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

But do you think they achieved their goal with this 'show'? I don't, and neither do the money markets.

I thought it was an extremely, extremely weak play given the Fed had announced the night before yet another 0.75% rise in their base rate.

If anything it just proved that the BOE only has one thing to attempt to protect - the housing market, which is the only thing that seems to matter in the UK. Clearly the currency doesn't, by their lack of action.

It doesn't matter anyway. Even at ~4% for 2 - 10 year fixed currently, the banks will very quickly adjust those because the yield.on gilts is going haywire.

And the precious housing market? That's toast for FTBs now, because the amount available to borrow on mortgages now is slashed Vs a few months ago. The amount available to borrow at 1.5% is hugely different to 4%.

And without first time buyers, there is no market.

@LaurieFairyCake Id start thinking about selling now. Look at todays stockmarket. UK will be 5-6% by Jan. Its crazy.

The only people who may suffer are the first time buyers who have brought in the past couple years at inflated prices, everyone else would of had their house value go up and be able to get a better rate

@jimmyjammy001 without FTB, the housing markets stagnate, and house values plummet. Your house value drops, your equity drops. Your equity drops, you LTV ratio drops. Worse rates for borrowing.

The problem for values is new entrants to the market cannot get the same financing terms as a few months ago. Far, far from it.

FTBs are the marginal buyer. What they can borrow dictates every part of the chain going upwards.

Can anyone help me with some hard sums here then? So currently paying Halifax Standard Variable rate on £106k interest only, we only have 4 and a half years left so we won't manage to pay it off, but why are our payments/interest currently so high? £590+ a month.

Lots of people here talking about interest rates going up to over 5% but ours is already 5.24% (due to go up again after BoE announcement yesterday) so am I missing something? Seems I am already paying an interest rate that people are worried about? Or do you mean if BoE rates go up to 6/7%? If so, what on earth might the SVR I pay be then?!

forecast for US or UK?

Weird. If you have borrowed 106k, interest only then at 5.24% your payments should be about £463 p/m by my maths....

The bigger problem - is you say you 'only have 4.5 years left so you won't manage to pay it off'. What do you mean by that?

If it's an interest only mortgage - you are going to have to find 106k in cash in 4 and a half years, remortgage, or sell the house.

sound very nice to set into parts.
how to do it?

Yes we could but we have a fixed rate and only 3 years left on the mortgage anyway, so fortunately not an issue for us.

We have always overpaid and only took out a mortgage based on managing it on one income comfortably.

It must be terrifying for those who have maxed out and rely on 2 wages coming in.

I wouldn't sleep at night!

Welldone for the stealth bragging

5.24%!???? and fixed in half a year ago???
is it buy to let??

half a year ago should be around 2%-3% max

@SwanBuster I've got another thread on the go about divorce so don't want to hijack this one, but yes we will sell. Its just that it might not be feasible for at least a year, particularly with the obvious drop in house prices just now.

I am thinking if we are stuck living here our SVR interest only monthly payments could go up to well over £1k based on what's been said on this thread?

I reckon we could afford £1.2k max to answer OP, but in general its making me think we should try to get a new fixed rate now, maybe a 2 year deal based on longer repayment terms, rather than sit it out on interest only, at least we'd be paying off a chunk of capital.

@happyfishcoco im not sure you can do it retrospectively - one part is my original mortgage, the next is a lump sum I added to it as the cheapest way to raise funds for a significant other purchase about 8 years after buying that house, and the third part is the extra I needed to buy the next house, another 6 years after that. I have kept the final payoff date the same though so even though I’ve increased my total borrowing my mortgage still ends after about 25 years. I’ve been able to offset the increase in mortgage payments for the new house by switching to a much cheaper car, phone contract and Netflix package, and a separate loan I had coming to an end.

@happyfishcoco not sure if I have confused things or you have misread, I am on the Halifax standard variable rate which is currently 5.24% - does that make more sense now? (Did you think I was on a fixed rate deal?)

BTW the poster saying upthread they can't sleep at night, yeah here I am unable to sleep worrying about it all!

@HangerLaneGyratorySystem you can definitely get a better deal - even HSBC standard variable rate is 5.04%

Try one of the comparison sites like compare the market, there are discounted variable rates on 2 year deals for less than 3% for interest only, but most of them have arrangement fees around £1k. Worth chatting to a mortgage broker.

I'm on a tracker for .59 above base rate. I have to pay £550 pcm but overpaying by £450 pcm. I Only have £19k left to pay as overpaid for 6 years whilst rates were low. I could pay mortgage off by using my savings. If rates go above 5 percent I will bite the bullet and pay it off and then replace savings each month.

@Sunbird24 - you are right of course; if I thought I could sell this ASAP, get a decent price and move on I would choose that first. But if we are stuck here, I think its a no brainer to look for a better deal for a while - even if we ended up having to pay an early repayment fee, it could be cheaper.

My son was a FTB last October. He was going to do a tracker but I advised him to take a 5 year fix. He rang me yesterday to say thank goodness you talked me into 5 year fix Mum. He has 4 years and 2 months left. By then my mortgage will be repaid so if need be I could help him each month.

Well the bad news is probably not.

The good news is that the mortgage would be cheaper to run at 10 years as opposed to the current 28 (time of remortgage more like 25).

So if we have to live off toast for a decade with no internet, heating, car, clothes etc. then atleast we will be mortgage free 🤷‍♀️

Oh shit we won’t have electric to make toast. Sorry just bread then. We can eat bread.

@HangerLaneGyratorySystem, I think a lot of SVR mortgages add on 2-3 percent above base rate. Can't you find a 5 year fix out there to shelter for a few years? Coventry was offering 3.77 percent last week for 5 year fix. If you stay on SVR you will get hammered if we get to base rate of 7 as you will be paying over 10 percent.

@HangerLaneGyratorySystem I am so sorry you are worrying about it, it must be awful.

I said upthread that I am v.fortunately not in that position but if I were, like you would be unable to sleep.

I have had money worries in the past and the burden and anxiety caused many sleepless nights so I really do feel for those struggling.

It's not money that keeps me awake at this ungodly hour these days, but DS17 with SLD & ASD who just does not grasp the concept of sleep! DH & I work in shifts with him, hence my turn tonight 😆

Different situation but I'm a FTB, have been struggling to find anywhere, on my Mortgage in principle I was looking at around 3.6 for a 5 year fix a couple of months ago, that's going to have changed now so we'll have to reduce the amount we can borrow accordingly which feels like it's going to make it almost impossible for us to find anywhere in budget. The housing market here still feels pretty crazy, hard to get viewings, anything half decent is going for 10+ % over asking price still. I'm not sure where we go from here!