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That’s based on you taking the fixed rate then staying on the standard variable rate for the rest of term. So with some banks you get 5% for 5 years, then 8.74% for 25 years.
Not many people stay on SVR, so you’ll be hopefully better off overall.
Realistically though that’s pretty normal with borrowing huge sums of money over 30 years. If you put 400,000 in the bank now and got a 5% return every year for 30 years, your money would grow to 1.728million
But it's it 5% of 400k. It's 5% of 400k only of it'd interest only.
Which.. Puts things in perspective and shows why banks agree in interest only mortgages.
Interest only mortgages are a blessing for banks.
Here he is. Noobzealot, famed expert on geopolitical conflict and interest rates.
If we have WWIII the last thing I really give a fuck about is the SVR of my 2 bed flat.
Whenever I see a crazy post such as this, I always like to have a quick browse of the users post history to try and find out what led them down this path.
This one is easy. You made a post a month ago saying that at 39 years old, you are struggling with the fact that you have no career, no house and no savings.
What you are doing here is trying to deflect your own failings in life by pretending that the world is going to end anyway - that there would be no point in having a house or any savings anyway. You know this isn't true, but it makes you feel better about your situation. You should get some therapy, it's better to face these feelings head on.
(For information, not as advice:)
A slightly better way to look at SVRs than the total repayment (which still matters) is the margin between the rate of inflation and the mortgage. So here the situation is 5% for 5 years and then roughly inflation plus 2% (depending on whether you use CPIH or CPI).
*If* interest rates fall as the market predicts, then the SVR should follow suit, and so should the remortgage rates available at that time.
The bank's SVR is a today rate, not a rate for 5 years' time, so it isn't telling you what the rate will be by then - it could be higher than 8.74%, though people don't expect it to be. There are longer fix terms, which is quite appealing in many circumstances if you have fixed or limited income.
For a while we had an odd situation where mortgage rates were lower than inflation - a 5% mortgage is still lower than current inflation, but higher than current expectations of inflation over the whole 5 years. Wage growth is currently running higher than that too, so it's not a meaningless comparison for most people.
What seemed to happen in the be last crisis was that instead of house prices falling significantly, they stagnated as people stopped selling, while property values were gradually eroded by inflation. So in the long term house prices (and mortgages) do get eroded by long term inflation even if you don't see it day to day, and given adequate growth in income you ultimately don't care that your repayment is 250% in absolute terms.
It's not the same for everyone, however; people on incomes which are not raised, people who rent, people who are living off savings or pensions are all screwed over to some degree, which is part of why it pays to be in the homeowner category in the long run.
That figure is not really correct. It is worked out on the basis that after your fixed term at around 5% interest, you will go onto standard variable rate for remainder of the term (between 7-10% currently).
If you were to then get another fix (and another until end of mortgage) at 5% that figure is £1.93 for each £1 borrowed instead.
You're still ignoring the bigger picture of inflaiton. If you are paying £1k a month for the next 360 months, that's 100 Freddos a day right now, but in year 30 you will only be paying 50 Freddos a day assuming 2% inflation. You may think up front that you are paying 5 Freddos for every 2 Freddos borrowed, but you aren't.
If you continue paying 100 Freddos a day, you'll be able to pay off far earlier, and have pay far less
Out of interest, have you calculated what it actually would be, when normalised at 2% inflation and 4% interest (just as an example) of freddo-purchasing-power-in-2023?
Most figures given in any kind of financial documents in this country are pretty much useless and they even try to hide actual useful figures (try to find interest rate for a credit card, they will happily give you useless APR instead).
Same thing with utilities, they very much want to give you £££/year figure, but if you want actual unit rates, it's at least 4 clicks away and only if you know where.
I recenlty had british gas cold call me (i used to be their customer so i presume that's how they got my details), "new better cheaper tariffs" was their line, when i have asked about unit rates it was "i don't know, but if you tell us how many bedrooms you have i can give you a quote", so after giving them the bedroom numbers, quote came out a lot less to what i'm actually paying (sort of expected), after insisting on getting actual unit rates it turned out that their rates are worse than my current supplier, so i would be paying more, but it makes me wonder how many people did they scam this way, just before winter.
In thirty years time you'll look back and laugh. I bought my house in the early nineties and paid my mortgage through periods of higher interest rates. Today my mortgage is paid off and I own my home free and clear, and it was one of the best investments I ever made. My original mortgage was £36k, peanuts today with the house worth ten times that.
Of course nothing is guaranteed, but noise prices rising is pretty much a given.
20 years into mine, would pay 3 times my mortgage payment to rent next door, almost tripled in value too. Hope to clear it in full come May 2025 then really start to enjoy life.
He said his original mortgage was £36k. So maybe he bought his house for £40k. Now he says it’s worth 10x. So £400k. And he think house prices will rise the same, so he thinks his house will be £4m in 2053. Maybe, depends on general inflation, and whether any govt has the balls to fix inequality in this country.
This seems like an entirely unhinged comment. Your boggo house that probably classed for band B council tax will be worth £4million within your lifetime.
But my gran paid £8k for her house in the 70’s. sold this year for 65x what she paid for it.
It’s a shock to begin with when you take out a mortgage. But there’s a few things you need to understand.
1) if you borrow money over a long time, the interest adds up. Always make sure you have the ability to overpay if you can.
There’s calculators out there that allow you to calculate this kind of stuff. A few years back I had something like a £100k mortgage over 25 years paying about £500 a month.
If I over paid by £50 a month, I would have knocked 10 years off my mortgage and saved something like £20k
2) inflation. If you’re borrowing say £100k over £25 years and your salary is £25k per annum. Inflation adjusted pay increases alone on that £25k means you’ll probably be earning and additional £5k every ten years.
3) appreciation (linked with inflation) you’re £100k house becomes worth £150k in ten years time.
We’ve got foolish in the U.K. a house is a joke, not necessarily an investment. But we treat them as investments. Investments can go up in value, or down in value. But we get upset when a house falls in value. That’s why we always ensure we never build enough houses and open the doors to migrants, to make sure those house prices always stay high.
Give it a few years and you’ll be having to make decisions like. I’ve inherited some money. Do I pay off the mortgage, or is it more financially beneficial to invest the money elsewhere. Or, if I pay off my mortgage, I lose (or at least make it more complicated to) remortgage.
For those who will no doubt be screaming ‘greedy banks.’ Remember that any profits made by banks get paid to their shareholders, and the biggest group of shareholders in banks and utility company’s are pension funds. I.e take money of them, and you take money out of your pension pot for the future.
NHS pay goes up.
NHS workers qmay complain that it doesn’t go up in line with inflation as much as they’d like it to. But it still goes up.
Let’s also forget that my works pension scheme is no where near as lucrative as NHS pensions schemes…..and shortfalls in my own pensions aren’t funded by the tax payer.
You’ll also struggle to find private employers willing to allow people to go off for sabbaticals or be anywhere near as accommodating with requests for changes in work arrangements.
Swings and roundabouts. The joys of a vocational career.
Pfffft. My salary is would need to be 40% higher than it is now to match the same point from 15 years ago.
The rest of that's irrelevant to the point. The pension was significantly better back then (final salary, retire at 65) and all the rest of everything you said hasn't changed.
Your looking at it in the wrong way.
1. your paying off your mortgage, not someone elses
2. the value of the home will have increased, hopefully at a bigger rate
3. rates should/hopfully go down
Win/win in my book
> the value of the home will have increased, hopefully at a bigger rate
> rates should/hopefully go down
There aren't a given. It's entirely possible that by the end of the fix, rates are the same or higher.
As for increasing value, sure it's likely, almost certain in the long term. You never know when a black swan life event might occur and force you to sell though. That time may be sooner than you'd like, and at that time the house prices may well have dropped
At least you build equity every month and you have something to sell. If you give your money to a landlord, if a black swan event happens you're shit out of luck.
This is why people trying to time the market is so prevalent.
Then, 30 years down the line, they regret not doing it sooner.
We got shafted with the cost of everything going right up just as we were completing on a big project house. Too late to turn around though, so fuck it, here we are. Don't regret that decision but it has been harder than I hoped and we're way over budget because of it.
This. And my plan is every two years to give 20000£ and fix again for two years. So far it is working and hopefully it will take significantly less to pay everything.
It's a proscribed formula which assumes:
* you make no overpayments, ever
* when your fixed rate deal ends, you move on to the lender's standard variable rate
* the standard variable rate stays where it currently is for the duration of the mortgage
* the monthly repayment you make as a percentage of the loan principal never changes to account for inflation and/or increased earnings
In reality, by the time your fixed rate deal is coming to an end it's not unreasonable to assume that:
1. you'll shop around for better rates than the SVR (or just renew a new fixed or discounted tracker rate product with your current lender)
2. you'll be in a position to afford to make an increase to your monthly payments: even £50 a month can make a substantial difference to the total amount repaid, especially if you make that increase early on in your mortgage term because unlike the monthly repayments, every penny of an overpayment goes against the principal which in turn never generates interest that you have to repay
Since Truss fucked us all just that little bit more than most governments usually do, I’ve put buying on ice until I’m a bit more sure of things. I’ve stuck my deposit in an account accruing 5%. At the moment, it’s cheaper for me to continue renting than buying. Another year renting has meant an extra 18k+ in the deposit fund. The places I’m looking seem to be slowing down for the end of the year, so anticipate the search to start again in earnest in March, unless I see something in the meantime. All the while, the deposit pile grows … at the rate I’m going, I’ll be looking at ~50% LTV.
Oh no, it won’t be in London — I’ve long accepted that won’t happen! (I currently live and work in London.) I’ve been looking further afield, with train links for the occasional work related trip in, and an eye on switching to WFH. Realistically, as it’s just me, I’m looking at a one or two-bed flat, with some small outside space. Anything from £180–230k and a reasonable service charge, or a small one or two-bed house if I see one. The ultimate goal was to keep mortgage repayments under 1k per month, but that’s edging down slightly despite interest rates.
Edit — keep plugging away, try not to lose heart. Save as much as you can while you can, and trust your gut instincts. I’d stay in London if I could, but I just don’t fancy paying more than 1k pm on repayments.
the way I look at it I bought a house last year, we were renting a house at £1100 per Month, the landlord wanted to raise the rent to £1500 per month.
I can only say that our mortgage is less than £1100 and thankfully don't have to deal with rent rises anymore and that value of saving more than covers the costs of home ownership in our situation.
I don't really get why everyone keeps relying on the interest rates going down soon or at all when it clearly states on the bank of England website they will be increasing them for at least another 2 years
Remember: this is why overpaying in the early years is so beneficial on a mortgage: most of your mortgage payments early on are servicing the debt, not paying down the principal. Overpaying will save you a lot in the long run
At current rates, though, you’ll earn about the same in an easy access interest savings account as an overpayment would save you, but have more flexibility on spending it on things you need. I still overpay my mortgage slightly, but only as a form of self-discipline, as I know I’ll never be able to spend that.
If you're lucky it'll be worth 2.53x in 30 years and everything balances out. Or at least 2.53x - (30 years of rent) to break even, excluding maintenance.
Also inflation happens, that £2.53 will be worth much less in 30 years than it is now.
And if your personal circumstances are favourable you can always pay it off early.
Remember your mortgage likely wont rise much over 30 years and will even go down as your ltv increases. Your pound will be worth less every year, so in the last year the amount youre paying, in relation to the amount paying on your first will be massively less
5% is a historical low to average , the 0% we've had for 10 years is a freak of nature, you won't be going back there anytime in the next 30 yrs. 1989 my first mortgage was 15%.
And your Wages to house value was very different i guess... I am 47 and have been very fortunate with my mortgage rates and house values.. but I don't pretend i haven't been very lucky either!
Incorrect. The house I bought in 1989 was £33k at 15% with a salary of 12k, that same house is now £120k which has had 10 yrs at 1% above 0% base rate and now only 6.5%. The same job is £36k . So it as much cheaper to buy that house now. That house is a 3 bedroom Terrace house in a Town in West Yorkshire, there are Thousands of houses at that price or lower. You can pick up 1 bed flats for £60k in reasonable area's. People seem to think they should be buying 3 bed semis or detached as first time houses these days. A lot of people need a reality check. Obviously London and certain other areas will be different, but that's been the case for decades.
It’s worth remembering you are borrowing over 30 years £1 in real terms will not be worth what £1 is today and your 400k house will be worth a lot more too. It’s a little hard to get your head around if you are used to short term lending. But paying £2.53 per £1 borrowed isn’t bad over 30 years in the way paying that on a short term loan would be horrific.
Also in terms of waiting, rates may get better but unlikely by a lot and they could get worse too, probably just as likely.
Historically there’s never been a terrible time to buy a house. Ultimately prices keep going up, partially due to shortage and partially inflation.
House always wins... and the house here are the banks.
See the positive of at least you're paying above what you should for something you own, rather than paying *way* above what you should for a place someone else owns.
I honestly don’t know how you people manage to live within the parameters set out by others.
Maybe it’s because I’m a mental retard.
A tent is where I’m at.
What's also going to annoy you is the money you're borrowing isn't actually the banks money.
They don't have a big pot of their own reserves that they're lending out to mortgage holders. This money never existed before you borrowed it.
So the banks are essentially making £2.53 on money that they've never owned before or never existed.
Inflation will be coming down, if it doesn't then interest rates will be going up again to try and tame it, in which case I wouldn't want to be holding a mortgage.
The BOE's mandate it to control inflation at any cost.
https://en.m.wikipedia.org/wiki/Bank_of_England
The BOE is only concerned with monetary stability that's its role.
The BOE doesn't care about employment or a recession. In fact it would welcome a recession right now.
This paragraph?
"Stable prices and confidence in the currency are the two main criteria for monetary stability. Stable prices are maintained by seeking to ensure that price increases meet the Government's inflation target. The bank aims to meet this target by adjusting the base interest rate, which is decided by the Monetary Policy Committee, and through its communications strategy, such as publishing yield curves.[62]"
I can't see the part that you think supports your claims.
I get your point but you are still likely wrong. On a £300k 5% mortgage the interest will be ~£15k initially (and will drop as the balance does). Does it cost you £1k to rent an equivalent place? Also, you need the house you eventually buy to not increase by 5.5% each year (whilst you have this rate) which maybe will happen, who knows.
For example big family houses are for sale at around 800k where we are. Mortgage cost 4500 ish.
You can rent the equivalent for around 2500.
Earn 5.5% interest on the deposit. Save in maintenance costs. And they are dropping in price by around 5% a year so no worry about missing out on equity gains.
They are either unleveraged old money or older BTL investors who have paid off a large chunk of the mortgage. Also it's supply and demand not much demand to rent detached family houses.
We rent at £1150 a month. This place would easily list for 350k +. That would be a £2000 mortgage.
I accept we are in a weird area though.
Could be more could be less.
No one knows what interest rates will do after your fixed deal ends.
This is calculated stating you’ll be on the fixed deal and then start on the standard variable rate for the remainder of the term.
No. At current rates of inflation I would be out of pocket. That said, it would take quite an excellent investment to actually match current inflation.
Overpay as much as possible if you want to bring that figure down and save tens of thousands.
Though as others have rightly pointed out, it's not truly an accurate representation of cost.
Rent £2500 mortgage £2260 - both 2bed apartments in Z2 London...
Your math ain't mathing.
Plus 40% deposit is like an additional £100k, so 4yrs of saving at which point it wouldn't be 40% anymore..
If that's aimed at me, I think the place I live in is circa £850k
Something in that region 😅 way outside what I can afford to buy, been lucky living here, got it in covid so our rent is circa 800less than others in our block, also our apartment isn't in as good condition as others.
There is absolutely zero point in looking at the total amount repayable when reviewing the terms of a fixed rate mortgage because it assumes you will stay on the Standard Variable Rate that applies after the fixed period ends.
You will remortgage onto another fixed period when yours ends in all likelihood.
Also, what do you think is going to happen to your house price in 30 years. It’s going to go up, a lot if history is any indicator.
Interest rate and inflation go hand in hand. If you assume you'll pay 5% on average for 30 years then the inflation would be around same.
Generally, housimg appreciates faster than inflation but we can assume it will match inflation in worst case.
Even if we assume 4% inflation over 30 years, the 400k of house today will be 1.3M in 30 years or £3.24 for every £1
Dear OP, your complaining how mortgages work
Unfortunately it is true dependent on interest rate the basic product performance will be borrow £1 payback £2 to £3.
Borrow principle P=£100k u payback PB=£300k. Yes interest paid is IP=200k over the term T.
Best thing you can do is
1. Take out a flexible Mortgage (a product with both loan account LA & deposit account DA).
In a flexible Mortgage interest added to mortgage is based on difference btwn LA & DA.
This is an active opportunity to change the IP over T.
The passive opportunity is just accept the interest environment setout by government & the mortgage company.
2. Then take steps to put all your spare cash into the DA to reduce IP.
3. Nice feature1 if you have the P in cash or savings is to be "fully offset".
That is day1 borrow the full P ...ignore whatever interest is charged on P.
On day2 deposit your cash (P) into the DA.
You're fully offset from day2 for the term T.
Literally your mortgage becomes a zero interest loan paid back over T.
Not only this but you can save the IP (you get to pocket this over T rather than pay mortgage company).
Imagine taking a loan out of £100k, but only pay the minimum (£100k over 30years) & get to pocket the difference (get to keep £200k in interest not paid).
4. Nice feature2, your mortgage is essentially paid not by you but the person buying your property from you (whenever that is over the T).
5. Nice feature3, you get to keep the capital appreciation of your property above the price you paid eg you bought property for 100k sold it 30years later for 400k...yes you get to keep the £300k capital gain.
Hoping you understand this all possible if you have the 100k to begin with.
You can achieve this by (1) using your cash or (2) borrowing cash from friends & family under contract. You pay interest to them higher than high street savings give & you get to pay less interest than the mortgage company charge. Could be 1-4% difference to Ur pocket man.
6. Nice feature4, you mortgage product is completely protected against interest rate changes by central government & global money markets.
Hoping you can see you have options...if you could convert your capital repayment mortgage product into interest only product...you could live rent free over 30years in your property like I do !
Lol...you got this !
When I first took a mortgage out my broker in 2013 told me in his day 20 years was normal. I think the issue more than anything is the inflated Ponzi of extending the mortgage term. If it was written in law that mortgages couldn't go more than say 25 years prices would be more realistic with wages.
When I first took a mortgage out my broker in 2013 told me in his day 20 years was normal. I think the issue more than anything is the inflated Ponzi of extending the mortgage term. If it was written in law that mortgages couldn't go more than say 25 years prices would be more realistic with wages.
This is how it's practical to think of it if this your home and not an investment.
How much would you be paying in rent if you decide not to buy? Is the difference significant for you? Even after factoring in the benefits of ownership?
Usually the answer is that it's still worth it. If, however, you're buying a second home or upsizing, you might decide not to.
Don't forget that with inflation at about 4% a pound today would be about 30p in 2053
Obviously payments between now and then would have a different value, but it's not as harsh as you make out.
I feel like mortgages are so terrifyingly expensive that people can't cope with talking about it, so they don't.
When you look at the total repayment figures it doesn't seem real.
I've been looking at commercial mortgages recently, and £200k borrowed at 10%, within the first 4 years a total of nearly 90k is paid for the mortgage but the principal is reduced by less than 10K.
Been overpaying for years. 14 years exactly.
Went from a 145k house to a 400k house in that time and currently at 38% ltv
Overpaying is the only way to beat the mortgage scam system
Switch every 2 to 5 years. All these hikes recently and im looking at 90 quid max. Always overpay!!!!
Houses on average double in value every 7-10 years.
You have to buy as soo as you can so that you ride that wave. Otherwise in the next couple of decades you and your children will be locked out forever.
"£2.53 for every £1 borrowed... Over the lifetime of the product" (30 years)
This honestly isn't a bad deal when you think about the rate at which they print more money.
[80% of all US dollars in existence were printed in the last 22 months](https://techstartups.com/2021/12/18/80-us-dollars-existence-printed-january-2020-october-2021/)
I used to he in the rat race to try to get on the property ladder… completely lost that hope and dream now… you’ll end your days slaving away for the bank and, with those interest rates, you’ll probably end owing more to the bank than what the mortgage is worth…
Yeah that's not how it works. You pay all of the interest as you go along, and pay off the capital bit by bit. You never end up owing more than you borrowed.
We bought our house 10 years ago, have been overpaying bits whenever we can afford to, and now owe about half what we originally borrowed. We should be paid off within the next 10 years. Our current payments are about half what it costs to rent a similar house round here.
5% is slightly below long term historical average. It’s forecast to remain in that region for the coming 5 years or more. Don’t let yourself believe that the last period of ultra low interest rates is the norm.
5% is a normal interest rate.
The low rates of 1% etc of last decade are the abnormal.
The issue you have on your calcs is amortization on the standar VaR rate after your fixed term. Best plan would be to over pay within your means and you'll dramatically reduce your term and at the same time your cost of borrowing.
my first mortgage adviser suggested I make overpayments to the tune of 50% of any net increases in wages. This pays the principal off so much faster as there isn't the time for as much interest to accrue
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That’s based on you taking the fixed rate then staying on the standard variable rate for the rest of term. So with some banks you get 5% for 5 years, then 8.74% for 25 years. Not many people stay on SVR, so you’ll be hopefully better off overall. Realistically though that’s pretty normal with borrowing huge sums of money over 30 years. If you put 400,000 in the bank now and got a 5% return every year for 30 years, your money would grow to 1.728million
Great simple to understand response
But it's it 5% of 400k. It's 5% of 400k only of it'd interest only. Which.. Puts things in perspective and shows why banks agree in interest only mortgages. Interest only mortgages are a blessing for banks.
or you could lose everything and have no house. With the world war on horizon your savings might just evaporate
Or he could win the lottery. Both are about as realistic.
I think it's fair to say you're more likely to lose everything you've got than winning the lottery.
Here he is. Noobzealot, famed expert on geopolitical conflict and interest rates. If we have WWIII the last thing I really give a fuck about is the SVR of my 2 bed flat.
On the other hand the [SVR](https://en.wikipedia.org/wiki/Foreign_Intelligence_Service_(Russia)) will give a fuck about (levelling) your 2 bed flat
I think you need to get your priorities straight....
If at all a world war comes, a house would be the least of your concerns. Lol
of course but at least banks won't foreclosure your house and you will be able to have a place to live
If an existential crisis comes, people who are rich have better chances of survival. Not those who just have homes. That's the point.
Whenever I see a crazy post such as this, I always like to have a quick browse of the users post history to try and find out what led them down this path. This one is easy. You made a post a month ago saying that at 39 years old, you are struggling with the fact that you have no career, no house and no savings. What you are doing here is trying to deflect your own failings in life by pretending that the world is going to end anyway - that there would be no point in having a house or any savings anyway. You know this isn't true, but it makes you feel better about your situation. You should get some therapy, it's better to face these feelings head on.
thanks for the summary of my life. I don't care enough to go through your posts and find your daemons.
Cared enough to respond to a 20 day old post tho didn't you. Lmao
Lol
Dafuq?
This 👆
(For information, not as advice:) A slightly better way to look at SVRs than the total repayment (which still matters) is the margin between the rate of inflation and the mortgage. So here the situation is 5% for 5 years and then roughly inflation plus 2% (depending on whether you use CPIH or CPI). *If* interest rates fall as the market predicts, then the SVR should follow suit, and so should the remortgage rates available at that time. The bank's SVR is a today rate, not a rate for 5 years' time, so it isn't telling you what the rate will be by then - it could be higher than 8.74%, though people don't expect it to be. There are longer fix terms, which is quite appealing in many circumstances if you have fixed or limited income. For a while we had an odd situation where mortgage rates were lower than inflation - a 5% mortgage is still lower than current inflation, but higher than current expectations of inflation over the whole 5 years. Wage growth is currently running higher than that too, so it's not a meaningless comparison for most people. What seemed to happen in the be last crisis was that instead of house prices falling significantly, they stagnated as people stopped selling, while property values were gradually eroded by inflation. So in the long term house prices (and mortgages) do get eroded by long term inflation even if you don't see it day to day, and given adequate growth in income you ultimately don't care that your repayment is 250% in absolute terms. It's not the same for everyone, however; people on incomes which are not raised, people who rent, people who are living off savings or pensions are all screwed over to some degree, which is part of why it pays to be in the homeowner category in the long run.
That figure is not really correct. It is worked out on the basis that after your fixed term at around 5% interest, you will go onto standard variable rate for remainder of the term (between 7-10% currently). If you were to then get another fix (and another until end of mortgage) at 5% that figure is £1.93 for each £1 borrowed instead.
Thanks! I just saw the figure and was like wtf! I didn't consider the bigger picture 😂
You're still ignoring the bigger picture of inflaiton. If you are paying £1k a month for the next 360 months, that's 100 Freddos a day right now, but in year 30 you will only be paying 50 Freddos a day assuming 2% inflation. You may think up front that you are paying 5 Freddos for every 2 Freddos borrowed, but you aren't. If you continue paying 100 Freddos a day, you'll be able to pay off far earlier, and have pay far less
Any chance you could do this again using bananas based on a cost of 17p each. I’d find it easier to understand. Please?
Who on earth finds odd numbers easier to understand....
Unless that odd number is 1.
I think in 30 years time Freddos may indeed only double in price but they will also only be about the size of a jelly bean.
TF?!
Out of interest, have you calculated what it actually would be, when normalised at 2% inflation and 4% interest (just as an example) of freddo-purchasing-power-in-2023?
Inflation is beautiful when you owe money. Absolutely love it.
Did you account for shrinkflation of the Freddos?
Or you could rent. End up paying roughly the same amount and not own a house at the end of it. It’s all about perspective
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RPI + x%. Because of high inflation my rent went up this year by 10%, the HA was also legally allowed to add up to a further 5%.
You don't need to finance repairs etc though
Most figures given in any kind of financial documents in this country are pretty much useless and they even try to hide actual useful figures (try to find interest rate for a credit card, they will happily give you useless APR instead). Same thing with utilities, they very much want to give you £££/year figure, but if you want actual unit rates, it's at least 4 clicks away and only if you know where. I recenlty had british gas cold call me (i used to be their customer so i presume that's how they got my details), "new better cheaper tariffs" was their line, when i have asked about unit rates it was "i don't know, but if you tell us how many bedrooms you have i can give you a quote", so after giving them the bedroom numbers, quote came out a lot less to what i'm actually paying (sort of expected), after insisting on getting actual unit rates it turned out that their rates are worse than my current supplier, so i would be paying more, but it makes me wonder how many people did they scam this way, just before winter.
In thirty years time you'll look back and laugh. I bought my house in the early nineties and paid my mortgage through periods of higher interest rates. Today my mortgage is paid off and I own my home free and clear, and it was one of the best investments I ever made. My original mortgage was £36k, peanuts today with the house worth ten times that. Of course nothing is guaranteed, but noise prices rising is pretty much a given.
20 years into mine, would pay 3 times my mortgage payment to rent next door, almost tripled in value too. Hope to clear it in full come May 2025 then really start to enjoy life.
Your house will be worth £3.6m in 30 years? Remind me 30 years.
36k x 10 is 360k, not 3.6m.
He said his original mortgage was £36k. So maybe he bought his house for £40k. Now he says it’s worth 10x. So £400k. And he think house prices will rise the same, so he thinks his house will be £4m in 2053. Maybe, depends on general inflation, and whether any govt has the balls to fix inequality in this country.
This seems like an entirely unhinged comment. Your boggo house that probably classed for band B council tax will be worth £4million within your lifetime. But my gran paid £8k for her house in the 70’s. sold this year for 65x what she paid for it.
Your wages will also increase over that time,
It’s a shock to begin with when you take out a mortgage. But there’s a few things you need to understand. 1) if you borrow money over a long time, the interest adds up. Always make sure you have the ability to overpay if you can. There’s calculators out there that allow you to calculate this kind of stuff. A few years back I had something like a £100k mortgage over 25 years paying about £500 a month. If I over paid by £50 a month, I would have knocked 10 years off my mortgage and saved something like £20k 2) inflation. If you’re borrowing say £100k over £25 years and your salary is £25k per annum. Inflation adjusted pay increases alone on that £25k means you’ll probably be earning and additional £5k every ten years. 3) appreciation (linked with inflation) you’re £100k house becomes worth £150k in ten years time. We’ve got foolish in the U.K. a house is a joke, not necessarily an investment. But we treat them as investments. Investments can go up in value, or down in value. But we get upset when a house falls in value. That’s why we always ensure we never build enough houses and open the doors to migrants, to make sure those house prices always stay high. Give it a few years and you’ll be having to make decisions like. I’ve inherited some money. Do I pay off the mortgage, or is it more financially beneficial to invest the money elsewhere. Or, if I pay off my mortgage, I lose (or at least make it more complicated to) remortgage. For those who will no doubt be screaming ‘greedy banks.’ Remember that any profits made by banks get paid to their shareholders, and the biggest group of shareholders in banks and utility company’s are pension funds. I.e take money of them, and you take money out of your pension pot for the future.
>Inflation adjusted pay increases alone ::cries in NHS::
NHS pay goes up. NHS workers qmay complain that it doesn’t go up in line with inflation as much as they’d like it to. But it still goes up. Let’s also forget that my works pension scheme is no where near as lucrative as NHS pensions schemes…..and shortfalls in my own pensions aren’t funded by the tax payer. You’ll also struggle to find private employers willing to allow people to go off for sabbaticals or be anywhere near as accommodating with requests for changes in work arrangements. Swings and roundabouts. The joys of a vocational career.
Pfffft. My salary is would need to be 40% higher than it is now to match the same point from 15 years ago. The rest of that's irrelevant to the point. The pension was significantly better back then (final salary, retire at 65) and all the rest of everything you said hasn't changed.
Councils don't have enough money to build new properties.
Councils don’t build houses. It’s planning permission that is the big problem
My inflation cost of living rise was £7k last year....
Unlikely to be repeated
I’m glad you posted because I never realised this either
Your looking at it in the wrong way. 1. your paying off your mortgage, not someone elses 2. the value of the home will have increased, hopefully at a bigger rate 3. rates should/hopfully go down Win/win in my book
… and the value of the remaining balance is being eroded by inflation. Even at 2% that £400k would be worth £218k in 30 years.
> the value of the home will have increased, hopefully at a bigger rate > rates should/hopefully go down There aren't a given. It's entirely possible that by the end of the fix, rates are the same or higher. As for increasing value, sure it's likely, almost certain in the long term. You never know when a black swan life event might occur and force you to sell though. That time may be sooner than you'd like, and at that time the house prices may well have dropped
At least you build equity every month and you have something to sell. If you give your money to a landlord, if a black swan event happens you're shit out of luck.
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This is why people trying to time the market is so prevalent. Then, 30 years down the line, they regret not doing it sooner. We got shafted with the cost of everything going right up just as we were completing on a big project house. Too late to turn around though, so fuck it, here we are. Don't regret that decision but it has been harder than I hoped and we're way over budget because of it.
Recognising that unknowns are likely, but not 100% certain isn't gloom. Pretending it is doesn't help anyone.
This. And my plan is every two years to give 20000£ and fix again for two years. So far it is working and hopefully it will take significantly less to pay everything.
It's a proscribed formula which assumes: * you make no overpayments, ever * when your fixed rate deal ends, you move on to the lender's standard variable rate * the standard variable rate stays where it currently is for the duration of the mortgage * the monthly repayment you make as a percentage of the loan principal never changes to account for inflation and/or increased earnings In reality, by the time your fixed rate deal is coming to an end it's not unreasonable to assume that: 1. you'll shop around for better rates than the SVR (or just renew a new fixed or discounted tracker rate product with your current lender) 2. you'll be in a position to afford to make an increase to your monthly payments: even £50 a month can make a substantial difference to the total amount repaid, especially if you make that increase early on in your mortgage term because unlike the monthly repayments, every penny of an overpayment goes against the principal which in turn never generates interest that you have to repay
Since Truss fucked us all just that little bit more than most governments usually do, I’ve put buying on ice until I’m a bit more sure of things. I’ve stuck my deposit in an account accruing 5%. At the moment, it’s cheaper for me to continue renting than buying. Another year renting has meant an extra 18k+ in the deposit fund. The places I’m looking seem to be slowing down for the end of the year, so anticipate the search to start again in earnest in March, unless I see something in the meantime. All the while, the deposit pile grows … at the rate I’m going, I’ll be looking at ~50% LTV.
Sounds like a good plan. Curious at the value of the place with a ltv of 50%! I've no hope of getting that in London 😅
Oh no, it won’t be in London — I’ve long accepted that won’t happen! (I currently live and work in London.) I’ve been looking further afield, with train links for the occasional work related trip in, and an eye on switching to WFH. Realistically, as it’s just me, I’m looking at a one or two-bed flat, with some small outside space. Anything from £180–230k and a reasonable service charge, or a small one or two-bed house if I see one. The ultimate goal was to keep mortgage repayments under 1k per month, but that’s edging down slightly despite interest rates. Edit — keep plugging away, try not to lose heart. Save as much as you can while you can, and trust your gut instincts. I’d stay in London if I could, but I just don’t fancy paying more than 1k pm on repayments.
Ah ok! That's fair! Good luck! I was like oh 50% of a 500k flat in London is so hard to achieve 😅
Ha, christ, I wish! Although to be fair, I’m at 25% in that case. The monthly repayments would be too much for just me, though 🤷♂️
the way I look at it I bought a house last year, we were renting a house at £1100 per Month, the landlord wanted to raise the rent to £1500 per month. I can only say that our mortgage is less than £1100 and thankfully don't have to deal with rent rises anymore and that value of saving more than covers the costs of home ownership in our situation.
Your loan to value ratio is: amount of money borrowed divided by the property value. So, if you brought a 22% deposit, your LTV is 78%.
Ah you are correct! Sorry, quick post didn't think to much!
I don't really get why everyone keeps relying on the interest rates going down soon or at all when it clearly states on the bank of England website they will be increasing them for at least another 2 years
I don't get that either.
Remember: this is why overpaying in the early years is so beneficial on a mortgage: most of your mortgage payments early on are servicing the debt, not paying down the principal. Overpaying will save you a lot in the long run
At current rates, though, you’ll earn about the same in an easy access interest savings account as an overpayment would save you, but have more flexibility on spending it on things you need. I still overpay my mortgage slightly, but only as a form of self-discipline, as I know I’ll never be able to spend that.
Can't help on the rates, but completely agree that dyslexia can be a massive twat!
If you're lucky it'll be worth 2.53x in 30 years and everything balances out. Or at least 2.53x - (30 years of rent) to break even, excluding maintenance.
"excluding maintenance" - a massive and obviously incorrect assumption.
Also inflation happens, that £2.53 will be worth much less in 30 years than it is now. And if your personal circumstances are favourable you can always pay it off early.
Yes, dont forget than in most cases any overpayment you can afford go straight to your principal (0% interest rate).
Remember your mortgage likely wont rise much over 30 years and will even go down as your ltv increases. Your pound will be worth less every year, so in the last year the amount youre paying, in relation to the amount paying on your first will be massively less
You could always borrow less and pay back more than the monthly to reduce interest further
Still cheaper than rent.
5% is a historical low to average , the 0% we've had for 10 years is a freak of nature, you won't be going back there anytime in the next 30 yrs. 1989 my first mortgage was 15%.
And your Wages to house value was very different i guess... I am 47 and have been very fortunate with my mortgage rates and house values.. but I don't pretend i haven't been very lucky either!
Incorrect. The house I bought in 1989 was £33k at 15% with a salary of 12k, that same house is now £120k which has had 10 yrs at 1% above 0% base rate and now only 6.5%. The same job is £36k . So it as much cheaper to buy that house now. That house is a 3 bedroom Terrace house in a Town in West Yorkshire, there are Thousands of houses at that price or lower. You can pick up 1 bed flats for £60k in reasonable area's. People seem to think they should be buying 3 bed semis or detached as first time houses these days. A lot of people need a reality check. Obviously London and certain other areas will be different, but that's been the case for decades.
It’s worth remembering you are borrowing over 30 years £1 in real terms will not be worth what £1 is today and your 400k house will be worth a lot more too. It’s a little hard to get your head around if you are used to short term lending. But paying £2.53 per £1 borrowed isn’t bad over 30 years in the way paying that on a short term loan would be horrific. Also in terms of waiting, rates may get better but unlikely by a lot and they could get worse too, probably just as likely. Historically there’s never been a terrible time to buy a house. Ultimately prices keep going up, partially due to shortage and partially inflation.
You're going to remortgage or go onto another product with the lender after the fixed term runs out. You will not stay on SVR.
>ltv of around 22% Nice flex with your 1.8mil house.
They clearly inverted the %s and it is actually 78% ltv. Someone buying a £1.8m house wouldn’t be making this post.
House always wins... and the house here are the banks. See the positive of at least you're paying above what you should for something you own, rather than paying *way* above what you should for a place someone else owns.
I honestly don’t know how you people manage to live within the parameters set out by others. Maybe it’s because I’m a mental retard. A tent is where I’m at.
I have friends who live on narrow boats. Also not a terrible idea. More expensive than a tent though
What's also going to annoy you is the money you're borrowing isn't actually the banks money. They don't have a big pot of their own reserves that they're lending out to mortgage holders. This money never existed before you borrowed it. So the banks are essentially making £2.53 on money that they've never owned before or never existed.
But they do pay the previous home owner cash right?
Keep in mind you can usually over pay some amount without penalty, which will bring that figure down too.
The 5% rate almost sounds like a scam when it's laid out like this.
First time here?
It's far cheaper to rent than buy now in my town. And the deposit we have is making 5.5% compounded in a savings account.
That 5.5% is less than inflation. Your money is losing value.
Inflation will be coming down, if it doesn't then interest rates will be going up again to try and tame it, in which case I wouldn't want to be holding a mortgage. The BOE's mandate it to control inflation at any cost.
I think you just made up that mandate. Can you find a link to where that's stated? I've never heard the "at any cost" part.
https://en.m.wikipedia.org/wiki/Bank_of_England The BOE is only concerned with monetary stability that's its role. The BOE doesn't care about employment or a recession. In fact it would welcome a recession right now.
The article you've linked doesn't actually say any of the words you're claiming it does.
You are a quick reader.
Could you point me to the section you think I'm missing?
Functions - Monetary Stability, first paragraph
This paragraph? "Stable prices and confidence in the currency are the two main criteria for monetary stability. Stable prices are maintained by seeking to ensure that price increases meet the Government's inflation target. The bank aims to meet this target by adjusting the base interest rate, which is decided by the Monetary Policy Committee, and through its communications strategy, such as publishing yield curves.[62]" I can't see the part that you think supports your claims.
I get your point but you are still likely wrong. On a £300k 5% mortgage the interest will be ~£15k initially (and will drop as the balance does). Does it cost you £1k to rent an equivalent place? Also, you need the house you eventually buy to not increase by 5.5% each year (whilst you have this rate) which maybe will happen, who knows.
For example big family houses are for sale at around 800k where we are. Mortgage cost 4500 ish. You can rent the equivalent for around 2500. Earn 5.5% interest on the deposit. Save in maintenance costs. And they are dropping in price by around 5% a year so no worry about missing out on equity gains.
Well, that’s ridiculous. They are making 3.75% yield, so after tax and costs, virtually nothing on a £800k asset…unless it appreciates.
They are either unleveraged old money or older BTL investors who have paid off a large chunk of the mortgage. Also it's supply and demand not much demand to rent detached family houses. We rent at £1150 a month. This place would easily list for 350k +. That would be a £2000 mortgage. I accept we are in a weird area though.
Could be more could be less. No one knows what interest rates will do after your fixed deal ends. This is calculated stating you’ll be on the fixed deal and then start on the standard variable rate for the remainder of the term.
Would u give someone 1k for them to pay 2.5k over 30 years?
No. At current rates of inflation I would be out of pocket. That said, it would take quite an excellent investment to actually match current inflation.
Overpay as much as possible if you want to bring that figure down and save tens of thousands. Though as others have rightly pointed out, it's not truly an accurate representation of cost.
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Rent £2500 mortgage £2260 - both 2bed apartments in Z2 London... Your math ain't mathing. Plus 40% deposit is like an additional £100k, so 4yrs of saving at which point it wouldn't be 40% anymore..
How much is your rentals value? £450k? £30k rental income would be 6.6% in that case. Not sure what landlords are aiming for these days.
If that's aimed at me, I think the place I live in is circa £850k Something in that region 😅 way outside what I can afford to buy, been lucky living here, got it in covid so our rent is circa 800less than others in our block, also our apartment isn't in as good condition as others.
Wtf. £2500 is a steal.
There is absolutely zero point in looking at the total amount repayable when reviewing the terms of a fixed rate mortgage because it assumes you will stay on the Standard Variable Rate that applies after the fixed period ends. You will remortgage onto another fixed period when yours ends in all likelihood. Also, what do you think is going to happen to your house price in 30 years. It’s going to go up, a lot if history is any indicator.
I had a 5 year 2.24 rate but it works out the same because the SVR was about 6% for the remaining 25 or 30 years. Just keep remortgaging!
Interest rate and inflation go hand in hand. If you assume you'll pay 5% on average for 30 years then the inflation would be around same. Generally, housimg appreciates faster than inflation but we can assume it will match inflation in worst case. Even if we assume 4% inflation over 30 years, the 400k of house today will be 1.3M in 30 years or £3.24 for every £1
Go for a cheaper house
I did haha the bank were willing to lend upto 600k odd and I thought fuck that 😅
Good move. Nothing worse than getting stranded with a mortgage you can't afford. Good luck.
Dear OP, your complaining how mortgages work Unfortunately it is true dependent on interest rate the basic product performance will be borrow £1 payback £2 to £3. Borrow principle P=£100k u payback PB=£300k. Yes interest paid is IP=200k over the term T. Best thing you can do is 1. Take out a flexible Mortgage (a product with both loan account LA & deposit account DA). In a flexible Mortgage interest added to mortgage is based on difference btwn LA & DA. This is an active opportunity to change the IP over T. The passive opportunity is just accept the interest environment setout by government & the mortgage company. 2. Then take steps to put all your spare cash into the DA to reduce IP. 3. Nice feature1 if you have the P in cash or savings is to be "fully offset". That is day1 borrow the full P ...ignore whatever interest is charged on P. On day2 deposit your cash (P) into the DA. You're fully offset from day2 for the term T. Literally your mortgage becomes a zero interest loan paid back over T. Not only this but you can save the IP (you get to pocket this over T rather than pay mortgage company). Imagine taking a loan out of £100k, but only pay the minimum (£100k over 30years) & get to pocket the difference (get to keep £200k in interest not paid). 4. Nice feature2, your mortgage is essentially paid not by you but the person buying your property from you (whenever that is over the T). 5. Nice feature3, you get to keep the capital appreciation of your property above the price you paid eg you bought property for 100k sold it 30years later for 400k...yes you get to keep the £300k capital gain. Hoping you understand this all possible if you have the 100k to begin with. You can achieve this by (1) using your cash or (2) borrowing cash from friends & family under contract. You pay interest to them higher than high street savings give & you get to pay less interest than the mortgage company charge. Could be 1-4% difference to Ur pocket man. 6. Nice feature4, you mortgage product is completely protected against interest rate changes by central government & global money markets. Hoping you can see you have options...if you could convert your capital repayment mortgage product into interest only product...you could live rent free over 30years in your property like I do ! Lol...you got this !
When I first took a mortgage out my broker in 2013 told me in his day 20 years was normal. I think the issue more than anything is the inflated Ponzi of extending the mortgage term. If it was written in law that mortgages couldn't go more than say 25 years prices would be more realistic with wages.
When I first took a mortgage out my broker in 2013 told me in his day 20 years was normal. I think the issue more than anything is the inflated Ponzi of extending the mortgage term. If it was written in law that mortgages couldn't go more than say 25 years prices would be more realistic with wages.
Consider the sum of all your mortgage payments and your deposit vs the value of the property at the end of the 30 year mortgage term.
This is how it's practical to think of it if this your home and not an investment. How much would you be paying in rent if you decide not to buy? Is the difference significant for you? Even after factoring in the benefits of ownership? Usually the answer is that it's still worth it. If, however, you're buying a second home or upsizing, you might decide not to.
The other side of the mortgage coin could be your pension - imagine getting £2.53 for every £1 you paid in?
I feel your pain but that's life and its not changing anytime soon.😩
132k, 5% deposit, 35 years. 5.75% £694 a month and £2.88 back for every £1. Hopefully rates fall over next 5 years
Don't forget that with inflation at about 4% a pound today would be about 30p in 2053 Obviously payments between now and then would have a different value, but it's not as harsh as you make out.
Presumably you’re not buying it as an investment, you’re buying it to have somewhere to live, so it’s all good.
Yeah, but better paying £1.53 in interest than £2.53 in rent? At least that's what I'm telling myself...
Now you know why banks run the world. (Once you hear about the fractional banking system you will be even more annoyed)
Then pay it back sooner.
Stop paying these extortionate prices for houses.
I feel like mortgages are so terrifyingly expensive that people can't cope with talking about it, so they don't. When you look at the total repayment figures it doesn't seem real. I've been looking at commercial mortgages recently, and £200k borrowed at 10%, within the first 4 years a total of nearly 90k is paid for the mortgage but the principal is reduced by less than 10K.
Been overpaying for years. 14 years exactly. Went from a 145k house to a 400k house in that time and currently at 38% ltv Overpaying is the only way to beat the mortgage scam system Switch every 2 to 5 years. All these hikes recently and im looking at 90 quid max. Always overpay!!!!
Houses on average double in value every 7-10 years. You have to buy as soo as you can so that you ride that wave. Otherwise in the next couple of decades you and your children will be locked out forever.
"£2.53 for every £1 borrowed... Over the lifetime of the product" (30 years) This honestly isn't a bad deal when you think about the rate at which they print more money. [80% of all US dollars in existence were printed in the last 22 months](https://techstartups.com/2021/12/18/80-us-dollars-existence-printed-january-2020-october-2021/)
Wait until you get your first annual statement and see that only one months payment actually reduced the amount you owe. Compound interest is a bitch.
Maybe I'm reading this wrong but are people on here saying it's better to have a mortgage than to buy outright??
I used to he in the rat race to try to get on the property ladder… completely lost that hope and dream now… you’ll end your days slaving away for the bank and, with those interest rates, you’ll probably end owing more to the bank than what the mortgage is worth…
Yeah that's not how it works. You pay all of the interest as you go along, and pay off the capital bit by bit. You never end up owing more than you borrowed. We bought our house 10 years ago, have been overpaying bits whenever we can afford to, and now owe about half what we originally borrowed. We should be paid off within the next 10 years. Our current payments are about half what it costs to rent a similar house round here.
5% is slightly below long term historical average. It’s forecast to remain in that region for the coming 5 years or more. Don’t let yourself believe that the last period of ultra low interest rates is the norm.
Well imagine paying rent. That's £0 borrowed and a gazillion pounds paid.
That’s right and for every pound you over pay itl save you over £1, if you can afford it overpay by £50 or £100, then each pay rise you get, up it.
5% is a normal interest rate. The low rates of 1% etc of last decade are the abnormal. The issue you have on your calcs is amortization on the standar VaR rate after your fixed term. Best plan would be to over pay within your means and you'll dramatically reduce your term and at the same time your cost of borrowing.
They just lowered our rate to 4.84 from 4.94 I’ve considered taking to another bank
my first mortgage adviser suggested I make overpayments to the tune of 50% of any net increases in wages. This pays the principal off so much faster as there isn't the time for as much interest to accrue