How will Brexit affect house mortgages?
"Only you can decide whether it's wise or not given your own personal circumstances. Brexit is certainly a big risk, and noone can really know what will happen yet. The specific worries you mention are certainly valid. Additionally you might find it hard to keep your job or get a new one if the economy turns bad, and in an extreme ""no deal"" scenario you might find yourself forced to leave - though I think that's very unlikely. House prices could also collapse leaving you in ""negative equity"". If you're planning on staying in the same location in the UK for a long time, a house tends to be a worthwhile investment, particularly as you always need somewhere to live, so owning it is a ""hedge"" against prices rising. Even if prices do fall, you do still have somewhere to live. If you're planning on going back to your home country at some point, that reduces the value of owning a house. If you want to reduce your risk, consider getting a mortgage with a long-term fixed rate. There are some available for 10 years, which I'd hope would be enough to get us over most of the Brexit volatility." Nobody can predict the affects of Brexit but it is wise to consider them. We saw the pound weaken after the vote to leave and it is possible the pound will weaken further after Brexit and this devaluation could be quite dramatic. If that happens it is likely to increase inflation, UK inflation has gone from under 1% around the time of the referendum to 3% today and it could well go higher. https://www.rateinflation.com/inflation-rate/uk-historical-inflation-rate If inflation continues to increase, the Bank of England is likely to put up interest rates, as it has historically done this to hedge against inflation.  We have been living in a world of artificially low interest rates since the global crash of 2008 as the BoE has tried to stimulate recovery with lower rates.  The rates cannot continue at this level if inflation starts to rise. http://www.thisismoney.co.uk/money/news/article-2387744/Base-rate-vs-inflation-chart-How-tell-things-really-got-better.html That in turn will put up mortgage rates.  So for example if you have a £100k mortgage at 3.92% (currently this is a reasonable rate to have) your repayments will be £523 a month.  If your mortgage rate goes up to say 7% then your repayments are £707 a month, if it goes up to 10% then it's £909 a month and so on. There is a mortgage calculator you can use to try playing with different amounts here: https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator My advice would therefore be try to get as small a mortgage as you can and make sure you can afford it quite comfortably, in case rates go up and you need to find a few hundred pounds a month extra. There are other risks from Brexit as well, house prices could fall as people decide not to buy properties due to excessive interest rates! Overall nobody knows what will happen but it is good to be planning ahead for all eventualities. ** I am not a financial advisor, this advice is given in good faith but with no financial qualification.
"So you're making $150,000 per year and you have $245,000 in debts. You're in your late 30s and have $41,000, or less than 1/3 of a year's pay, put away for retirement. That's a bad situation, but not disastrous. Lots of people have recovered from far worse. But like the old joke goes, when you realize that you're deep in a hole, STOP DIGGING. The worst thing you could do right now is liquidate the few assets you have and go deeper into debt. I don't know where you live or what the housing market is there. But the easy answer is: find a cheaper house.  I'm not sure what you mean about ""affect the resale value"". Yes, if you buy a cheaper house it will have a lower resale value. So what? The days when a house was an investment that would skyrocket in value are over. (And even in those days, it didn't help most people. So when you move, you get a big profit on the sale of your house. But the house you're moving to probably went up by a similar percentage, so you really didn't gain anything.) Even if your house did increase in value, unless you sell it, that doesn't help you make the mortgage payments. It's a paper profit. Get yourself out of debt. Step 1 is to stop taking on new debts. And if at all possible, you should be putting bare minimum 6% into your retirement plan. I don't know where you work, but most employers match some percentage of the first 6% you put in. If you don't take advantage of that, you're giving up free money." "That ain't nothing.  It's really easy to get ""whipped up"" into a sense of entitlement, and forget to be grateful for what you do have.  If this house doesn't exist, what would his costs of housing be elsewhere?  Realistically.  Would landlords rent to him? Would other bankers lend him money to buy a house? Would those costs really be any better?  What about the intangible benefits like not having any landlord hassles or having a good relationship with the neighbors?  It's entirely possible he has a sweet deal here, and just doesn't make enough money.  If your credit rating is poor, your housing options really suck.  Banks won't lend you money for a house unless you have a huge ton of upfront cash.  Most landlords won't rent to you at all, because they are going to automated scoring systems to avoid accusations of racism.  In this day and age, there are lots of ways to make money with a property you own.  In fact, I believe very firmly in Robert Allen's doctrine: Never sell.  That way you avoid the tens of thousands of dollars of overhead costs you bear with every sale. That's pure profit gone up in smoke.  Keep the property forever, keep it working for you.  If he doesn't know how, learn.  To ""get bootstrapped"" he can put it up on AirBnB or other services. Or do ""housemate shares"".  When your house is not show-condition, just be very honest and relatable about the condition.  Don't oversell it, tell them exactly what they're going to get.  People like honesty in the social sharing economy.  And here's the important part: Don't booze away the new income, invest it back into the property to make it a better money-maker - better at AirBnB, better at housemate shares, better as a month-to-month renter. So it's too big - Is there a way to subdivide the unit to make it a better renter or AirBnB?  Can he carve out an ""in-law unit"" that would be a good size for him alone? If he can keep turning the money back into the property like that, he could do alright.  This is what the new sharing economy is all about.  Of course, sister might show up with her hand out, wanting half the revenue since it's half her house.  Tell her hell no, this pays the mortgage and you don't!  She deserves nothing, yet is getting half the equity from those mortgage payments, and that's enough, doggone it!  And if she wants to go to court, get a judge to tell her that.  Not that he's going to sell it, but it's a huge deal. He needs to know how much of his payments on the house are turning into real equity that belongs to him.   ""Owning it on paper"" doesn't mean you own it.  There's a mortgage on it, which means you don't own all of it.  The amount you own is the value of the house minus the mortgage owed.   This is called your equity.   Of course a sale also MINUS the costs of bringing the house up to mandatory code requirements,  MINUS the cost of cosmetically making the house presentable.   But when you actually sell, there's also the 6% Realtors' commission and other closing costs.  This is where the mortgage is more than the house is worth.  This is a dangerous situation.  If you keep the house and keep paying the mortgage all right, that is stable, and can be cheaper than the intense disruption and credit-rating shock of a foreclosure or short sale.  If sister is half owner, she'll get a credit burn also. That may be why she doesn't want to sell.  And that is leverage he has over her.  I imagine a ""Winter's bone"" (great movie) situation where the family is hanging on by a thread and hasn't told the bank the parents died.  That could get very complex especially if the brother/sister are not creditworthy, because that means the bank would simply call the loan and force a sale.   The upside is this won't result in a credit-rating burn or bankruptcy for the children, because they are not owners of the house and children do not inherit parents' debt." Lets do the math, using your numbers. We start off with $100K, a desire to buy a house and invest, and 30 years to do it.  Scenario #1 We buy a house for $100K mortgage at 5% interest over 30 years. Monthly payment ends up being $536.82/month. We then take the $100K we still have and invest it in stocks, earning an average of 9% annually and paying 15% taxes.  Scenario #2 We buy a house for our $100K cash, and then, every month, we invest the $536.82 we would have paid for the mortgage. Again, investments make 9% annually long term, and we pay 15% taxes.  How would it look in 30 years?  Scenario #1 Results: 30 years later we would have a paid off house and $912,895 in investments Scenario #2 Results: 30 years later we would have a paid off house and $712,745 in investments Conclusion: NOT paying off your mortgage early results in an additional $200,120 in networth after 30 years. That's 28% more. Therefore, not paying off your mortgage is the superior scenario.  Caveats/Notes/Things to consider Play with the numbers yourself: Whether it is better to buy or to rent depends on several factors.  Most of them are fairly uncertain, but calculations can be made to see how they play out in the long-term for insight into their impact. The results below are made on the basis that both the buyer and the tenant spend the same amount, in this case $1,480.03 per month.  The buyer pays his mortgage and when it's all paid for he switches to investing $1,480.03 per month at the fund deposit rate.  Meanwhile the tenant pays rent and invests whatever remains from $1,480.03 per month at the fund deposit rate. The amount $1,480.03 is set by the mortgage case and used by buyer and tenant for equal comparison. Taking some hopefully not too unrealistic rate estimates, these are the calculation inputs:- (All percentages are expressed as effective annual rates) Plot of buyer's and tenant's accumulated assets over time The simulation extends for twice the term of the mortgage.  If the investment fund can return 7% and a $900 rental is comparable to a $300,000 house then there isn't much of a compelling case either way. Lowering the expected fund return shows a different picture.  Sticking with the 5.0% fund return, lowering the rent brings the tenant's asset accumulation closer to the buyer's.  If there is a particular set of inputs you would like to see plotted I'm sure I could add another example to this post. There is also an interactive version of the calculation which you can find via this page.  However, unlike the examples above which include a deposit and grant, it just explores the simple case of a 100% mortgage. The aim is just to see how rate variations affect asset value over time. Article (behind paywall):  &gt; There has been a glut of gloomy Brexit predictions about the UK’s financial services industry. Consultancy Oliver Wyman has said up to 75,000 jobs could leave Britain. EY, another consulting firm, thinks as many as 83,000 roles could move. The London Stock Exchange Group has plumped for 100,000.  &gt; Much of the analysis is based on worst-case “hard Brexit” scenarios, involving only a very loose association or no deal at all between the UK and the EU. The banking industry would be most at risk, experts agree, but there would also be some impact on insurance. Analysts have been more optimistic, however, about the asset management industry.  &gt; For anyone paying attention over the summer break, though, this last piece of received wisdom has been thrown into doubt.  &gt; In mid-July, Esma, the EU securities regulator, published an opinion paper, suggesting national regulators should take a tougher line on policing the asset management sector after Brexit.  &gt; In particular, it zeroed in on “delegation” rules that allow a fund management company registered in one country to outsource its asset management to another place, either within the EU or outside it.  &gt; This sounds like pretty arcane stuff. But it is crucial architecture for the European and global asset management industry. Philip Warland, a former Fidelity executive who is now a consultant, reckons about 90 per cent of EU assets under management make use of delegation rules. Most European funds are registered in Dublin or Luxembourg, but the actual fund management takes place globally, with the largest chunk delegated to London.  &gt; Anecdotal evidence suggests France is very keen to win more of this business. And when Esma published its paper, the UK industry smelled a rat. Not only is the regulator Paris-based, but the “convergence” agenda, under which the opinion paper was published, is the responsibility of Sophie Vuarlot-Dignac, a seasoned French regulator.  &gt; The wording in the delegation section of the document has alarmed some fund managers. “Delegation to non-EU entities could make oversight and supervision of the delegated functions more difficult . . . National competent authorities should therefore give special consideration to such delegation arrangements and be satisfied that their implementation is justified based on objective reasons despite the additional risks which may arise from them.”  &gt; In plain language, that could mean at the very least that more risk management functions need to be put on the ground where a fund is registered, or at most that no fund management functions can be delegated outside the EU.  &gt; Taken to its logical extreme, this would not only be very disruptive for the asset management industry and the current hubs in the UK, the US and Asia where most of the best fund managers are based, but there would in likelihood be a second-order magnetic effect on the investment banks, whose traders and salespeople would need to follow their fund manager clients to parts of mainland Europe. If that happened, those apparently doom-mongering post-Brexit job-move predictions might start to look conservative.  &gt; According to Efama, the European fund management association, total assets under management in Europe last year were €22.8tn, equivalent to almost a third of the global total. More than 4,000 asset management groups are registered in Europe directly employing 100,000 people, nearly 40 per cent of them in the UK. Across the EU, close to half a million people are in jobs that service the asset management industry.  &gt; All of the above is a worst-case interpretation of a non-binding document. Eyes are now turning to the European Commission, which is due next January to review the AIFMD, a directive that covers “alternative” asset managers such as hedge funds.  &gt; It may also review the directive on Ucits — the rules on mutual funds based in the EU. Even if the commission did decide the delegation rules should be tightened, any changes would need to go through the full EU process at the European Parliament and European Council. Fund experts believe Ireland and Luxembourg, which have prospered as global administration hubs for the industry thanks to the current rules, would reject calls for change, no matter how hard France pushes.  &gt; Such optimism may prove justified, but in the meantime another Brexit risk for London has appeared on the horizon. I've recently started studying a bit of finance (I am a software developer) and have a question regarding the Bank of England (BoE) announcement.    The BoE agreed in maintaining its current interest rate (0.25% I think), although it announced it would be buying GILT (Government Bonds), wouldn't the purchase of bonds by a central bank make the interest rate move down?   Isn't the goal of a central bank purchasing bonds, to move the interest rate? Is there a difference between adding liquidity to the market (increasing money supply) and changing the interest rate? Can these two things be separated?  Thank you :) No, it will have no negative impact on getting a mortgage. You are building up a history with regular payments and are not carrying a balance on the card each month. Your ability to get a mortgage will ultimately be based on other things. Money Saving Expert has a good guide on what will affect your credit score. A further discussion on the topic that backs up that what a mortgage company is interested in is affordability and a stable history. They really don't care about utilisation ratios.  (Though might be spooked by almost maxed out cards - sign of poor spending control, or large unused limits - too easy to go into bad debt.) Fixed-rate mortgage is supposed to give you security. You are not going to get the best possible rate, but it is safe and predictable. Your argument is the same as complaining that you are paying for home insurance and your home hasn't burnt down.  Switching to a variable rate mortgage right now seems a bad idea, because there is some expectations that rates are going up. If you can overpay, that is probably what you should do unless you can invest with better return after tax than your mortgage interest. It doesn't just shorten the time of your mortgage; every time you overpay £500 your mortgage principal is down by £500, and you pay interest on £500 less.  And if the interest rate goes up over the next five years as you seem to hope, that just means you will pay higher interest when your mortgage needs renewing.  You can't hope to always make the optimal decision. You made a decision with very low risk. As with any decision, you don't know what's in the future; a decision that is low risk if the risk could lead to fatal results is not unwise. You could have picked a variable rate mortgage and could be paying twice as much interest today.