Ray_li

Currently thinking of getting on to the property ladder so I'm just doing a little planning and calculations.

The current interest rate in 0.5% but way back in 1990 the interest rate was 14%. If interested goes back up to 14% I'll be buggered when trying to pay the mortgage.

What can cause the interest rate going up to 14% and is it possible?

Sorry if this a wide open question and I’m still getting my head round mortgages

FlightMan

If and when the economy picks up, rates will rise. It's a certain as the sun coming up tomorrow. I think the historic average is around 6 to 7% so work out your costs according to that and you wont go far wrong.

Good luck.

Ray_li

7% I can afford so thats not to bad.

need more studying in to mortgages.

I heard what every you borrow from the bank you'll end up paying double back. DAMN!

Dunk

iTrader: (1)

If you're worried about future rate rises, look at a fix or capped deal. You'll pay in excess of the std variable rate now, but it may protect the future for you!

D

Coffin Dodger

Most of the fixed or capped rates that offer any good value are only for 3-5 years though, so at the end of it if the rates have doubled you're still potentially screwed. Not saying fixed rates are bad or anything but you still have to consider rate rises.

What you must also understand is that the last time interest rates hit 15% inflation was raging at a similar level. As a consequence of that if you were lucky enough to be in employment then you'd be getting a raise every few months to keep with the cost of living. The circumstances now may be different to that, inflation would appear to be relatively stable though perhaps higher than the BoE would like it to be.

As mentioned if you think you can afford 7% mortgage interest then go for it. My biggest regret in life financially was not getting on the property ladder sooner and now is an excellent time if you have enough deposit to be a first time buyer. You can drive a hard bargain

Yes you do effectively pay the bank back a lot more than the house if worth but if you can overpay, even if only by a few £100 a month, it can make a huge difference to the final interest bill. Also if you could get used to that now you already have the reserve built in if the rates were to rise

tony de wonderful

I'd be only too happy to see them rise.

a) it would help crash property and b) it would give me more interest on my savings.

Gear Head

iTrader: (2)

I think out mortage equates to paying back £1.90 for every £1 borrowed.
But when you think about it, 25 -30 years is quite a generous time scale to pay back a loan!
We were in the same position recently and have just bought our first house. Ours is a two year fixed but I really wanted to jump onto standard variable straight away. Unfortunately, they don't let you do that!

Go for it.

Ray_li

I can only do it with the support of my parents so buy something decent

PaulC72

Looking at most of the current fixed rates they site around 4-6% anyway and it all depends on your LTV.

Good luck.

Chip

Ray,
Take a look here:

http://easycalculation.com/mortgage/amortization.php

Overpayments can make a huge difference to how much you repay over the long term.

Chip

EddScott

I know chrispurvis100 has just bought and a work colleague has moved quite a way up the property ladder but I'd be tempted to wait a while. Just to see what house prices do in the face of the austerity measures etc.

However only a fool bets on the UK housing market so who can say when the right time is.

As for interest rates I think they'll stay low for some time yet. If interest rates get into double figures it will be a mortgage payment bloodbath!

Ray_li

I'll be 55 years old by the time I've paid a 25 year mortgage.

billythekid

Was talking to someone about this the other day. He reckons 8 to 9% in 2 years, then fall back to about 6% and hold there for quite a while.

Obviously anything can happen.

Chip

Unless of course you make overpayments.

Chip

SPEN555

For Info on a 25 year mortgage of £105,000 if I can manage to overpay by £30 per month and after every year up this by £30 per month my mortgage goes from 25 years to 15 years! The only way I can do it though is by getting pay rises each year. But suprising how a little each month has such a dramatic impact.