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Old 08.07.2013, 20:19
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Mortgage rates are going up?!

I've been on the hunt for a house/apartment for the last 2 months. Last month I hired d-l.ch after the good things I read on EF about a member getting 1.8% on his 10 year mortgage bond. I met with the representative a month ago, did a calculation with my circumstances and we did a loan simulation for fixed rate 10 year at 2.00%. He said probably will get me less than that.

He has just called me with a offer of 2.5%?! WTF? After giving him my piece of mind I checked on UBS and other bank pages and I see now the rates are at 2.7 or 2.8% for 10 year loans?! I feel stupid as this really surpriesed me.

When did the interest rate go up? Why I haven't read anything about this?

Not that I complain that 2.5 is bad for a house loan, but I was expecting something in the 2.0 range.

So EF experts, what will this change in the mortage rates bring? Less buyers? Lower prices? Or the same old dreams of house price crash on the Arc Lemanic?
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Old 08.07.2013, 20:28
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Re: Mortgage rates are going up?!

For 30 years interest rates have been falling, anyone younger than 50, will not have experienced rising interest rates and the consequences.

Expect interest rates to start rising, possibly always rising for many years to come. The children ( sorry Phil ) who only know about free money may be in for a surprise, when assets bought with free money loose value, quite sharply
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Old 08.07.2013, 20:32
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Re: Mortgage rates are going up?!

[QUOTE=fatmanfilms;1922684]For 30 years interest rates have been falling, anyone younger than 50, will not have experienced rising interest rates and the consequences.

Clearly you have not experienced the UK mortgage trend over the last 30 years.
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Old 08.07.2013, 20:57
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Re: Mortgage rates are going up?!

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For 30 years interest rates have been falling, anyone younger than 50, will not have experienced rising interest rates and the consequences.

Clearly you have not experienced the UK mortgage trend over the last 30 years.
Yes I have, i paid over 15% and remember when Lloyd's had a 25 year deal al 9.9%, a huge bargain , I never paid less than 11.5 %
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Old 08.07.2013, 22:54
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Re: Mortgage rates are going up?!

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So EF experts, what will this change in the mortage rates bring? Less buyers? Lower prices? Or the same old dreams of house price crash on the Arc Lemanic?
As an EF expert my 2c.

At current interest rates it won`t push prices down. In fact considering how ridiculous low interest rates are it may cause a rush to get in as people see the curve upwards (has already happened in the US too).

IF interest rates rise a lot then prices would have to settle but currently (at least our bank) calculated our mortgage/ house affordability at 5%. So in theory any buyer who can afford a x chf priced house at current interest rates can also afford said house at 5% interest rates (according to the banks).

I am hoping against a house pricing crash (homeowner already) and don`t see one coming. I don`t know the French area of Switzerland though. I see a more soft landing, possible slight backwards prices at some stage then a stabilization.

Of course I bought an apartment in NJ in 2007 (to live in) and didn`t see that coming so what do I know

I am assuming you are looking for a house to live in not as an investment. If you could buy for the long term at these interest rates and you don`t pay more than the house is worth I think that`s a good deal.

I remember my parents paying I think around 18% interest in Oz in 1989 (guessing the year). If I could never be in that position I will be a happy camper.
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Old 08.07.2013, 23:24
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Re: Mortgage rates are going up?!

Swissquote. 2.19 percent for 10 years.
http://www.swissquote.ch/sqw-static/...geRates.action
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Old 08.07.2013, 23:29
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Re: Mortgage rates are going up?!

Depends a lot on your personal situation.
If you max-out the loan (80/20 rule), the bank will likely command a premium.
Same if construction scratches at the affordability-limit.
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Old 09.07.2013, 10:09
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Re: Mortgage rates are going up?!

Might be obvious, but just remember.. if you take out a long term, fixed rate mortgage you pretty much have to stay in the property until it expires(or maybe rent it out).

If you want to sell before the mortgage expires you will bay a very hefty early settlement fee (it decreases as time goes on) You should definitely ask for the early repayment schedule.
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Old 09.07.2013, 10:41
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Re: Mortgage rates are going up?!

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Might be obvious, but just remember.. if you take out a long term, fixed rate mortgage you pretty much have to stay in the property until it expires(or maybe rent it out).

If you want to sell before the mortgage expires you will bay a very hefty early settlement fee (it decreases as time goes on) You should definitely ask for the early repayment schedule.
If rates go up, your mortgage will be a valuable asset, which can be sold for a premium, it's only when rates go down that it gets expensive!
Eg if rates hit 7% and you have 5 years left @ 2.5%, the bank will not seek a penalty but will be laughing at you if you want to redeem your mortgage.
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Old 09.07.2013, 10:55
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Re: Mortgage rates are going up?!

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I am hoping against a house pricing crash (homeowner already) and don`t see one coming.
F.L.W (Famous Last Words)

Let me remind you about crashes, not many people see them coming!

Jokes aside, I am of the opinion that interest rates will start rising to something reasonable within the next 5 years or so. The gravey train has passed and the stimulus taps will be switched off sooner or later.

Another note on affordability is that if the bank works it out on 5% of the current market value, that 5% will jump to maybe 8% or more on the new reduced market value and you would technically be in negative equity (potentially margin called to bring the LTV back to at least 80%) so you'll be married to that mortgage and house for longer than you wish.

This rising interest rates issue has been described as a ticking timebomb and I really don't wanna be the last one holding it when it pops. Real estate prices in the US, china are at all time highs with anual growth rates reported in a recent bloomberg article of up to 18% in certain areas. I dread to think what will happen when there is no cheap money to pay for these rediculous valuations anymore.

Just my tuppence, call me Dr. Doom if you like
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Old 09.07.2013, 11:09
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Re: Mortgage rates are going up?!

I'd like to see the end of QE and negative real rates. Asset prices have been pushed to stupid values (real estate, shares, bonds, ...) and it would be nice if things returned to sane levels.
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Old 09.07.2013, 12:10
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Re: Mortgage rates are going up?!

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For 30 years interest rates have been falling, anyone younger than 50, will not have experienced rising interest rates and the consequences.
Anyone remember 16th September 1992? I got back to Heathrow from a business trip and there was absolute pandemonium in the bus to the car park. Interest rates had skyrocketed during the day as the UK withdrew from the ERM. I had a "cap and collar" mortgage and the cap kicked in (thank goodness). It was a rough few months, but it wasn't that long before the collar was actually preventing me from getting lower rates. But that bus ride is something I will never forget...
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Old 09.07.2013, 12:58
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Re: Mortgage rates are going up?!

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I'd like to see the end of QE and negative real rates. Asset prices have been pushed to stupid values (real estate, shares, bonds, ...) and it would be nice if things returned to sane levels.
Share prices are not high relative to earnings , those earnings have increased radically , prices will catch up when the little people enter the markets. Those. same people were gold bulls 2 years ago, been quiet most of this year
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Old 09.07.2013, 14:24
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Re: Mortgage rates are going up?!

I remember our mortgage interest reaching a staggering 19.5% in 78, just after we had over stretched to buy a new house (being very pregnant with number 2, OH living in digs, and no family to help- as the house we thought we had agreed to buy was withdrawn at last minute!) not for the faint hearted!
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Old 09.07.2013, 14:52
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Re: Mortgage rates are going up?!

The problem is people believe mortgage rates of 2-5% are normal, unfortunately that's far from the truth. With CH mortgages never being paid off , there will be pain again during my lifetime .
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Old 09.07.2013, 14:59
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Re: Mortgage rates are going up?!

because of what happened before, some things have happened:
- changes in tax to penalise quick sales
- the inclusion of clauses in the Grundbuch to limit interest to 10% on the property (as I had in SZ years ago)

So one is to limit the housing market causing the jump and the other to limit the damage should it happen.

edit: I'm saving 2+k a month by buying so I'd have to be +4k a month for the time I've been buying to "break even"
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Old 09.07.2013, 15:05
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Re: Mortgage rates are going up?!

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I've been on the hunt for a house/apartment for the last 2 months. Last month I hired d-l.ch after the good things I read on EF about a member getting 1.8% on his 10 year mortgage bond. I met with the representative a month ago, did a calculation with my circumstances and we did a loan simulation for fixed rate 10 year at 2.00%. He said probably will get me less than that.

He has just called me with a offer of 2.5%?! WTF? After giving him my piece of mind I checked on UBS and other bank pages and I see now the rates are at 2.7 or 2.8% for 10 year loans?! I feel stupid as this really surpriesed me.

When did the interest rate go up? Why I haven't read anything about this?

Not that I complain that 2.5 is bad for a house loan, but I was expecting something in the 2.0 range.

So EF experts, what will this change in the mortage rates bring? Less buyers? Lower prices? Or the same old dreams of house price crash on the Arc Lemanic?
The interest rates are not going up, there's an expectation for them to go up; that's the case I believe. I have 30% of my mortgage in LIBOR (yeah I like to take risks a bit) and I have an interest rate around 1% all the time for the last 3 years; whereas the mortgage rates for 10 years came down from 3.5% to 2% and then increased back to 2.5-2.7%.

In addition I expect a correction in the pricing of the housing in Cantons GE and VD; because of the overpriced real estate. Talking to the real estate agencies; the number of transactions dropped by 40% in 2013 compared to 2012. With the interest rates staying low I don't think we are talking about a crisis; but rather an "adjustment".
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Old 09.07.2013, 15:18
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Re: Mortgage rates are going up?!

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The problem is people believe mortgage rates of 2-5% are normal, unfortunately that's far from the truth. With CH mortgages never being paid off , there will be pain again during my lifetime .
Just because most people don't pay off their Swiss mortgage doesn't mean they don't have the cash or investments that could pay it off, or make a big dint in their mortgage, should that become a place where their money would be better off. I'm saving around 4k every month from what my place would rent for. I invested it somewhere else instead, extending my home and developing and selling another place.

I have no net debt, but haven't made any extra repayments on my Swiss mortgage. Why would I when my current interest rate is 0.85%? I went 100% Month Libor (not that I like taking risks, I just don't like paying more than I have to) and there is a 10% max. interest clause on my place too.

Also, my interest rate actualy went down 0.05% this month
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Old 09.07.2013, 15:56
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Re: Mortgage rates are going up?!

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Just because most people don't pay off their Swiss mortgage doesn't mean they don't have the cash or investments that could pay it off, or make a big dint in their mortgage, should that become a place where their money would be better off. I'm saving around 4k every month from what my place would rent for. I invested it somewhere else instead, extending my home and developing and selling another place.

I have no net debt, but haven't made any extra repayments on my Swiss mortgage. Why would I when my current interest rate is 0.85%? I went 100% Month Libor (not that I like taking risks, I just don't like paying more than I have to) and there is a 10% max. interest clause on my place too.

Also, my interest rate actualy went down 0.05% this month
Well your taking a counter party risk, if the bank holding your cash fails, you won't look so clever. Swiss law now means depositors will bail out the bank like Cyprus.
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Old 09.07.2013, 16:58
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Re: Mortgage rates are going up?!

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Share prices are not high relative to earnings , those earnings have increased radically , prices will catch up when the little people enter the markets. Those. same people were gold bulls 2 years ago, been quiet most of this year
I think they are around 30% high relative to historical earnings ratios.
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