

Is that a recognition that BTL doesn’t work with IRs at 6% and rising ?
I could be wrong but I think you already know that you have to get out of that game.
Look on the bright side, no broken down boilers to replace, no new environmental regulations to follow.
And let’s face it, you’ve had a good run over the last 10 years or so.
Yes you will have CGT to pay. Death and taxes, only certainties in life.
Anyway thats my advice for what it’s worth and my only other advice is don’t take financial advice from someone on a Campervan forum.

No, I’m not saying that BTL doesn’t work at IRs of 6% and rising. What I am saying is that for BTL to work at IRs of 6% and rising you need a good chunk of equity in your BTLs.

But don’t forget that BTL landlords get a 20% tax credit on any interest they pay. That has the effect of reducing a 6% interest rate to 4.8%.