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

We are very lucky as our fix is for another 3.5 years at 1.6%. Going to overpay as much as possible and then try and clear a chunk with a small investment we have. Though of course that investment will probably be worth about 40p by then!

Yeah. Fixed for 7 years a few months back, more luck than anything else really, and there won't be much left at the end of that. But we never had a big mortgage in the first place which helped.

What happens to LTV though in a recession where house prices stagnate or fall and interest rates are high? Surely it will slowly kill off all House moves not just moves by FTBs? If you try to borrow it will cost more because your LTV will go up on ‘loan’ and down on ‘value’?

So presumably that means prices won’t actually fall because there will be no stock because no one will move by choice but also there will be many fewer buyers, so moving will get even more expensive both to move and then to service a mortgage. Stamp duty drops won’t make a huge difference will they?

Therefore larger or more expensive properties won’t sell at all and smaller or cheaper ones will keep changing hands quickly as people default on payments and buyers who would have bought bigger will snap them up because they need to cut their cloth in this market.

Oh wait I just realised the Tories have already thought of this they’ve removed caps on bankers bonuses so that will prop up the London and Home Counties market for expensive homes. But the rest of the UK can just suffer. Terrifying what they are doing to the economy.

We bought back then and despite buying at the point at which house prices (and interest rates) were at their highest in that period, our house has since doubled in value. However as it’s our home we are not benefitting from the increase in value; we could do with a larger house but of course they’ve all gone up in value significantly too. For us personally we’ve lost out financially due to the increase in our house value because council tax bands were changed here some years back (not England), meaning we’ve been paying a higher band rate than we were when we bought and we also weren’t eligible for the recent payout based on council tax band because of this. Yet we’re in a small house that we barely fit in.

@clearopalite have you not benefitted from better LTV & mortgage rates?

I do think the council tax bands are weird. My parents multi million pound home in another borough is the same as mine non million pound home.

We could cope if interest rates went up to 6/7% mortgage would go up from £800 to £1200. Thankfully, we are on a fixed rate until July 2024 and youngest DC goes to school in September 2024. At the moment I’m paying £700 per month in nursery fees.

i was looking forward to feeling minted in September 2024 but it’s increasingly looking like the extra £700 will be swollowed up by stuff! I already work full time with two small DC and I’m knackered, and I fantisise about going PT. I really need to build up some saving as my car/roof/windows are all old and need replacing!

We will be ok because we are higher earners not overstretched any more, and no longer paying childcare (which was £1,000 a month, that’s the same as the extra interest I’d pay at 8%).

How other people will cope I have no idea.

No cap of bankers bonus is good for the banks but not necessarily the bankers. The base salary for bankers has increased since 08 to make up for the fact that the bonuses were capped. Now that they are no longer capped it may mean the renumeration structure is more Darwinian with lower base pay. So during lean times a lot of bankers might find that they earn less

You seem to have forgotten to mention that banks will be unloading repossessed homes at below the market rate, so that they can get a quick sale.

Hold on tight, its going to be a rollercoaster, brought to you by KwasiTruss entertainments inc.

Hold on tight, its going to be a rollercoaster, brought to you by KwasiTruss entertainments inc.

^^This

If it continues to rise (and it will) people
will need to consider different types of mortgages ie. interest only or extend the term when they come to remortgage. Banks would prefer not to repossesses but may be left with no choice if people really are maxed out.

Ours would go from £1050 a month to just under £1700. It wouldn’t be pretty but we could afford it.

We have just come off a 5 year fix at 2.20% and the best deal we could get was 3.4% 😒

We've always fixed, just so I have a little bit of certainty, our first ever fix was 6.4% we are now half way through a 1.9% fix.

I'm bracing myself for the shit show which is coming, thankfully we have teenagers so no child care costs and they do have part time jobs, so slowly becoming self sufficient.

Our fix is up next year. We have taken the 1% exit penalty hit to get a new fix offer earlier this year which is valid for 6 months ( ie we will remortgage later this year but have secured a reasonably good deal in advance)
You may want to consider looking into this if you are due to end your fix in the next 12 months although it might already be too late. Our new deal is 2.2 and now they are 3.5 ish in a matter of months

We panic remortgaged last month so it's now £100 more a month and we paid about £4.5k in ERC and fees but we locked in for 5 years which gets the youngest into school (we current have two in nursery). We could probably just about manage up to 10% but we would be paupers in other areas of life. No holidays, no clothes or days out, eating a diet of beans and rice! Once nursery is done we will have more wiggle room but we are currently paying £2k a month.

We have just over 2 years left on our fix, we can afford the rise as we have a small mortgage due to overpaying, even at 8% we would be paying less than £800. We were planning to move somewhere a lot bigger in next 2 years as youngest starts school next year, would mean a big increase in mortgage and running costs though so I'm reconsidering. May extend here using savings and stay long term. Worried about both BILs though as they both moved last year on 2 year fixes and 30 year terms and are already stretching themselves. I imagine lots of people who bought 'forever homes' recently will be in the same position.

Are you sure this is right?

We have a massive mortgage and by the time our fix ends in 2024 we’ll have two kids in nursery at several thousand a month. We could keep the house at 8% if we cut back massively on holidays, eating out, food shop, weekend activities, stopping saving etc. but it would be really tight.

We’re lucky that we have good incomes so could always sell and move somewhere cheaper (we’re London zone 2 now) but we’d be very sad to do so having settled here and spent a lot on the house. Obviously others have it worse but I’m still worried, head in the sand for now and we’ll see what 2024 brings.

To those overpaying your mortgage- have you considered putting the overpayments into a savings account instead?

For example, if you’re currently on a low fix (mine is 1.19% until mid 2026) there are savings accounts out there paying almost 2% now for easy access, and more for 6month-3 year+ fixes.

We’re doing this and the savings + interest we will earn will then be put into the mortgage as a lump sum prior to the term being up and a switch potentially being in place (or a day or two after, with a very slightly delayed switch f it’s more than the 10% of remaining mortgage we’re allowed to put in without penalty).

Our current mortgage is fixed at I think 2% - it's £2400 a month

If they quadruple and I think my fix ends next year then what will it be?

@MelvinThePenguin our mortgage is around 2% so if we whacked money into a 1 yr fix & 6 month account instead of overpaying every month would that be better?

Would be nice if all the “we’re lucky as we have good income 💅🏻” arseholes would stop posting

@LaurieFairyCake won't it depend on how much capital you have paid off as well?

As usual with these things, it depends!

Have a look at this: www.moneysavingexpert.com/mortgages/mortgages-vs-savings/

Only if the thread title had been, “who all is going to get repossessed if rates hit 7%?”

The OP was trying to get a feel for how many people couldn’t absorb the incredible, so all replies are valid.

When we took out a mortgage, the 2nd time we did not need to but wanted to keep some money in the bank for a rainy day - we asked, "what would our repayments be if rates were at xx" - the clown/mortgage advisor lol and said "they will never be that." - So I pointed out re 'Black Wednesday' where rates shot up to 14/15% I thing - then she said "oh, good point, I only wished others asked me that.'

So, when you take out a variable or fixed rate mortgage always be aware of the real world EG rates can down as well as up and how will you mange if you lost your job, time and or health.

Yes, read the above and keep it close to your hearts as it is a great point I make