To not have many options re mortgage

It's about affordability.

A house valued at £900k isn't necessarily a house that will sell at £900k.

Theres a couple of issues here.

There is only a small pool of people who can afford £900k. There is a bigger pool who can afford £700k.

The OP has an income of £200k. Her mortgage is for the house being valued at £700k - the debt being over £500k. She is worried if interest rates go up she will not be able to afford the debt (she can but that's another story).

If the house is worth £900k now, then the people purchasing it either have to have a greater amount of cash to put into the purchase (to match or better having only a £500k debt). Or they will probably need a higher income than £200k.

Now... The higher the income, the less people this means. And if interest rates increase that number of people increases too.

So if the OP wanted to sell the house in this climate, even if the house is valued at £900k, the chances are it won't sell for that. Especially if the OP wanted a quick sale.

The valuation of £900k is only really good for helping calculate which LTV band you fall into when you remortgage if you are not selling and for insurance purposes. It doesn't mean a lot else.

In the current climate with increased stretches on affordability with a likely 25% rise in energy costs incoming in January, this squeezes the number of people able to get a mortgage big enough and puts off even some equity rich or cash buyers because bigger properties are more expensive to heat.

Therefore headed into an energy crisis and a series of expected interest rate rises, prices in this band of properties drop as demand drops, whilst putting higher pressure on cheaper properties pancaking and distorting the property market. This makes it harder for people who want to buy with a mortgage who aren't able to staircase, whilst the cash/equity rich buyers get more choice for less money. It puts downward pressure on the lower part of the housing market whilst marking the top of the market very difficult to sell at an increasing price.

Basically there is something of a ceiling in the market based on mortgage affordability and wage to price ratio which is affected by interest rates.

The very basic oversimplified equation is interest go up = house prices go down.

And stagnate wage growth = an inability of house valuations to continue to rise as in previous decades.

We've basically reached the limits of how much people can borrow to buy a house. Younger home owners are now people who have not benefitted from the large equity gains from house price inflation that we saw 10-15 years ago. The only people now who have large amounts of equity to move up the ladder to buy the 'large family house' are those who have had a significant inheritance or have moved from the SE to the right part of the North (even this last one is starting to run dry because of slow downs in the market down south).

We are reaching a point where the value of a large property will be less than the value of two smaller private properties of equal sq m to the large house in many parts of the country. This poses big questions in terms of a house crisis and planning. The financially astute thing would be to split many of these houses into two properties - no need to break as much green belt then. However this is planning dependant and in areas where there was poor provision for parking, this is even more so the case (and why this type of planning gets rejected). This is where poor public transport is a big issue too.

I wrote a demonstration of changes in purchasing power relating to a slow down in equity growth for my local area. I gave it to local councillors including one who was a geography lecturer on urban planning at one point and has been instrumental in ensuring there's more social housing in the area than most councils and trying to prevent disconnected estates with no services and no public transport. Basically planning and housing was his baby.

He was stunned at my numbers and hadn't realised the extent of the problem. He hadn't seen them written down and understood what they demonstrated before. It shows up what the 2008 market crash meant for local people and how much it killed the market going forward which hasn't adequately adjusted to this cliff point in demographics which exists between age 44 and 48. People under the age of 44 simply do not have the purchasing power of the generation before and this matters because until enough old people die there's not enough liquidity in the market for people under this age to bridge the gap to buy these more expensive properties. But equally as more older people die, there's greater oversupply of the most expensive properties and less to be made from these type of sales too. To put it bluntly, there may be more people in the UK but these people are ultimately poorer overall than the generation before at the same age. Only those who get a good inheritance buck the trends and even this has diminishing returns over time due to parents living longer, greater care costs and the inability of the market to continue to increase in value at the same rate as previously.

My argument was that we needed to ease problems at the second stage of the housing market rather than continue to allow the building of large detached houses no one could afford to take pressure off the middle and bottom of the market and avoid over supply of larger properties which is only helping to make problems worth. Something that the ONS and think-tanks on planning have subsequently also stressed.

The market has peaked in parts of London and elsewhere in the SE in particular. The idea that your house is an investment which you will make a profit on, is not necessarily as true as it was. The numbers show that houses in some places are selling for less than they were. They won't deflate beyond a certain point as the retain a certain floor to their value as well as a ceiling, but if your debt is bigger than your sale price you have an equity problem. I think we will see a lot more correction of the market over time to do with this, to reflect lower wage growth and lower wages btw.

So no. I know fuck all about the housing market and valuations.

Absolutely-fucking-nothing at all

The OP, however, has a spending problem not a debt/interest rate problem.

Sounds right thanks!
is there any way we could get to paying less (basically I would happily downsize but DP and 3dcs won’t budge)

It's outer London, but still on the tube. Yes the house has gone up that much, we actually sold it last year for 910,000 but we pulled out (the buyers already had a mortgage in place with their bank) because our son got into an outstanding primary that was on our road. Our older dd was doing GCSEs so actually it would have been more stressful plus we couldn't find anything too.

That’s what I said, it’s about affordability. Rates up affordability goes down

It's about affordability.

A house valued at £900k isn't necessarily a house that will sell at £900k.

Theres a couple of issues here.

There is only a small pool of people who can afford £900k. There is a bigger pool who can afford £700k.

The OP has an income of £200k. Her mortgage is for the house being valued at £700k - the debt being over £500k. She is worried if interest rates go up she will not be able to afford the debt (she can but that's another story).

If the house is worth £900k now, then the people purchasing it either have to have a greater amount of cash to put into the purchase (to match or better having only a £500k debt). Or they will probably need a higher income than £200k.

Now... The higher the income, the less people this means. And if interest rates increase that number of people increases too.

So if the OP wanted to sell the house in this climate, even if the house is valued at £900k, the chances are it won't sell for that. Especially if the OP wanted a quick sale.

The valuation of £900k is only really good for helping calculate which LTV band you fall into when you remortgage if you are not selling and for insurance purposes. It doesn't mean a lot else.

In the current climate with increased stretches on affordability with a likely 25% rise in energy costs incoming in January, this squeezes the number of people able to get a mortgage big enough and puts off even some equity rich or cash buyers because bigger properties are more expensive to heat.

Therefore headed into an energy crisis and a series of expected interest rate rises, prices in this band of properties drop as demand drops, whilst putting higher pressure on cheaper properties pancaking and distorting the property market. This makes it harder for people who want to buy with a mortgage who aren't able to staircase, whilst the cash/equity rich buyers get more choice for less money. It puts downward pressure on the lower part of the housing market whilst marking the top of the market very difficult to sell at an increasing price.

Basically there is something of a ceiling in the market based on mortgage affordability and wage to price ratio which is affected by interest rates.

The very basic oversimplified equation is interest go up = house prices go down.

And stagnate wage growth = an inability of house valuations to continue to rise as in previous decades.

We've basically reached the limits of how much people can borrow to buy a house. Younger home owners are now people who have not benefitted from the large equity gains from house price inflation that we saw 10-15 years ago. The only people now who have large amounts of equity to move up the ladder to buy the 'large family house' are those who have had a significant inheritance or have moved from the SE to the right part of the North (even this last one is starting to run dry because of slow downs in the market down south).

We are reaching a point where the value of a large property will be less than the value of two smaller private properties of equal sq m to the large house in many parts of the country. This poses big questions in terms of a house crisis and planning. The financially astute thing would be to split many of these houses into two properties - no need to break as much green belt then. However this is planning dependant and in areas where there was poor provision for parking, this is even more so the case (and why this type of planning gets rejected). This is where poor public transport is a big issue too.

I wrote a demonstration of changes in purchasing power relating to a slow down in equity growth for my local area. I gave it to local councillors including one who was a geography lecturer on urban planning at one point and has been instrumental in ensuring there's more social housing in the area than most councils and trying to prevent disconnected estates with no services and no public transport. Basically planning and housing was his baby.

He was stunned at my numbers and hadn't realised the extent of the problem. He hadn't seen them written down and understood what they demonstrated before. It shows up what the 2008 market crash meant for local people and how much it killed the market going forward which hasn't adequately adjusted to this cliff point in demographics which exists between age 44 and 48. People under the age of 44 simply do not have the purchasing power of the generation before and this matters because until enough old people die there's not enough liquidity in the market for people under this age to bridge the gap to buy these more expensive properties. But equally as more older people die, there's greater oversupply of the most expensive properties and less to be made from these type of sales too. To put it bluntly, there may be more people in the UK but these people are ultimately poorer overall than the generation before at the same age. Only those who get a good inheritance buck the trends and even this has diminishing returns over time due to parents living longer, greater care costs and the inability of the market to continue to increase in value at the same rate as previously.

My argument was that we needed to ease problems at the second stage of the housing market rather than continue to allow the building of large detached houses no one could afford to take pressure off the middle and bottom of the market and avoid over supply of larger properties which is only helping to make problems worth. Something that the ONS and think-tanks on planning have subsequently also stressed.

The market has peaked in parts of London and elsewhere in the SE in particular. The idea that your house is an investment which you will make a profit on, is not necessarily as true as it was. The numbers show that houses in some places are selling for less than they were. They won't deflate beyond a certain point as the retain a certain floor to their value as well as a ceiling, but if your debt is bigger than your sale price you have an equity problem. I think we will see a lot more correction of the market over time to do with this, to reflect lower wage growth and lower wages btw.

So no. I know fuck all about the housing market and valuations.

Absolutely-fucking-nothing at all

The OP, however, has a spending problem not a debt/interest rate problem.

House is currently valued at 910,000 in London and we bought it for £700,000.

No I’m not sure you do.

its supply and demand. When rates rise, affordability falls. There is already a small subset of people that can afford the luxury property market ie above 550k and they will be more sensitive to rate shock. The house is worth what people are willing to pay and in a rate up environment big houses struggle to sell so depending on their location they can stagnate in value or increase but as a smaller rate. In a rate up environment in general house prices won’t rise as fast because its supply and demand and basic affordability has changed, where 5 years ago £1000 a month got you say a £300k mortgage now it’s £200k or less etc

I dont think you understand the property market.

Your house won't be worth £910,000 with these interest rates rises. It will be worth closer to £700,000. Or less.

The problem with house prices is they are about what people can afford. As less people are able to afford £900k, it ceases to be worth £900k because there is no one to buy it for that amount.

Ok so he could be exaggerating then. If we increased the term would it be less?

OR maybe we’ve been living our lives because tomorrow is never guaranteed!
we worked hard to earn this, postgraduate degrees and endless courses that never seemed to end. I’m sure if anyone on here wants this type of salary they can work towards it!!!

Half of that salary will be paid in tax though! They’ll bring home £100k. Once the existing mortgage and bills are paid they won’t be anywhere near the amount you think for overpayments (although not nothing!)

Jesus op. Your joint salary is £200k!

Even with 4 kids and a mortgage of £2500 a month you could knock £100k off your mortgage in the next 12 months unless you've got top-tier private school fees to pay too.

You're in an exceptionally wealthy position compared to the majority of the UK population. You should pay for some advice because your DH has no idea about mortgages or how they work but even then nobody can accurately predict the future.