Like many people I am on a (relatively) short term mortgage deal. My two year offer expires in a few months so I have been looking around and doing a few sums.
If I do nothing, I will be moved onto my mortgage providers standard variable rate. When I worked it out I was quite surprised how much of an increase it was. Enough to cause pain and force me to make cut backs in other areas. (Try it for yourself, most banks standard variable rate is Bank of England + 2%; 7.25% at the moment.)
A friend of mine is a mortgage advisor and suggested that I speak to HSBC as they are one of the few banks still lending money and have a reasonably decent rate. I gave them a call today and they will (only) lend me 2.75 times my salary.
Imagine if I had taken out a 5 times my salary mortgage two years ago? I would be completely stuffed, unable to remortgage and forced to pay the standard variable rate of my current provider.
In many ways the credit crunch hasn't really hit the wider economy yet. The value of our pensions will have fallen with the stock market and we have underwritten Northern Rock for a couple of grand each, but this are mainly indirect effects. However, as people roll off their mortgage deals, it will hit their wallets. If they are unable to find a solution the consequences might be quite dire.
I am not going to give my personal financial details on the blog, but I would encourage everyone to think about it. Have you borrowed more than 2.75 times your salary? Use the CML mortgage calculator to see what your monthly payments would be at a 7.25% interest rate. I don't mind admitting I got a bit of a shock toady.
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I think people assumed that those cheap deals would last forever. The base+2 deals were pretty standard up until a few years ago when the market suddenly for a lot more competitive and the housing boom hit (cause/effect?). I am on a 5 multiple but luckily my current deal still had a long time to run!
ReplyDeleteA 2% margin sounds like proper theft my friend!!! And a rate of 7.25% would be high enough to give me a heart attack. With my colleagues in the office, we are always complaining about the Swiss franc LIBOR rate increase as it rose from 0.75% 3 years ago when I bought my flat to 2.8% these days. Reading your blog, I now feel very lucky, especially as my Bank only charges a standard 0.8% margin. I guess the only solution available to you is simply to make more money and repay your mortgage as quickly as possible.
ReplyDeleteI think I might move to Gex!
ReplyDeleteOlivier - sounds the Swiss Bank is *doing* low inflation while our own one *talks* about it...
ReplyDelete