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Interest rates and mortgages.....

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baldkev

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Hellooooo

Im hoping some of you guys will have some wisdom for me. As we are all being told, the interest rates are going to rise. The media ( probably scaremongering ) are saying it will skyrocket.....

We have a 2 bed house, with mortgage. House is now worth about double the remaining mortgage.
We are hoping to buy a piece of land next to us and do an extension early next year ( although a customer today told me theres a 9 month waiting list on planning applications )
We will then need to borrow another 100k, so was aiming to remortgage at the end of February as we will have tripped into the last year of our current deal and we will have to pay about £3500 to leave early. If we do it before that, itll be 7k!

Our l.t.v on our current deal is way off, firstly because prices have risen sharply and second because we bought at a slightly discounted rate but the mortgage lender based l.t.v on the sale price, not the actual value.

So...... what on earth do i do? Or do i not worry about it?
 

baldkev

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P.s this year ive spent a LOT on tools and a bat project ive started, so i was aiming to give my bank balance a rehab by feb..... so right now i probably dont look very attractive to the bank 🙃
 

Fitzroy

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Go see a mortgage broker, don’t ask random strangers on a forum for financial advice! But as you already have!

You can have two mortgages at the same time. You don’t need to exit your first mortgage to extend your borrowing. Get the second mortgage deal with a period such that it ends as the same time as the first. Then remortgage the lot to get back to one deal.

We’ve lived in a period of stability for many years with very low interest rates, it’s very hard for anyone to say if/when/how much they will rise. The maths is easy to calculate what your repayments would be under higher rates. Work out how much you could stretch to and what interest rate this equates to. Remember your home is at risk if you don’t keep up repayments.
 

Inspector

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On the news the other day they said inflation was up, more than expected and the Bank of Canada might raise the prime lending rate to slow it down. That usually means loans and mortgages go up too. Ours was due for renewal at the end of this year but the bank lets us lock in 3 or 4 months prior so we did for another 5 year term. I would assume things are more or less the same for you guys. Things could easily remain the same so the advise given to go talk to the bank or broker is good.

Pete
 

deema

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I’ve so far been through two major house price corrections. I can remember a streets of houses being sold for £1. Interests rates jumping to 15% in a matter of months. Negative equity locking people into not being able to move. I think it comes in cycles as each generation forgets the pain endured by the last as the banks get silly with lending. We are here again, mortgages that are interest only, silly house prices. Just needs a few percentage points on the interest rates to start people having to sell / be repossessed to start the cycle again.
 

Inspector

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When I bought my first house in 1990 I paid 14% for a 1 year term. Ten or so years earlier it was 20% and people were walking away from their houses. At the moment a 5 year term is 2.3% and a 1 or 2% increase will cause a lot of people grief that live with their credit maxed out.

Pete
 

Jameshow

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Be careful about building an extension at the height of the market.

We did in 2008 and didn't get the full mortgage amount when the market crashed. And the value of the property wasn't worth the money invested in it, I.e. negative equity.

Cheers James
 

RobinBHM

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Hellooooo

Im hoping some of you guys will have some wisdom for me. As we are all being told, the interest rates are going to rise. The media ( probably scaremongering ) are saying it will skyrocket.....

We have a 2 bed house, with mortgage. House is now worth about double the remaining mortgage.
We are hoping to buy a piece of land next to us and do an extension early next year ( although a customer today told me theres a 9 month waiting list on planning applications )
We will then need to borrow another 100k, so was aiming to remortgage at the end of February as we will have tripped into the last year of our current deal and we will have to pay about £3500 to leave early. If we do it before that, itll be 7k!

Our l.t.v on our current deal is way off, firstly because prices have risen sharply and second because we bought at a slightly discounted rate but the mortgage lender based l.t.v on the sale price, not the actual value.

So...... what on earth do i do? Or do i not worry about it?
I would go ahead with the land purchase if it’s not too much.

In regards to the mortgage…well mortgage deals only last a few years, so I would say it’s not worth worrying about the interest rate you might get for the first fixed rate mortgage deal…..it’ll only last for a few years then you will back on standard variable rate.

yes Interest rates will go up, If They went up a crazy amount, there would be a housing crash and we would all be in the doo da.
 

Blackswanwood

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Your existing mortgage lender will most probably be prepared to make a further advance (increase your loan) to buy the land. Most typically the way this would work is that the existing loan would continue as is and the additional borrowing would be on the terms they have available now. When you apply for a new mortgage part of the affordability assessment is whether you could cope if mortgage rates go up. Rates are pretty much at an all time low currently but that doesn't mean an increase isn't something that could cause some people problems.

Having a loan with portions on different terms can make things complicated if you want to switch lender in the future and so getting the expiry of the fixed rates for each portion of the loan to align could be useful. It's also possible that the lender will waive the ERC if you are transferring to one of their other products while increasing your borrowing. As when you come to the end of your current fixed deal on each portion of the loan your lender is likely to offer you the opportunity to fix again this arguably is not worth worrying about too much. If you use a broker they will advise you whether switching lenders or accepting anew offer of terms from your existing lender is best.

While you can get mortgage deals on the high street mortgage brokers can often better them. Lenders give exclusive product terms to brokers. Choose a broker that deals with the whole of market as opposed to a restricted range of lenders.
 

NikNak

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Prices are currently at an all time high...including land prices. If it were me i would try and get the land owner to agree (via a binding contract with a solicitor) to the option to buy the land if/when you're given planning permission. Would seem silly to buy the land only to find out you're then refused planning permission. My other half's nephew did this. Just as well as it took 4 attempts to get planning permission for the land (he does it for a living), the land owners had tried and failed twice before.
 

baldkev

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Thanks for your replies, most helpful!
Be careful about building an extension at the height of the market.

We did in 2008 and didn't get the full mortgage amount when the market crashed. And the value of the property wasn't worth the money invested in it, I.e. negative equity.

Cheers James
Hi james, the driving force for the extension is that we have a 2 bed house, with 2 boys who need their own space.... and now another sprog on the way 😬

what sort of bats - cricket or the furry sort?

I just wondered as my FIL helped build some electronics to count bats - his friend did surveys on the Greater Horseshoe bat.
Hi Robin, cool! The furry ones...
batroost.co.uk
I dont know how well it'll take off, but i need to target ecologists. Ive had some interest, and some helpful adv8ce from a great contact at the v.w.t

Your existing mortgage lender will most probably be prepared to make a further advance (increase your loan) to buy the land
Heya, i think ive got the land covered, so that will add to our value.... but certainly if it looks like a good deal, it could be worth adding the build costs ( estimated 100k ) in this way until the job is done and the new l.t.v would be worked out..... but yes, we will go to a broker. Our original guy was very helpful but to be honesy, i dont know how much of the market he uses, or if he has a couple of preferred lenders.....

If it were me i would try and get the land owner to agree (via a binding contract with a solicitor) to the option to buy the land if/when you're given planning permission
Hi, thats very good advice.... its taken 7 years of repeated asking ( once a year ) to get to a point where they are considering it. Unfortunately they dontbwant or need to sell ( a housing association owns it )
If i get the opportunity, it'll probably be the only time they will do it, but I'll definitely think about that.... theres a side issue with the land in that the extension basically fits in our land, apart from a 1m x 1.2m triangle, which arguably sits on our border ( a thick devon bank ) so the land is going to be our garden as we would loose our garden if we built an extension.... plus the planners may turn it down if we dont have enough garden space....
Nothings ever simple.


Thank you again for your replies!
 

artie

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It might be worth considering, if you spend £100,000 on your house it doesn't automatically increase in value by £100,000.

I don't know your circumstances, but it may be a lot less hassle and a better financial proposition, to move house.
 

Spectric

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This is just going to be a case of all good things must come to an end, and soon it will be in favour of savers not borrowers. The wise will have been paying more than the set amount on their mortgage providing they have not been unwise and overstretched themselves in the first place. It is to easy to just get laid back and accept low interest rates, but I have known people living on a knife edge where every penny is spent before they get their wages and is just a case of very poor financial judgment, always have money stashed for rainy days and when debt is cheap don't stretch it out and overspend just because you can, did the Tibetan monk not say happiness through buying is only short lived!
 

baldkev

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Hi guys

It might be worth considering, if you spend £100,000 on your house it doesn't automatically increase in value by £100,000.
Very true. Where we live the house prices have gone mental and a 2 bed is 550k upwards.... so if we wanted to move we would have to move further away to a cheaper area. We are lucky to be in a popular seaside town.

did the Tibetan monk not say happiness through buying is only short lived!
Its extremely true, the novelty has usually worn off by the time my new toys reach the workshop! Thats part of my problem, ive spent a lot on kit, although it also means the range and scale of jobs i can take on has increased now i have a full workshop setup ( thats my exvuse and im sticking to it 😆🤣 )
 

Phil Pascoe

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I know someone who took a mortgage holiday and was surprised when he found his repayments had gone up. My wife works for an upmarket bank, she said the the same - a customer had complained when he'd taken a mortage holiday and his repayments had increased. The mortgage - hundreds of thousands. He had six of them.

There's no such thing as a free lunch, people (sometimes even very wealthy people) are often naive.
 

baldkev

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Yeah, when the whole mortgage holiday thing got offered during lickdown, i looked online and dismissed it within minutes. It amounted to paying interest upon interest and would have made our mortgage about 30 quid a month more. Luckily we didnt need to
 

CornishWoodworker

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If you are set on the build.
Remortgage now with existing lender, Usually they will waive exit fees if you say you are planning to get another lender who will give good rates or pay your existing exit fees.
Bank the money whilst your planning goes through.
Hopefully by then building materials will have dropped somewhat, as at present they are around 30 to 40% higher than 2019, with constructional timber being around 60% higher.
I have put my new workshop on hold as 4 x 2 has gone up from 1.99 per m to 3.49 per m , 18mm plywood is over £60 a sheet. Now looking at alternative building materials
 
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