Can you cope with 6/7% interest rates when your mortgage expires?

[onthefencesitter]

www.bankofamerica.com/mortgage/mortgage-rates/

American interest rates are at that level now and given the level of tax cuts that are going to be implemented, I think we would be at 6/7% at least by next year, perhaps even 8%

Vote YABU for no.
Vote YANBU for yes

Ah yes, I see what you mean. I thought you meant an actual cost to port the mortgage on its own.

Sorry i probably wasn't clear

"I am going to assume that I won't see interest rates on mortgages below 5% for the rest of my life time and work out what is affordable based on that."

Really? I mean I'm not doubting you personally but WTAF? Is that what others on here think?

Sorry that was in reply to @jgw1 but in question to all and any.

Yes. We got a long fix though, and when it expires we will have less than 1/3 the mortgage we started with overpaying. We are mid thirties & our incomes have risen significantly so we could easily remortgage over 25 years to reduce payments if needed.

Yes, really. 5% as an interest rate is not particularly high if you look back at history.

I am going to assume that I won't see interest rates on mortgages below 5% for the rest of my life time and work out what is affordable based on that."

Really? I mean I'm not doubting you personally but WTAF? Is that what others on here think?

Yes, i would essentially take this approach. It's a prudent approach.

It baffles me why people would gamble with whether or not they will be able to afford to live in their children's home.

@NatMoz Dont pay 50k in a lump. Use it per month thus buying yourself months of mortgage holidays. Use the money you would have spent on monthly payments to save and absorb energy cost increases. By the time you get through 50k the rates will have dropped and you will have kept payments, met interest rate increases and absorbed cost of living through cashflow. Save like crazy.

Seems like an excellent approach to me.
Genuinely interested in the reason for your “WTAF” @HangerLaneGyratorySystem

Where do you think interest rates will go this decade?

WTAF means I think surely not, and clearly I am in the minority - I did ask earlier how do you all know this? I'm 60, I've seen various recessions etc., but everyone seems to have some inside knowledge I don't?

@HangerLaneGyratorySystem I am generally fairly financially savvy anyway but I’ve made a point of doing my own research on mortgage rates etc - I can spend a couple of hours with my notebook and a calculator doing all the maths to compare different rates and fees combos to work out which one works out better for my finances when I’ve got a rate coming to an end.

For example, I could have got a better interest rate for my newest bit of mortgage if I’d paid a £1k fee, but because of the amount of mortgage I wanted, it actually worked out more expensive over the 5 years I was fixing for to do it that way. With the 3.85% rate, not only do I not pay a fee but I also get £500 cashback from the bank when I make my first payment. Lots of different variables to consider, but I love that sort of problem-solving.

Me too, I set up a spreadsheet, quite an eye opener when the low rate vs. Fee examined closely!

@wigywhoo i should probably do it that way! 🤦‍♀️😂

That's exactly what I worked out. When you add the fee to the mortgage and extra interest on it a lot of deals aren't that good.

We're on a lifetime tracker 0.4 above base. Have had it since 2007 so have benefited from low rates. I'm wondering whether to fix as at around 4% I'll be paying more than I am now until my rate reaches 4% and then probably more for x months and then possibly go back down again so overall probably work out to the same.

We'd be ok at 7%, or even manage at 15% but that would be the bare essentials only. I'm very glad we fixed for 5 years earlier this year. We're early 30s with 22 years left.

I feel very sorry for people who are about to be in serious trouble because of this 😥my parents really struggled in the 90s due to the interest rates and have never been able to afford to buy again once they sold their house at a huge loss. It's truly shit.

Seven years left but to keep some money spare for holidays and a reasonable standard of living we will probably extend the term a little when the fix expires. Yes it will cost more long term but I think worth it to have spare money each month for fun things.

The bank of England base rate has, with some exceptions, been a pretty steady 5ish percent for over 300 years. It seems likely that we'd be able to expect to work towards something like that in the longer term. Looking at the exceptions, they seem to be due to wars and major oil price rises which have caused big spikes. I'm not an economist - this is based on the information the government gives us on past rates.

Personally I fixed recently at a rate that I was comfortable paying. It might cost me more over the longer term than going for a lower rate for a shorter time but I'm expecting to have a fixed cost while my childcare fees are eyewatering and a potential higher cost once they come down massively.

My fixed deal finishes at the end of May. Terms state that I can move to a new deal free of charges 3 months before that - but am nervous about how rates will have increased by then. Currently trying to decide whether to pay ERC and fix a new deal now. I wouldn’t be able to pay the ERC upfront, would have to add it to the mortgage.

Ive got 14.5 years left on the mortgage - would probably fix for 5 years (to give me peace of mind and hope that rates come back down by then. LTV is around 38%, which sounds good, but equally it’s not a small amount each month for my mortgage.

Am single, so responsibility all on me and no partner to talk it over with. Feel like I’m going round in circles in my head!

Some lenders will let you book their fix 6 months in advance. It sounds like it would mean changing lenders for you though, which isn't always practical for people.

We fixed for 5 years earlier this year and have £87k amd 15 years left to pay. Hoping to overpay a little in Feb/ Mar and every year if possible, so if the financial situation isn't much better in a few years we should still be fine, providing nothing drastic changes and we still have our jobs.

Thanks - I’m not keen on changing lenders, just due to the whole palaver of new valuations, delving into financial info etc. Am with a well-known building society (which feels “safe” to me). Think I’ll set aside time in the week to actually call them to discuss options and work out various scenarios.

I did do a quick trawl on a comparison site this evening - and couldn’t find anything better than what I’d roughly worked out re new deal with my current lender.

TBH, I think my main dilemma is the term. Half of me wants to do a 10 year and just have peace of mind. The other half wants to do 5 years in the hope that rates come down before the end of it as I hate the thought of paying more when I don’t have to. I guess this is a dilemma a lot of people are struggling with atm.

We fixed in Feb (rate booked Dec) at 1.29% for 5 years on a large mortgage. We have loads of work to do to our house (some cash set aside but working on basis the works will take all our spare cash until end 2024). Nursery fees currently 1433 a month but reduce next sept when DC1 starts school and I am going to increase my hours at work. Nursery fees completely gone by sept 2025.

so I think we could afford an increase by time our fixed rate up (may 2027).

That said, I am worrying a bit and plan is that once works over, depending on what is happening with rates then, we save to pay off a chunk at end of fixed rate. That cash was supposed tp be chucked towards pensions but we did buy a large house so plan will be to downsize when in our 60’s

the other option is that once both DC in school I go back to doing what I did pre-kids, don’t really want to as was v stressful job with long hours but would double my salary

so we have options which I know we are lucky to have

we almost bought a house last year which would have been an even larger mortgage and longer term (and it was at a higher rate of interest due to the lender we would have had tp go with to borrow). No works were required to that house but I’m glad we didn’t take on that mortgage now (they pulled out 2 weeks prior to completion)

I do think it’s scary times and we are trying to make cut backs in our daily living costs to save as much as possible - I also suffer from anxiety so am a perpetual worrier!

I am currently considering selling and relocating and buying outright if that's possible. I am absolutely overwhelmed with what to do and nobody to share that worry with. I don't know where to start to make that decision. Absolutely terrified with how things are going in this country and particularly after today's horrific budget.

I think I would do exactly that if I was in your shoes, @TheFormidableMrsC . It's a really difficult position to be in.

That will all sound very familiar to us older MNers. In the late 80s, the value of my house fell by nearly 50%. I'd bought several years earlier, so wasn't in negative equity, but a friend who'd bought more recently was in negative equity for years.

Ironically, it did her a favour as she split up with her partner. If prices hadn't crashed, she'd have had to buy him out, but as there was no equity so he was entitled to nothing!

Iirc, prices didn't fully recover until the second half of the 90s.

The big difference between now and then is that inflation rates fell and remained pretty low throughout the decade. I fear that may not be the case now.