Are adjustable rate mortgages the norm in the UK?

SydBarrett

Perhaps an odd subject for a presumably religious focused discussion board, but there are a fair number of Brits here...

I'm an American, but I sometimes listen to the podcast of the James O'Brien radio show. (A brit political radio show where people call in).

The past few months, a common topic has been people calling in discussing how hard they are getting hit financially because of a dramatic rise in interest rates on their mortgage. Here in the U.S, at least among everyone I know, a 15 or 30 year fixed rate mortgage is the norm.

Based on the callers, it seems like adjustable rate loans are the norm in Britain. Is fixed rate prohibitively difficult to get in the UK or am I just hearing selection bias because the fixed rate people aren't calling in because they have nothing to complain about? People in the US sometimes choose adjustable rates too, but its usually A.) a person with not so good credit taking what they can get, and they refinance to a fixed as soon as they qualify or B.) a gambler who feels certain that interest rates are gonna remain stable or possibly even drop.

Whats the deal?

GrreatTeacher

I'm in the US too, but I think the standard in the UK is 25 year mortgages, whether fixed or adjustable I don't know.

They also seem to have a more risky house buying process in the UK in which contracts aren't exchanged until a considerable amount of time and effort is expended and the seller can sell to someone else. For example, a home inspection is performed there before contracts are signed, whereas here they are often done post contract signing with a kick out clause for the buyer if the news is bad.

Interestingly, it seems like there is much handwringing about offering a lower amount post inspection if there are problems. Buyers seem to be afraid of insulting the seller.

Whereas here, a bad inspection usually involves further negotiations and the seller can refuse outright if he doesn't want to negotiate the price.

We bought our first house with an adjustable rate so we could qualify. There were limits with how much it could increase. We sold within five years and all our mortgages since have been fixed.

slimboyfat

I think it’s about 50/50 and is perceived as a consumer choice whether to go with a fixed or variable rate.

Variable rate has been popular since the 2008 crash because rates became so low and the variable rate has generally been a bit lower than the fixed rate available.

In the past couple of years fixed rates have become more popular again because rates have been rising, and there has been expectation they will rise further so people now wish to lock in a perceived lower fixed rate, if possible.

Fixed rates are generally not available for the whole term and need to renegotiated after 5 years or so.

This is the situation as far as I know.

James O’Brien is insufferable.

stan livedeath

All these whingers moaning about mortgage rates..i was paying 15% in the late 80s..

slimboyfat

Yeah but house prices were ten times lower in the 1980s.

15% of a much lower number is a lower amount than 6% of a much larger number.

stan livedeath

So were wages..and most things needed to survive with.

slimboyfat

House prices have increased much more than wages since the 1980s that’s why interest rates at 6% are a much bigger deal at current prices than even at the peak interest rates in the 1980s when prices were much lower. Even at that, interest rates of 15% were very short lived in the 1980s any case.

https://www.economicshelp.org/blog/5568/housing/uk-house-price-affordability/

House prices have increased by 2 and 1/2 times since the early 1990s when taking inflation into account, from around £100,000 to over £250,000 in today’s money.

SydBarrett

"Fixed rates are generally not available for the whole term and need to renegotiated after 5 years or so."

Wow. What a drag. Dealing with the uncertainty that my mortgage payment may increase significantly every time I approached 5 years would drive me crazy.

That's one of the immediate benefits IMO of a mortgage vs. renting. The cost of the roof over my head will be the same next month and 12 years from now...

stan livedeath

what caused all these problems of high mortgage repayments now was the easy availabilty of dirt cheap mortgages in recent years--lack of supply in a high demand market shot house prices up. All the yuppies had to "get on the ladder" But the bubble has burst and house prices are collapsing.

We have seen it all before.

I sold up in 1991 and took a loss--then rented for the next 8 years.

Bought again in 1999--same price as i sold for 8 years before--and sat in that house for 4 years as the price quadrupled !

sold and bought twice since then.

Sold my present house 2 years ago for 50% more than i paid for it 5 years before--but cancelled the sale...as it was so chaotic with properties being sold the day they hit the market.

For me the cloud has a silver lining--at least i am now getting reasonable interest on my savings--but i have seen interest rates of 10% on savings in years gone by.

Simon

i was paying 15% in the late 80s..

Same.

Government devaluation of currency due to irresponsible money printing has made housing unavailable for many young people.

People who took on large mortgages, believing cheap money and low rates would last forever, contribute to the issues and they need to experience the pain of house prices coming down and payments being higher for prices to return to sane levels.

Are adjustable rate mortgages the norm in the UK?

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