Most European fix mortgages and borrow over longer periods. Germany for example. The Germans are so fixated on inflation that have stagnated the whole of europe. They slavishly chase an inflation target of 2% and the thing was 0 for 5 years before the ****s would print an extra euro. you want a reasonable interest rate that allows for borrowing at an attainable level but that also means saving is actually worth it.
yes wbut where is the middle? 0% in effect is bad. people with mortgages that actually track the rates are laughing or variables where banks are actually passing on the interest rates.... but some of us come form a time where 15-20% was aorund (as in my parents and i can remember when it was myself) 5% should probably be considered low no? anyone?
But my friend there are 2 ways to get onto the ladder: 1. Borrow more than you can barely afford to get onto the ladder 2. hope house prices go down a) Supply - Go down because we build more houses - won't happen as developer won't sell them at less than todays market rate b) Demand - Go down because less people want them whether thats because they are being sold by investors or because people aren't upgrading etc 2b) can sort of happen with higher interest rates. As for people with money in the bank to gain interests - going to have to disagree.... there will be rich people who have money in the bank (or more likely investments if they are that rich) and there will be the savers saving up for either a rainy day, their kids or for a deposit on a house. The people who have no money in the bank will either already own a home or be on the breadline and will not be buying a house. Higher rates will affect people who have overstretched themselves
I live in south and have mortgage that was fixed for 3 years so doesn't affect me right now, but if they go up then it'll affect me when trying to renegotiate a new rate. You say people shouldn't borrow more than they can pay, true... but what if your current rate of 4% for example, is perfectly payable but they bump up interest rates, suddenly you're paying 7% and struggling to meet. Is that fair?
for IBWT: point 1 mentioned is inflation. higher interest rates are designed to take money out of the economy to restrict spending. simply an instrument to try chas inmfation lower so the cost of goods and repayments is lower Point 2. cheaper housing? nah that is never happening. This only comes about in a bust where peopel have nothing to buy with. In a normal cycle as interest rates go up peopel may not buy as much equities or properties to rent to make profit alights but house prices only go down when theres a recession. Higher interest rates as a sign of excess spending if anything IMI Point 3: is savings. Yes anyone over 25 should have savings so should be seeing at least some return on depsoits and maybe in pensions etc. Point 4: Value of pound: Interest rates are only an initiator here. The pounds value is relative and down to strength of economoy so the interest rates are just another sign of the same thing. Point 5: fix rate mortgages. not really affected other than with inflation (which is what interest rates track) the NPV of money paid in is less. If you fix say at 5% (whever you did) and its 0 or 20% actual rate you are still paying the same thing. The theory of fixing is you pay for certainty, meaning your bank is typically trying to charge more for fixed than variable rate. You take your chances and pay for the certainty but you'll only be fixed for 5 or 10 years etc. Sure if inlfation goes mad and you get a pay rise the pain of paying whever you pay seems less but in actual fact if inflation goes nuts that will still hurt.
Interest rates were 20% but the cost of a house in relation to average yearly pay was a lot lower. These days average salary is about 25k? Houses are prob on average 250-300k (down here). That's nearly 10 times salary on your own...
Yes, for two reasons. 1) Fixed typically start out paying more than variable or 3 year fixed. Banks build the risk to them into the rate. 2) Also fair because if banks have to pay more to borrow they will pass that cost on to you.
You need to plan for that in case that comes up. Maybe you need to cut out some luxuries but is it fair no? but what is fair? Maybe you need to downsize to a more reasonable mortgage. Anyway i don't have a proper answer for that as that's hypothetical. A more realistic is from 0.25% -> 5%. I think that's reasonable as historically thats what the rate was. If you bought your house with the intention your mortgage was going to stay at 0.5% forever then i would say you are naive and unfortunately you will be caught out because you didn't plan for this. Honestly, i think if people wanted to, they could cut on whatever luxuries they have. People nowadays have a lot more than the old used to have and either don't want it enough and can't live through adversity. You would save a few quid month just by not playing football Obviously this doesn't work for someone whos been unfortunate to be laid off etc etc.
its in the terms and conditions unfortunately you should in theory have the means if you borrowed sensibly and they didn't lend foolishly. the issue is they get away with it but you can't... the sods. if you borrow at 4 and it goes to 14 that's when its serious.... If you even keep your job in that sort of economy.
you can always seek to pay interest only or extend the number of years but all of that is a banks dream cos they get more out of you over the life of the loan. In general all of these issues all come back to the theory that property doubles in value every 10 years IN THEORY if you buy as a market is starting to grow then you should have enough equity in a house to get the **** out if this kind of **** occurs. Its when you buy at the top then see the arse fall out of the market that the pain comes. If you can sell up and rent then thats better than having a bankruptcy. but then again we are talking homes not assets but then.. .thats what may wants rather than the german model of protecting people and their homes (i should say german people in their german homes of course poor greeks)
Cheap credit over a very long time is bad as it distorts the normal economy and causes bad habits as it feels like it is normal. It can cause credit booms and we can all see the effects of that throughout europe.The reason interest rates are so low is because they were slashed at the time of the financial crisis and have never gone back up as a) the economy has only just recovered the ground it lost at the time of the crash ** B) the fears of deflation **even that is debatable as they often use GDP but that is not a level playing field due the abnormal rise in UK population over that period
Yeah by the time may is through rhe army will have to make their own and all. Its not prosperous enough for her to supply guns and bullets.
