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

Yea. I have 2.5 years left on my fix. Assuming all else is the same by then (eg job etc) then a rise of 10% or more can be withstood.

It won't be fun, but it will be possible.

probably a good idea then to wait and see until 2024 (when our mortgage deal expires) to upsize. Is the second half on a 5 year fixed?

when you pay your mortgage, does it go into two separate tranches into the two mortgages (ported and new).

I don't get why its so different with energy. People were having kittens about heating but for most people, even at £6k, thats like £500 per month.

I read 6/7% rates are akin to the double figs of the past in terms of impact on incomes.

We have less than 2 years left on our current deal, with a £500k mortgage and a baby in nursery. Was looking at MN threads a few months back and have 2 offers fixed for 10 years (cheapest is at 2.8%) but as we will be pulling out of our deal early we will be charged £20k ERC. Difficult to know what to do for the best but 6% interest rate would see us paying half our salary on our mortgage which is just not do-able

We owe £205k on our mortgage and have 32 years left. We are mid 30s and overpay by £100 a month.
Current fix at 1.3% and mortgage is £650 a month but we pay £750.
Calculators estimate it will go up to over £1250 at 5%.
Our fix ends in Oct next year and I feel sick at the thought of it 😪 I rang my mortgage company earlier this week but we cannot leave our current fix without paying £4900 which is just not feasible.
I feel so trapped.
Between us our joint income is around £55k but we have high childcare

Our current deal runs out in January so are probably looking at a significant increase. We'll be ok, but that's by chance rather than design (both kids now at school so childcare costs significantly reduced and paid off car finance this year). Does mean we're unlikely to be able to save much and therefore unable to move any time soon and we're struggling for space.

No.

We have four years to pay it down as much as possible!

No, I wouldn’t be ok.

Ive got til Dec 2023 til I have to remortgage anything.

We have a large disposal income, so yes we could cope, would rather not pay more, as I'm sure everyone else feels.

This is my dilemma now. We're lucky to have a small mortgage that we currently overpay. Due for renewal next December.

The plan was to release equity and have some home improvements but the way everything is going we're looking at coming out early, paying the ERC, and revisiting home improvements when the mortgage is paid off. Hopefully the situation will have bettered then.

It's shit but there will be a lot worse off. We're going back to paying childcare too for a few years so for the best.

What are you basing this prediction on, OP?

I've just had a quick look, and there are 10year fixes for under 4% still, despite the recent BoE rise. Mortgage lenders wouldn't be confidently offering 10yr fixes so low if there was a good chance of rates going above 8%. They employ good economists to make sure they make money.

I'm a bit of a hobby economist and I don't see interest rates rising that high. A really significant contributor to high inflation has been energy price rises, which are pretty inelastic and will have a dampening effect on spending all by itself. Don't think we'll need higher interest rates to curb spending in 12 months time.

We have 10 years left, and just shy of 100k. 350k ish equity. Last 5 year deal ends Nov, but signed up for another 5 yr fixed at the end of June. Didn’t avoid all the interest increases but hopefully protected from this coming storm. I’m old enough to remember the negative equity disasters from the previous conservative government, it wasn’t pretty. And we didn’t have runaway energy prices then.

why are they putting the interest rates up when it isn’t consumer borrowing driving inflation? This all almost seems wilfully destructive. Presumably the wealthy will swoop in for some property bargains as the housing market collapses.

Presumably the wealthy will swoop in for some property bargains as the housing market collapses.

Well that is the plan, got to repay those who pay for us.

No.

From the Economist:

An interest rate of just 3% today results in mortgages that absorb the same share of income as a rate of 14% did in 1980, after adjusting for the fact that mortgages are bigger and mortgage interest is no longer tax-deductible, calculates Neal Hudson of BuiltPlace, a housing website.

www.economist.com/britain/2022/09/23/britains-chancellor-offers-up-a-reckless-budget-fiscally-and-politically?utm_content=article-link-1&etear=nl_today_1&utm_campaign=a.the-economist-today&utm_medium=email.internal-newsletter.np&utm_source=salesforce-marketing-cloud&utm_term=9/23/2022&utm_id=1329652

There are quite a lot of people who don't have much disposable income left every month.

Increased costs and higher mortgage rates is not going to be a good thing for those people.

According to the latest Asda income tracker corporate.asda.com/media-library/document/asda-income-tracker-september-2022/_proxyDocument?id=00000183-693b-dc2f-adef-fdbfb8160000

1/5 of households have NEGATIVE discretionary income of £60 a week and 1/5 have just £7 a week of discretionary income.

1/5 have about £78 a week of discretionary income

So I can see some issues

@KarmaComma what's your prediction?

@NoNadaNeinNope for fun (although it's not funny)....

BofE consider this 0.5 rise as a real firm show to build confidence in inflation coming under control. Predictions for inflation next year have decreased due to new cap on energy. If mortgage companies are happy to offer 10yea at under 4%, I'd say 4% tops next year.

But I don't really know anything, and the new budget seems to be designed to undermine any anti inflationary measures by reducing tax for the people who can afford to absorb some costs, so who knows!

My mortgage is in 3 parts, with 3 different renewal dates, which helps act as a bit of a buffer when rates are going up. I’ve currently got about £23k on 1.39% due for renewal in May, about £27k at 1.49% until Mar 24, and £30k on a new 5 year fix at 3.85%. Total payment currently £750 a month with just over 10 years left.

I can overpay each by up to 10% per year, so I’m doing that for now, but still deciding whether it’s best to fix a new deal on the May one in Nov once I can do it without incurring an ERC, or save up as much as I can between now and May then let it go onto the SVR when I won’t be limited on my overpayments. I’d then pay as much off it as I could afford before fixing again. It’s a gamble either way, thankfully it’s with smaller amounts than some are looking at.

YANBU hopefully yes

Trying to work out what payments will exactly look like at 6/7% interest rates

😂😂😂😂😂

The BOE are an absolute joke. In the face of the Fed doing another 75 bps jump, and the SNB also doing the same our clowns do a weak 50bos and you thing that was showing they are 'strong on tackling inflation'?!!

The differential between what they and the fed did was what mattered. They have already been extremely tepid and now we see what that has done to the £ today.

Prediction by Citibank that BOE would have to raise interest rate to 7% but I think that is one of the more pessimistic predictions. Truss' economic guru says he sees base rate at 3-4% which would probably mean mortgage interest rate at 6-7%... I think Truss' tax cuts are a game changer as they would fuel inflation.

@SwanBuster read what I wrote. I said they considered it a show.

In the context of predicting what BofE will do.

Yes. It's small, we don't have long left and are lucky to have been able to save enough to ride it out if we need to.

On the other hand, we don't have a many outgoings (no childcare costs, no car, no subscriptions etc) so don't have much we can cut back on if we need to.