Mortgages

Mortgages

Mortgages for first time buyers, remortgaging and buy to let. Amazing tools to help you plan, pay off and manage your mortgage. More »

Mortgage Risk Model

Mortgage Risk Model

Find out what level of risks you are running with your mortgage or with a new mortgage. More »

Advanced Mortgage Calculator

Advanced Mortgage Calculator

Find out what your level of repayments might be, how you can reduce your mortgage term and how much interest you are paying with our advanced mortgage calculator. More »

 

Simulating future interest rates

Strictly for Geeks!

If anyone is sufficiently geeky enough to want to understand more about how the mortgage risk model “does it’s thing”, we thought we’d write a short post about the interest rate model behind the mortgage risk model. This drives the results to a large extent so transparency about it seems pretty important to us.

Monte Carlo Simulation

The mortgage risk model works by looking at how the repayments on a mortgage loan would be recalculated each future year based upon the prevailing Bank of England interest rates in that year. Our model runs 1,000 different random simulations of future interest rates, calculates the repayments due under each future scenario and records the results.

How do you generate a single run of the model

The model of interest rates is based upon a Cox-Ingersoll-Ross model of future short term interest rates. It is calibrated monthly using historic levels of the Bank of England base rates together with a yield curve of future interest rates derived from current market data.

What Yield Curve data do you use?

For ease of use, we make use of the yield curve data published by the Bank of England, on their website. The current yield curve data being used is for [Month] and is shown below:

Sample Output

A sample of 10 runs of the simulator are shown below based on the latest monthly yield curve and calibration:

Cash Squirrel is Born

Welcome to the very first post from the Cash Squirrel.  Our website is in it’s infancy but we will be adding lots of valuable content and tools over the coming weeks and months.  The site’s going to look a little bare to start off with but stick with it.  Personal finance is a huge topic covering insurance, mortgages, loans, credit cards, investing and savings.  To start to scale the mountain of material that we will be generating we are going to start with just one such category and then expand into other areas as time ticks on.  So where are we going to start?

Mortgages

A house purchase is probably the largest single purchase most people will ever make.  Most people purchase their houses with a mortgage and it is likely to be the biggest loan you ever take out.  Therefore we thought we’d tackle the subject of mortgages first and foremost.  So look out for additional posts and tools to help you understand mortgages, choose the right mortgage, move mortgages, pay off your mortgage and more.