Student Loan Interest Rates - Good news ex students!

[Sheaf]

Just a heads up for those of us with student loans...

In case you don't know, the interest rate for the student loan is changed annually (on 1st Sept each yr) and is based on the RPI (Retail Price Index) percentage change. What they do is use the figure for the % change in the RPI for the March 6 months before. So, the RPI for this month will dictate the interest rate.

Last March the RPI change was 3.8%, so the rate was set in Sept.

The history of the RPI can be found here:
http://www.statistics.gov.uk/StatBase/t ... re=N&All=Y

However... it seems that this isn't all. The interest rate has just dropped to 1.5%. I didn't realise until today that they only take the RPI figure if it's lower than the Bank of England base rate + 1%. Otherwise they'll take that. So, due to the recent base rate falls, it's been dropped, and dropped, and dropped.

More info here: http://www.slc.co.uk/statistics/facts%2 ... index.html

But, it gets even better... like I say, it's the lower of the two, RPI % or base rate +1%.
As you can see, the RPI % is presently.... 0% for Feb, it's predicted that this month it'll actually go negative. This, I'm sure is a bad thing in a lot of ways.... but it means that we'll be paying no interest whatsoever on student loans.
I'm guessing that they've put somewhere in the small print that in the even of it going negative they wont actually pay us, but you never know, lol.

It makes zero difference at the mo, as I'm sure you all appreciate, payments are based on earnings, but I'm quite happy that as a result my loan will be dropping by around £450 more in the next yr than it did in the last yr due to not having to pay interest. It goes a little way to make up for the fact that I'm stuck on a 5.83% 5yr fixed rate mortage while loads of people are paying 3% on variable at the mo.....

Now, fingers crossed the MD doesn't tell us due to deflation we're all getting a pay cut rather than rise next month!

[mg-richard]

how much are you paying off your loan each month then, im gonna owe a fortune

[tompinney]

Given my experience of the SLC, I reckon they'll get confused and won't know what the hell is going on, most of the time I get the feeling they don't know their a$$ from their elbow!

SLC took a bit fat chunk out of my annual bonus this month too doubled my repayment amount for this month and took over 10% of my bonus. Hopefully no interest will make up for it this month.

[Sheaf]

You pay 9% of all earnings over 15k.

So, it totally depends on how much you earn. 15k or less and you pay nowt, on 20k you'd pay £37.50 a month, 25k is £75 a month etc etc.

I tend to do overtime atm (don't actually think I've had a std paypacket this yr) and I'm usually anywhere between 100 and 160. You don't notice it tbh, I've never not had it deducted.... but I do look forward to the day it's gone and that an extra ton or so in my pocket every month. So, every month the rate is crazy low is another month where I'm getting a lot closer to it all going.

Incidentally, it's still better to save money in a savings account, or even better pay it off a mortgage than pay it off student loans if you have spare cash, despite these rate drops.

They shouldn't take over 10% of your bonus... should be 9% of the bonus (assuming your wage is over 15k basic), rounded down to the nearest pound IIRC. Not that 1% means much but it's possibly down to your payroll cocking it up maybe. I've been paid all sorts of amounts, with overtime and bonus etc in the last yr and it's always worked out right.

[Jonny 5]

Interest rates +1% means we will never see it go below 1% was my impression? Maybe it woudl go negative. Lowest year was my first year where interest was 1.3%

Good job you didnt rush to pay it all off hey Sheaf God knows how much I owe, Im yet to pay anything and i graduated 5 years ago.

[mg-richard]

friend of mine puts his student loan in a high interest account, the interest off that makes him a bit of money and at the end he can pay it off with the savings, least i think thats what hes doing. lucky bugger i need all the money i can get

[stefaclese]

lucky bugger i need all the money i can get

Lol, same here. Roll on 20th April!

In theory, you could work abroad and tell the SLC you're earning less than £15,000 per year. Even if they knew you were earning more, theres not a great deal they could do about it...

[matt10328]

remember the drop in rate only affects people who took loans out after september 1998. So if you started uni before in sept 1997 or before you will be paying 3.8% interest now and it will be fixed until 31st Aug 2009.

[Sheaf]

Interest rates +1% means we will never see it go below 1% was my impression? Maybe it woudl go negative. Lowest year was my first year where interest was 1.3%

Good job you didnt rush to pay it all off hey Sheaf God knows how much I owe, Im yet to pay anything and i graduated 5 years ago.

How'd you manage that then? Mine's always been taken automatically since I started proper employment.

Yeah, I know I was crazy thinking I'd pay it off early, lol. I just didn't like the idea of it.
Of course it always works out more beneficial not to pay it and to save the money... stick it in a high interest account if you have the money, but trying to find a high interest account is quite a challenge atm, I've got one ISA at 0.5% and another at 1.75%. 6 months ago they were at 6.25 and 4.75% respectively.
Or, as I said, pay off the mortgage, which is my intention...

mg-richard, your friend is best off not paying it off, even at the end of his degree (other than the compulsory amount). Just keep the money he's saved in savings and continue gaining more interest than he's charged. Then he'll eventually get a mortagage and can use the money as a deposit and save himself thousands as the mortage interest rate will be significantly higher than the SL one.

The rates should go below 1%, the SLC website seems to say they take whatever rate is lower, so if the RPI change is 0% or similar and the base rate stays at 0.5% then come September it'll drop to to 0%. Unless they have a lowest amount cap, but I cant see any reference to it.

Yeah, I hadn't considered the older people although I assumed they'd not really have much left? A workmate is 33 and fell into the old scheme where is wasn't means tested and paid back over a fixed term, but they were handing out grants at that point too, so he only walked about with about 3k, which soon got paid off.

[Punx0r]

Good news

If you're paying ~£150 month then you must be on the equivilent of £50k? At least going by the rates you wrote above!

[Beaker]

SLC took a bit fat chunk out of my annual bonus this month too doubled my repayment amount for this month and took over 10% of my bonus. Hopefully no interest will make up for it this month.

Tom,

If you have ended up paying extra you can claim it back from them at the end of the year.

[Beaker]

Good news

If you're paying ~£150 month then you must be on the equivilent of £50k? At least going by the rates you wrote above!

I take it maths wasn't your strong point at school

[618ireland]

Bummer about the fixed rate mortgage Alex, my sister is on one too, I told her not to go fixed but she thought it a good idea, costing her over €350 (probably more actually) a month now more than a variable I would have liked to see the banks being more inclined to let people off the fixed rate mortgages given that the recent drop in rates were brought about largely by a worldwide economic downturn that was apparently not expected. I know it isn't in their best interests to do so but with governments propping up banks around the world it would have been a nice gesture.

About student loans, they aren't a huge thing over here as college is "free" apart from a registration fee every year for the last couple of decades. All going to change now though, government has ear maked 3rd level fees as a money spinner in the upcoming budget.

[shen]

I pay £53 a month and have done for ages...scumbags started taking off me before i even earned £10k in a year
... crappy job as a clerk for a while when I left uni

[Sheaf]

Good news

If you're paying ~£150 month then you must be on the equivilent of £50k? At least going by the rates you wrote above!

I wish! £150 a month = £1800 a year, which would work out as 9% of 20k, so a total wage of 35k.
I earn less than that, but like I say, I'm doing overtime atm, this month I think I did 28.5 hrs over, hence the large payments.

As for the fixed rate, it's a bit gutting as it does cost a lot more, but at the time the whole economy was unstable, the rates were actually increasing every week and we figured we'd rather know what we had to pay than take a risk.
As it turned out we lost out, but the payments are such that we can afford it fine, in fact I'm overpaying as much as I can and there's nowt I can do about the rate so no point in worrying about it... they'd never let us out of the fixed rate, they'd loose loads. They wont even let people with new mortgages get a variable atm, it's fixed (at over 5%) or nothing last I looked.

[618ireland]

They wont even let people with new mortgages get a variable atm, it's fixed (at over 5%) or nothing last I looked.

, bastads, the banks here are trying to flog the variable rate ones but apparently they want over 10% deposit. No one buying any thing over here anyway at the moment, unless the price is looney cheap.

[Punx0r]

I didn't try and work it out, I just extrapolated Alex's figures... Incidentally, I just scraped a B in GCSE maths - it was the only subject I revised for. Definitely not a strong point of mine

I've heard worse cases here: banks wanting 30% deposits to give anything like a decent rate.

A fixed rate is a sensible option IMO. You may loose out a bit now, but it's safe and you can budget properly for the repayments.

Incidentally, the cheapest personal loan available at the moment is 8%. Considering the base rated of 0.5% and the banks claim that they want to get people borrowing again, it's taking the mickey a bit.

[shen]

I didn't try and work it out, I just extrapolated Alex's figures... Incidentally, I just scraped a B in GCSE maths - it was the only subject I revised for. Definitely not a strong point of mine

I've heard worse cases here: banks wanting 30% deposits to give anything like a decent rate.

I don't see that as a bad thing tbh
It was people with paltry deposits who had not proved any ability to save getting ridiculous mortgages which enabled the banks to create the mess we're in.

The higher the deposits the banks want the more stable things will be.
I believe this is the old fashioned values that keep being mentioned were slung out the window.

I do think it's disgusting however that to people who have shown stability and their capability to make payments that the banks are not getting on the interest cuts which the government are trying to pass along.

[rovex]

I must be older than you lot, i dont have to pay anything unless i earn over £26k gross, which i currently dont..

[Sheaf]

I was chatting about this with one of the younger guys at work who left uni in London last summer... with around 35k debt.

We came to the conclusion the interest rates make absolutely no difference to him as it'll never be paid off. Even at 0% and several payrises down the line it'd take over 20yrs for him to pay it off, so he's just accepting it as a percentage pay cut for ever.

As for mortgages, I have to admit it's a little annoying that the government has bent over backwards to stop people who don't consider their finances properly from loosing their homes by dropping the interest rates while people who have and are on long term fixed rates are left paying more... but hey ho, if it had all swung the other way and rates had gone sky high like in the 80s then I'd be laughing. It's all a bit of a gamble really.
The funny thing is, the people I know who are gaining from it all are just banking the extra cash they save, or spending it. Personally if I was blessed with low low rates I'd be overpaying everything I save and getting the capital down as much as I could before the rates go back up. You can chop massive amounts of years off your mortgage now by overpaying it, and while the house prices are low the cost of upsizing is less than ever too...

[618ireland]

What happened in the 80's is really really unlikely to happen again, the rates 12 months ago were at a high bigstyle.

[Beaker]

Personally if I was blessed with low low rates I'd be overpaying everything I save and getting the capital down as much as I could before the rates go back up. You can chop massive amounts of years off your mortgage now by overpaying it, and while the house prices are low the cost of upsizing is less than ever too...

Actually all the mortgage products I have seen in the last year or so (if they offer overpayment at all) restrict on how much you are allowed to overpay in one year to some silly low amount with out being penalised. Forcing people who wish to overpay by a considerable amount onto SVR.

House prices are actually not that low at present - granted they have gone down. For the market to self correct itself though they need to go down a fair amount more.

[Sheaf]

I'm probably one of the only people to actually disagree that the house prices are too high, in fact I don't honestly think they were as ludicrously high as people made out before they started falling.

I mean, we managed to buy our place, a 2 bed flat on the nice road in town, 3 yrs old, lift, etc etc last yr before it dropped... and when the interest rates were higher... and tbh I could actually afford it by myself.

We don't exactly earn a fortune (less than the UK average for two people), and it's our first place!

In fact one of my workmates has one income for him and his Mrs (she's a student), he earns less than me, has a 2 yr old flat (from new, bought for a fair bit more than it's worth now), with a higher interest rate... and he still manages to overpay the mortgage, run a car AND go on holiday every year.

I think a lot of the fact that people cant afford houses now isn't due to the house prices directly but more to do with the fact that these days everyone's in god knows how much debt for cars, holidays and other stuff that a load of their income is spent elsewhere. Plus the fact that more people are wanting to buy on their own, which has never been easy or affordable.
It's pretty much down to poor money management really IMO.

You can now buy a 3 bed house for £150k, which seems crazily low to me. The only problem is raising the higher deposits demanded now.


As for overpayments.. Nationwide let you do £500 a month My mate has a mortgage with HSBC and they only allow 20%, which he was gutted about as he wants to pay more....

[Bikernut]

I The funny thing is, the people I know who are gaining from it all are just banking the extra cash they save, or spending it. ...

True . My interest rate is 0.34% above the base rate with a Nationwide tracker.So as you can imagine my payments have plummeted this last 6 months,allowing me to pay off credit card debts etc.etc.
I bought my first house back in 89 and then the interest rates soared to 13%.This was incredibly hard to maintain the payments,even though it was just a 15k mortgage.
How things have changed.
Even though house prices are high,interest rates...even your fixed rate Sheaf are incredibly low compared to 10/20 years ago.

[Punx0r]

You can now buy a 3 bed house for £150k, which seems crazily low to me.

For an average punter earning £18k (or less), single, how does he afford the house, even if the bank wasn't asking for a big deposit?

6 months ago the average house cost around 10 times average earnings. It was obviously not sustainable.

It's easy to forget about the hoards of everyday people who work in retail, basic industrial work, cleaning etc who earn ~£15k.

[mg-richard]

min wage job 12k a year isnt it

people deserve to be able to buy a house where they want

wages havent got up with house prices= unfair
as for average wage that just rubbish, most common wage more realistic

[Jonny 5]

I'm probably one of the only people to actually disagree that the house prices are too high, in fact I don't honestly think they were as ludicrously high as people made out before they started falling.

I mean, we managed to buy our place, a 2 bed flat on the nice road in town, 3 yrs old, lift, etc etc last yr before it dropped... and when the interest rates were higher... and tbh I could actually afford it by myself. .

What about when you have kids?

You are refering to house prices yet you have bought a flat. Why do you not own a house Sheaf if they are cheap?

If you're the only one thinking that Im gonna declare that that is because on this occasion you are totally wrong. I wont even entertain the notion that at the peak they were reasonably priced.

[618ireland]

House prices at the at the moment and for the last year are like rain and knickers !! One of the few things guaranteed to come down

On a more serious note 150K for a three bed a perfectly reasonable price ?? Depends what your earning obviously but it's an awful lot of cash if you don't have it / can't get it.

[618ireland]

Why do you not own a house Sheaf if they are cheap?

I can't speak for Alex but about four years ago I bought a flat as I was a single chap and didn't want a house,in the village where I bought it a house could be bought for about €20/ €30 K more which the bank were willing to lend me and I could have afforded the repayments. Just pointing out that some folk buy flats as it suits them. Also no cutting grass or exterior painting etc. Suits many folk, I know it suited me. Also as I moved back to Cork after buying it, it was easier to rent the thing out too.

[Sheaf]

The official average wage is 24.9k. This is likely to be skewed by high earners, but out of all the people I know (ranging from people who left school at 16 to go to work to people who spent 4 years at uni) I think the average is probably more like 18-20k.

Two incomes like that and it's ok. Factor kids in and it's obviously a lot harder... which is exactly why we're planning on kids after we've got a good few years of payments and payrises under our belts, which is increasingly common now as women want to develop their careers before having to take time off too.

IMO I don't think you can ever expect a single person on a 12k wage to be able to afford a house on their own... that's pretty unrealistic, in the same way that I don't expect to be able to afford a Ferrari.
What you should be able to expect is for the average couple to be able to afford to get on the ladder (which will more than likely be a flat, then go onto a house a few years down the line when they have kids), which is/was perfectly doable.

Compared to somewhere like Japan properties are silly cheap here. Over there i'm told it's perfectly normal for people to get 100 year mortgages, which they hand down to their kids when they die.

As for flat vs house, a flat was more suited to us. Haven't got the time/enthausiasm for a garden and the floorspace of the flat is far better for less money. Plus the heating bills are a fraction of the cost (£42 for gas/electric a month all in)... house would be fairly pointless for just us, smaller, would involve more work/maintenance and Katie would have to clean the stairs. When we looked at places we saw some houses and they were nowhere near as big/nice, but cost more. The decision for us was an easy one tbh. Obviously it's different for anyone with kids.

[Sheaf]

Even though house prices are high,interest rates...even your fixed rate Sheaf are incredibly low compared to 10/20 years ago.

Yeah, I know... like I say, it's a bit annoying that we missed out on the crazy low rates atm, but it's not silly high or anything so it's no worry.

It would just have been nice to save the extra few hundred a month and blitz the mortgage even quicker. It's amazing how much of a difference £150 or so makes.. at the start of the term it actually doubles the capital repayment.

This is going WAY OT...

[618ireland]

would involve more work/maintenance and Katie would have to clean the stairs. .

Are you for real or did you leave out a smiley ?? Just curious, lol.

[Sheaf]

would involve more work/maintenance and Katie would have to clean the stairs. .

Are you for real or did you leave out a smiley ?? Just curious, lol.

Not serious about the cleaning the stairs bit... Katie does often say how it's so much easier cleaning the place than cleaning a house due to no stairs, but it wouldn't be a good enough reason to put us off a house, lol.

It is generally more convenient in a flat mind, our 2nd bedroom is used as a study/spare room/xbox room so I'm in and out of here all the time... in fact most days (like now) I eat my breakfast while surfing the net, which is something I'd not do in a house as I couldn't be bothered going up and down stairs constantly.

As for maintenance, it's nice to not have the exterior and car park responsibility. I'm usually at work, out doing something or at home too knackered to do much, and I know I'd never get round to exterior maintenance.

[Beaker]

Not serious about the cleaning the stairs bit... Katie does often say how it's so much easier cleaning the place than cleaning a house due to no stairs, but it wouldn't be a good enough reason to put us off a house, lol.

How easy do you find it cleaning the place? .....

[Punx0r]

IMO I don't think you can ever expect a single person on a 12k wage to be able to afford a house on their own... that's pretty unrealistic, in the same way that I don't expect to be able to afford a Ferrari.

Perhaps not a three-bed semi, but why not a flat or a little mid-terrace in the cheaper end of town? Should single, hard-working but low earning people sleep in the parks?

You can't seriously compare a luxury sports car to the basic requirement of a roof over your head Bear in mkind that rental prices reflect buying prices.

I bet you could afford a ferrari, too. You can get a nice enough one for 20 grand!