British pound hits record low against the dollar • Hacker News Board

Re: British pound hits record low against the dollar

#361

Post by kypro » Tue, Sep 27, 2022, 11:24 AM UTC

sloucher wrote: post #339

kypro wrote: post #252

So the bigger news here imo is what's happening in the bond market. It's now expected that the BoE will increase rates above 6% by the middle of next year. Most people in the UK are on fixed rate mortgages, most of which are 2-3 year fixes. Those who brought a home during the pandemic or fixed at a low rate typically fixed at around 1-2%. I personally fixed for 2 years at a rate of 1.7% just over a year a go when I m…

> I believe this is actually the fastest rise in rates ever. Why do you believe that? https://www.propertyinvestmentproject.co.uk/property-statist...

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.

Re: British pound hits record low against the dollar

#362

Post by kypro » Tue, Sep 27, 2022, 11:38 AM UTC

justinator wrote: post #341

pjc50 wrote: post #299

Earlier quoted context omitted.

That is literally how they are marketed, and the rate is fixed for N years.

"a changing fixed rate" sounds like an oxymoron to my ears.

Yes, this is why I've always been critical of fixes in the UK. They're not really fixes. You basically pay a significant premium and risk large early redemption charges for "long-term" fixes here in the UK (5-10 years), and even then they're not fixed for the lifetime of the mortgage so you still won't get the full protection from rate moves.

The best option you have in the UK is generally a 2 year fix because the fees and premiums are more reasonable. If I could take a US style mortgage I would have obviously. We just don't have that option here unfortunately.

It's hilarious though because you see so many articles written by "experts" here in the UK suggesting people take out fixes to protect themselves from rate moves, but a 2-5 year fix basically offers no meaningful protection. I'm not against people taking fixes, but I just wish they weren't sold in the way they are. They're barely safer than trackers and depending on your circumstances, you might actually be better with a tracker in many cases. As I said in another comment, people fixing for longer periods today may not realise they're locking themselves in to much higher rates for years and will be unable to switch to a better deal or sell their home without incurring large fees. The price you pay for that marginal safety really needs to be considered carefully.

Re: British pound hits record low against the dollar

#363

Post by kypro » Tue, Sep 27, 2022, 11:42 AM UTC

rdtwo wrote: post #353

kypro wrote: post #332

Earlier quoted context omitted.

I'll speak with my lender this week. I don't think I can refinance for another few months without fees and at this point there's a significant risk in taking out a longer-term fix anyway because this move could be temporary and a fix would be locking in the higher rate. There's really no good options. The right answer would have been to try to find a 10 year fix when I took out the mortgage but as I've explained in a…

If you lock in a high rate you can always refi down later

You must live in the US lol. No, you can't do this in the UK without incurring fees. Once you take out a fix you basically lock yourself in at that rate. You cannot sell or refi without fees, which are often in excess of 5%. If rates move down a lot perhaps that would make sense in some cases, but generally it doesn't.

Re: British pound hits record low against the dollar

#364

Post by gpderetta » Tue, Sep 27, 2022, 12:33 PM UTC

mFixman wrote: post #291

kypro wrote: post #252

So the bigger news here imo is what's happening in the bond market. It's now expected that the BoE will increase rates above 6% by the middle of next year. Most people in the UK are on fixed rate mortgages, most of which are 2-3 year fixes. Those who brought a home during the pandemic or fixed at a low rate typically fixed at around 1-2%. I personally fixed for 2 years at a rate of 1.7% just over a year a go when I m…

I'd expect rents to raise at least as much as mortgages, so until the next 2008-style house price crash nobody who bought a house during the pandemic is losing money.

I kind of expect that, instead of the prices crashing in nominal terms, they will be inflated away by a few years of high inflation.

Re: British pound hits record low against the dollar

#365

Post by stuaxo » Tue, Sep 27, 2022, 12:37 PM UTC

RickJWagner wrote: post #351

kodah wrote: post #342

Earlier quoted context omitted.

I'm pretty sure this would be called an Adjustable Rate Mortgage (ARM) in the US. You aren't stupid; ARMs are sold heavily during "good times" and to be frank, to my knowledge, most of your country uses what we call ARMs without issue. Having lived through, and lost all my shit, in the last financial crisis as a young man I'd also like to say something more directly to you. You did not let your family down. You thoug…

"The governments of the world will have to step in." No, they won't. It's irresponsible to think the government is going to bail you out of some predicament. It's not stupid or foolish to be caught in some financial trap, but it should not happen twice and it should not happen to those you care about in latter years. Financial literacy is a precious skill, and one that we should all work on constantly. I don't mean f…

The UK government has a history of propping up the housing market, so given that context it makes sense.

Re: British pound hits record low against the dollar

#366

Post by gpderetta » Tue, Sep 27, 2022, 12:37 PM UTC

kypro wrote: post #332

theGnuMe wrote: post #271

Earlier quoted context omitted.

The UK has longer fixed rate mortgages right? Can you refinance now?

I'll speak with my lender this week. I don't think I can refinance for another few months without fees and at this point there's a significant risk in taking out a longer-term fix anyway because this move could be temporary and a fix would be locking in the higher rate. There's really no good options. The right answer would have been to try to find a 10 year fix when I took out the mortgage but as I've explained in a…

I took the risk last year of taking a 5 year mortgage at 1.7% because the upside of the rates going further down was nothing compared to the risk of going up and the premium compared to 2 years was very small. I strongly suspected that the end of the good times was near, but this surpassed by expectations. It is a significant mortgate and I'm currently not excluding that rates might be in the 10% in 4 years. It is not going to be fun.

Re: British pound hits record low against the dollar

#367

Post by theGnuMe » Tue, Sep 27, 2022, 2:36 PM UTC

kypro wrote: post #363

rdtwo wrote: post #353

Earlier quoted context omitted.

If you lock in a high rate you can always refi down later

You must live in the US lol. No, you can't do this in the UK without incurring fees. Once you take out a fix you basically lock yourself in at that rate. You cannot sell or refi without fees, which are often in excess of 5%. If rates move down a lot perhaps that would make sense in some cases, but generally it doesn't.

The US has refi fees too. Whether it is worth it depends on how much longer you will stay in the house. It can be worth it if it it reduces your payment to something manageable with the option of only increasing the length of the mortgage by a little bit, i.e. borrowing the money for longer. You pay more in interest over the lifetime of the loan unless you can refi again at a lower rate.

I suspect if you calculate the expected average interest rate over the length of your ownership and the fixes (2-3, 5, 10) you'll get a similar number even with higher volatility in the specific rates. But you'd have to run the numbers/math.

This of course does nothing for the many 12-24 months of higher payments even if it evens out over time.

Re: British pound hits record low against the dollar

#368

Post by Workaccount2 » Tue, Sep 27, 2022, 2:45 PM UTC

pbak wrote: post #261

Workaccount2 wrote: post #242

Earlier quoted context omitted.

Even if your claim is true, it still would have been the smarter long term move to keep the war going. The prospect of a western aligned russian regime is so valuable it's worth fighting (and funding) the war for.

Well, yes, if you are blind to the problem of said war definitively and massively causing the Russia people to be irretrievably unaligned against the West for generations. But, seems a lot of western leadership is blind.

When the curtain falls we'll see how desperate they are to cut off their nose to spite their face. The gains for joining the west would be enormous, while the alternative is staying a destitute 2nd world country. I don't believe russians are that stupid.

Re: British pound hits record low against the dollar

#369

Post by pjc50 » Tue, Sep 27, 2022, 2:55 PM UTC

kypro wrote: post #362

justinator wrote: post #341

Earlier quoted context omitted.

"a changing fixed rate" sounds like an oxymoron to my ears.

Yes, this is why I've always been critical of fixes in the UK. They're not really fixes. You basically pay a significant premium and risk large early redemption charges for "long-term" fixes here in the UK (5-10 years), and even then they're not fixed for the lifetime of the mortgage so you still won't get the full protection from rate moves. The best option you have in the UK is generally a 2 year fix because the fe…

Conversely, the US 30-year-fixed mortgages are fixed at a much higher spread vs the central bank rate. You pay a premium for the bank to insure you against higher rates. It's effectively option pricing, and neither side has a free lunch.

I was very happy to get a (as rates tend towards zero, house prices would tend towards infinity)

Re: British pound hits record low against the dollar

#370

Post by theGnuMe » Tue, Sep 27, 2022, 3:02 PM UTC

rr808 wrote: post #5

Crazy times it wasn't long ago that a pound bought over $2. The interesting thing this week is that the most fragile and indebted country that the EU has bailed out for 30 years straight (Italy) has elected a govt that doesn't like the EU. Good times ahead.

Piketty has studied this stuff extensively and thinks that Europe needs to move towards a USA style Federalist system or it is otherwise doomed.

I'm pretty sure we are in a phase where corporations and authoritarians have coopted the political engagement of lower socioeconomic classes thru identity and economic issues vs the traditional labor base of unions which is a threat to personal safety and democracy world wide.