Mortgage rates I mean. The base rate is still far behind the curve. Mortgage rates move with market expectations and those have skyrocketed over the last 6 months. Base rates haven't kept up with recent moves. I believe you could still get mortgages for under 2% at the start of the year. After this move in markets mortgages under 5% are unlikely.
Also, none of these stats ever adjust for affordability. People like to cite rates in the 70s but forget that people borrowed much less on their homes back then so the impact of rate moves wasn't so extreme. When adjusted for affordability this is without a doubt the largest move ever. You have to consider that first time buyers today frequently take out mortgages with just a 5% deposit, and often use all of their savings to do so. They have no buffer.
The sad thing about all of this is that I'm probably in a relatively good position compared to most buyers given I have some savings and didn't take out a 95% debt/equity mortgage.
I still take issue with the idea that a rise of 3% is unprecedented. I speak as someone who purchased my first property right before the ERM crisis and saw my mortgage payment almost double.
Also, for a long time, 100% and even 105% mortgages were common. I remember that when property prices nose-dived, we had people on TV being interviewed and complaining that they were "now in negative equity" as though that were something that had been done to them. These people started in negative equity by taking out a loan for more than the value of the property at the time of purchase.
With all that said, you're 100% correct that higher rates are going to cause real pain now, just as it did then. I don't accept that it's going to cause unprecedented pain, because to do so is to dismiss the very real problems that many many people had back then.
PS. Your strongest "unprecedented" argument would have been that the percentage increase in rates is bigger than ever before. 5% is 250% of 2%, whereas 15% is "only" 200% of 7.5%. But then it's easy to grow hugely when starting from a very small baseline.
kypro|3 years ago
Also, none of these stats ever adjust for affordability. People like to cite rates in the 70s but forget that people borrowed much less on their homes back then so the impact of rate moves wasn't so extreme. When adjusted for affordability this is without a doubt the largest move ever. You have to consider that first time buyers today frequently take out mortgages with just a 5% deposit, and often use all of their savings to do so. They have no buffer.
The sad thing about all of this is that I'm probably in a relatively good position compared to most buyers given I have some savings and didn't take out a 95% debt/equity mortgage.
sloucher|3 years ago
Also, for a long time, 100% and even 105% mortgages were common. I remember that when property prices nose-dived, we had people on TV being interviewed and complaining that they were "now in negative equity" as though that were something that had been done to them. These people started in negative equity by taking out a loan for more than the value of the property at the time of purchase.
With all that said, you're 100% correct that higher rates are going to cause real pain now, just as it did then. I don't accept that it's going to cause unprecedented pain, because to do so is to dismiss the very real problems that many many people had back then.
PS. Your strongest "unprecedented" argument would have been that the percentage increase in rates is bigger than ever before. 5% is 250% of 2%, whereas 15% is "only" 200% of 7.5%. But then it's easy to grow hugely when starting from a very small baseline.